Friday , May 14 2021

Afry: Playing a cannabis business on the side – Africa Inc. (NYSE: APHA)



Background

At any time, an exciting new industry attracts broad attention also attracts retail capital, which in turn can attract unscrupulous actors. This is not a story of the cannabis industry and its commercial potential, nor is it a story about the values ​​and the competitive dynamics of the market. This is simply for one of the larger companies in the industry that seems to have redirected a huge amount of money to the private interests of its insiders at the direct expense of its public shareholders.

Background of co-copyright typical capital management (QCM)

We are proud to bring this report on QCM. QCM has an unmatched track record in identifying and exposing corporate abuses through a profound investigative in-depth analysis.

The latest QCM report was released in May this year and focused on the Greek retailer Folli Follie. The report cites broad inflation of revenues. After the announcement, FF shares fell 60% in two days and were discontinued two weeks later. In July 2018, the company filed a request for protection against creditors through the Greek bankruptcy code. The management now faces criminal charges and the shares did not continue trading.

Previously Foley Foley, QCM released a report on Globo PLC, a provider of software and services for managing the mobility enterprise. Globo's actions were suspended in less than 12 hours, and management acknowledged fraudulent accounting within 48 hours of the announcement. Globo never re-opened for trading and was declared worthless by the liquidator.

Background: Ahur Nouver's scandal

Earlier this year, Aphria was under investigation after we found undiscovered self-confident insider relations in connection with the acquisition of Nuuvera at $ 425 million.

We wrote that Nuuvera seems to be a worthless skill designed to enrich insiders at the expense of African investors. The company later acknowledged that its CEOs and directors had undisclosed stakes in Nuwera before buying Africa, along with a key partner named Andy DeFrancesco.

The company traded lower by about 30% on Sundays after exposure and subsequent admission. After the episode, the company responded with convincing investors that the newly emerging international funds were of great value. They further tried to stop investors' concerns by adding personnel to align and publish governance reforms that relate to its investment policies. The action has largely recovered from that moment and even reached new records in September.

Introduction: They are again in that – LatAm transactions

Despite the announced management reforms, our research shows that Africa's insiders have doubled their dubious investment:

Afria recently spent over $ 280m on virtually worthless Latin American acquisitions that appear to have clear signs of an insider car.

We conducted an extensive field analysis in Jamaica, Colombia and Argentina and we will present evidence that the newly-identified assets appear to be very inflated or completely fabricated.

We will also present documents showing that the same counselor of Ahira, who described himself as an "architect" to Nuweera's contract, Andy DeFrankesco, was an unknown supporter of this last order of agreements. DeFrancesco performed the transactions in co-operation with Aphria's President / CEO Vick Neufeld, who also served as President of the Skytte Biological Science (recently renamed Sol Global Investments), another company integral to the performance of these "LatAm" contracts.

All this, the effect is enormous. We estimate that at least 50% of Achary's C-1.46 billion net assets are redirected to "investments", which are at best grossly inflated. Our deficiency in these on-balance sheet positions is as follows:

  • C $ 524 million in good faith that we believe is completely worthless;
  • C $ 246 million in intangible assets, which includes licenses, permits and "brands" acquired by these deals, which are estimated to be inflated by 80% +; and
  • C $ 86 million in capital investors and long-term investments that we believe are the product of related parties and are significantly damaged.

(Source: Cap IQ)

After reviewing LatAm's agreements, then we will look at Andy DeFrancesco's background, including his entry with Canadian regulators and his tight business ties with individuals for which the SEC allegedly hired multiple times pumps and landfills, including Bobbi Genovese, Barry Honyg, John O'Rourke and John Steson.

(Andy DeFrankesco. Source: Instagram account on DeFrancesco)

Finally, we will consider the operation of cannabis in Apia. While the company declares itself a "standard setting" for cheap production, in reality it seems to set the standard for low-quality production. We share the content of an interview with a former worker who has thoroughly obstructed revisions with Health Canada, a circus-like environment and a facility that has repeated the mold problems and is "attacked by mistakes". We also share the content of our interviews with industry experts, all of whom have confirmed the low-quality character of the product.

With dazzling red flags that relate to investment activities, strongly negative historical cash flow and product with low quality cannabis, We think African shares will be smokers.

Part I: The unusual structure of Aphria's "Acquisitions"

We believe that Afria has redirected the shareholders' funds to the insiders through a systematic process:

  1. The Athenian insider Andy DeFrankeaux forms or acquires an international company, providing a token justification for the acquisition (for example, conditional cannabis licenses, a rented facility, the purchase of a small existing local business.)
  2. The international company then bought a Canadian shell company under the control of DeFrancesco through its tight private firm, Delavaco Group.
  3. The company "Shell" agrees to acquire the "sister" company Aphria, Scythian Biosciences, where Vic Neufeld, Aphria and DeFrancesco President / CEO have key insider roles.
  4. Skitian then sells his stake in Afry's entity in a major brand.
  5. As a result, DeFrancesco and unnamed associates receive cash and / or sketch actions, Skitana receives money and / or shares of Afria, and Akria shareholders receive international funds that are essentially worthless.

See below for how this process took place with LatAm's recent Aparias investments:

(Sources: Scythian / Apricot submissions and press releases, Canadian corporate records, and field research)

Undiscovered insider self-government?

The architect of these deals, as we shall show, seems to be the Athenian / Scythian insider Andy DeFrankeaux. DeFrancesco was an integral part of the formation of Afry and Scythia, serving as the founding investor and organizing reverse mergers that hanged the two companies publicly. He served as an adviser to all purchased contracts in Africa, and is currently the chief and chief investment officer of Skitjan. In fact, earlier this year, Skitjan worked outside the same office and the number of private company DeFrancesco, Delavako Group.

Our first major indication that something is inconvenient came through the following revelation: Canadian corporate records show that the entities acquired in the LatAm deal were all previously named after a personal private company DeFrancesco, group Delavako:

Efforts seem to have been made to hide the relationship with Delawako. The names of all these entities were changed before the announcement of the procurement, ensuring that the name "Delavaco" did not appear in any of the press releases. For example, Canadian corporate records show that the name of the entity with allegedly Jamaican origin has changed two days before the Scythian's announced letter of intent to acquire it.

In short, retail investors are spending money in Africa, which then used the capital to buy "assets" from entities related to insiders.

So, let's look at some of the funds.

Japanese Airia purchase of C $ 145 million: Negative projects

In March 2018, Skitjan signed a letter with the intention of acquiring Marigold Acquisis Inc., which was described as a "private corporation British Columbia". (Page 24) At that time, Marigold Acquisis was in the process of buying a 49% stake in the Jamaican company Marigold Projects. In other words, the entity still did not possess the wealth of Jamaica.

Four months later (in July), Skitjan then announced the sale of a letter of intent to marry, along with their other "Latin" assets, "Afri". Skitian completed the acquisition in mid-September and then closed the sale of Afry 2 weeks later.

Ultimately, Aphria paid about $ 145m for the shares of Neven, which helped Skitian for a profit of $ 127m for an asset, property in about 2 weeks. (page 96).[1]

Meanwhile, the unnamed investors in the unmanned in a "private" guard were paid $ 18 million. We will present evidence that those investors include Aphria / Scythian insider DeFrancesco along with unnamed associates.

On the ground in Jamaica: Officially registered office of Neven is an abandoned building

So what exactly did Africa buy? We visited Jamaica to find out. According to Marrigold's latest filings, the company's official registered office is the 28 Lancaster Road in Kingston St. John's. Andrew:

When Afria closed her Latin American acquisition, she declared them "world class assets". We visited the office during working hours in late September and we thought it was a world class landfill. Here we are on the Lancaster Road:

And here we are at 28 Lancaster. Similar to the acquisitions of Africa, the outside seemed almost passable:

But from the inside, it became obvious that the building was abandoned for years:

Killed doors and ceilings. Holes in the wall. Yellow news on the floor. Dirt everywhere. It is not exactly the most modern thing that you would expect.

Managing Director of Marigold, Lloyd Tomlinson, lists the same abandoned property as his personal address:

After our visit, we checked the real estate records in Jamaica and found out that neither Tomlinson nor Nevin no longer own the abandoned property. Tomlinson was the owner, but in January he was sold by a mortgage lender:

Despite this, however, the recent submissions of Marigold and Tomlinson left the abandoned property as their current address.

On the ground in Jamaica: the marigold claims that there are 3 other leases

Aside from the abandoned building, Neven claims to have 3 leases in Jamaica (page 17):

We have also visited Neymar's other properties, or at least those that we can confirm are actually there.

On the ground in Jamaica: the marigold claims to lease "unit 51" of a building complex that only goes to unit 50

The family claims to buy a 800-square-meter (800-square-foot) herb house in co-operation with the Peter Tosh Museum located at Unit # 51, Pulse Center, 38a Trafalgar Road, Kingston (page 17). The company claims it has rented the building since April. (page 57) We visited the location in October:

We talked to the owner during our visit. He informed us that the units go only to 50. In other words, Her "unit 51" of Neven did not exist.

Then we called the museum later in the month. They could not give us contact information for the Neven, saying that "they are not yet open".

On the ground in Jamaica: "A Leading Medical Cannabis Company from Jamaica" … Does the book sign the door to its empty office?

Neven also reportedly rented space in "Suite # 6" at the Kingston Jamaican office (page 17). The rent for the office was signed in April (p. 57). Our researcher visited the site in October during office hours on many occasions and found that while the lights were on, no one was at home. He talked with the neighboring business who said he rarely saw anyone entering or leaving office. Here's the picture of a locked, empty package:

Why this "world-class asset" have a paper sign on his office door for 6 months in his lease? (Someone may also want to stop from time to time water that dehydrates an office plant):

There were also the company's printed inscriptions at the entrance to the building:

Another lease of the company is for the facilities for cultivating a plot in the parish of Saint Catherine. According to the company, this land intends to support greenhouses and the most modern research facility. After many searches, our researcher was unable to find the site. So we could not confirm his existence.

On the ground in Jamaica: A team of "top" scientists from Neven

When Skitian signed a letter intending to acquire a share in Neven in March 2018, one of the justification for the transaction was the strong scientific team of Marigold:

Neven's management in the most modern cannabis cultivation and precise dosing leads to additional depth and prestige of an already strong team.

The director Medical Doctor for the Newman denies that he ever serves any board, let him be innocent

We reviewed Jamaican corporate records to see who is in the team of top scientists at Marigold. One of the first founding directors of the Marrigold team was Dr. Janis Simonds-Fisher, one of the two scientists associated with the company:

Dr. Fischer is a doctor based in Jamaica (and she is a very pretty lady). We visited her office and talked to her. She denied that she had ever held positions in the directors any company, let alone Neven. In fact, she later signed a document confirming this:

(Note: Dr. Fischer's personal data is unclear)

Marigold genetic engineer. A Total Unknown

The other director-director of Marigold was an individual named Ray Anthony Chin, who was named as "genetic engineer" of Marigold:

We visited the address of Mr. Chin at 7 Norbrus Crescent:

The tenant said that no one with that name lived there and they never heard of it with a name.

Research, web resources, social media, etc. We came up with completely empty hands, we searched for signs of a superb (or any) genetic engineer named Ray Anthony Chin at high speed. Did Mr. Chin succeed in becoming a top scientist without leaving a trace of his achievements?

On the ground in Jamaica: the very imposed reason for the contract – A local cannabis license for research and development, for only $ 500 for the purchase

At the time of the announcement of the agreement, much was done from the fact that Marigold was issued one of the three original Jamaican licenses for research and development of cannabis products.

We met with the Jamaican Cannabis Licensing Authority (CLA) and we learned that by the time the Nevinny contract was closed in September, the KIA approved at least 22 full licenses and over 80 conditional licenses.

We asked about the process for obtaining a license. It takes about 500 dollars, some documents and a waiting time of less than 6 months. That was basically that.

Jamaica: But wait … The bride is not even fully licensed!

Shortly after our visit, the media from Jamaica reported on the agreement of Marigold with Afry. According to the article, Managing Director of Marigold Lloyd Tomlinson said that the bride is planning to plant 5 herbs in Jamaica, "the first of them will be opened at the Pulse Center." In other words, no one is open.

Furthermore, Tomlinson said he would keep the full comment about the retail dummy:

until all its licenses have issued the Cannabis Licensing Authority.

The article continues …

… His already exists conditionally approval for several licenses.

… The operation will be supplied with a 20 hectare farm in Bernard Lodge, but potentially could source a raw material from the farm, which will function as a separate business from the Tomlinson family within the Blue Mountains. That farm is awaiting approval for growing marijuana.

So, instead of being licensed to work, the bride is waiting for their conditional licenses to be approved.

Jamaica / Bride: To recap so far …

  • The official office is an abandoned property that was sold by the lender almost a year ago.
  • The company claims to buy a "unit 51" that did not exist.
  • One of the founders of the company denies that he was once the director of the company.
  • The other mysterious scholar has no clear presence on the Internet.
  • The plot of the unprocessed land of the company is not approved to grow cannabis.
  • The company has conditionally licenses and awaits full approval.

All this … for $ 145 million? So, what's going on?

Jamaica: The negative deposits were initially purchased for $ 118 in total. Who were these lucky shareholders?

Неоткриените партнери на Апиа / Скитјан кои купиле акции во Невил не изгледале дека средствата вределе 145 милиони долари.

Корпоративните записи на Јамајка покажуваат дека два Канаѓани поврзани со повеќекратни договори со DeFrancesco ги купиле своите акции на јамајканскиот ентитет за околу 118 американски долари (no милиони) за акции кои беа префрлени во Скиф за само неколку месеци подоцна за 18 милиони долари (и на крајот се префрлија во Африка за 145 милиони долари).

Двете поединци именувани во јамајканската корпоративна евиденција се Марвин Игелман и Клифорд Старк.

Марвин Игелман односот со Aphria / Scythian инсајдер DeFrancesco опфаќа повеќе од една деценија, откако работеше заедно во брокерската фирма Standard Securities Capital Corporation (SSCC), каде што ДеФранцеско служеше како Управувачки партнер:

Оттогаш Игелман игра активна улога во договорите поддржани од ДеФранцеско, вклучувајќи и услуги како:

  • Заменик-претседател на Делавчако,
  • Директор на сок Џамба поддржан од Delavaco, и
  • Директор на American Apparel, поддржан од Delavaco.

Клифорд Старк е опишан како "рана фаза инвеститор и финансиер на Nuuvera Corp" пред неговото преземање од Aphria. Како што беше забележано во нашето претходно дело, мислиме дека Нуувера беше исто толку безвредни како другите превземања на Африка. Договорот има нејасни судири на интереси, вклучувајќи ја и сопственоста на ДеФранцеско, заедно со претседателот / извршниот директор на Aphria Вик Нејфелд, CFO на Aphria и повеќе директори на Aphria.

Јамајка: Евтини акции беа во сопственост на ентитет кој беше именуван по фирмата Афирија / Скитскиот инсајдер Енди ДеФранкеско

Акциите подоцна беа префрлени во нетранспарентно, новоформирано лице од Бермуд. Тој ентитет, пак, бил во сопственост на канадскиот ентитет кој претходно бил наречен "Делавако карипски вентури". Потсетиме дека Делавако е името на приватната фирма за приватниот капитал на Апија / Скитскиот инсајдер Енди ДеФранкеско.

По промената на името, Скитијан го објави своето писмо со намера да го стекне ентитетот. Промена на името се случи само 2 дена пред Scythian потпиша своето писмо со намера да се стекне со ентитетот на 21 мартул. Канадската корпоративна евиденција ги зароби оригиналите, меѓутоа:

Потоа, два дена подоцна, на 21 мартул:

Имајте на ум дека покрај улогата на ДеФранцеско, Претседателот / извршниот директор на Aphria Вик Нејфелд исто така беше претседател на скифија за време на најавениот договор за Невен. Ова е истиот Vic Neufeld кој го надгледува купувањето на Aphria само неколку месеци подоцна, на крајот плаќа 145 милиони американски долари од акциите на акционерите на Aphria за ентитетот на Јамајка.

Акционерите на приватниот школка субјект за возврат беа платени 18 милиони долари, што изгледа дека е речиси чист профит.

Архивинската набавка на Африка од 50 милиони американски долари: А.Б.П. SA

На 11 март 2018 година, Скитјан потпишал писмо со намера да се здобие со ММЈ Интернационал, кој подоцна беше опишан како "приватна компанија од Британска Колумбија" (стр. 24). MMJ International имаше договор да купи аргентинска компанија наречена АБП, "фармацевтска компанија за увоз и дистрибуција".

Четири месеци по писмото на Scythian дека има намера да го стекне аргентинскиот имот, Scythian потоа ја објави продажбата на Aphria на писмото за намери на ABP, заедно со други средства "LatAm".

Скитиан ја затвори својата нарачка кон крајот на септември и потоа ја затвори продажбата на Африка 6 дена подоцна.

На крајот на краиштата, Африја платила околу 50 милиони УСД за акциите на АБП, што му помогнало на Скитјан за добивка од 23 милиони долари за средство само што всушност сопственост for 6 дена. (стр.3).[2]

Во меѓувреме, инвеститорите во приватниот школка ентитет биле платени 27 милиони долари за нивниот удел во MMJ. Ние ќе покажеме докази дека тие инвеститори вклучуваат Aphria / Scythian инсајдер DeFrancesco, заедно со неименувани соработници.

На теренот во Аргентина: "Силна" платформа за малопродажба на ABP се состои од една мала фармација

Компанијата смета дека "ABP има силна платформа од нејзината дистрибутивна и малопродажна фирма за да се надгради."

Трансакционите документи на Aphria гледаме дека ABP имал вкупно 2 објекти (стр.74):

АБП работи два објекти кој се наоѓа во градот Буенос Аирес – аптека која работи под трговското име Farmacia & Perfumeria и центар за дистрибуција на дрога на големо, кој исто така служи како средно складиште за Farmacia & Perfumeria.

Така "силната" малопродажна платформа се состоеше од точно една аптека. Еве слика од надвор од аптеката, благодарение на Google Maps:

Ја посетивме локацијата. Се наоѓа во засебниот дел од Буенос Аирес и е помал од конвенционалниот CVS или Rite-Aid. Еве слики одвнатре и потврда која го потврдува името на ABP на нашата набавка:

На теренот во Аргентина: "Водечки увозник и дистрибутер на фармацевтски производи" … Со празна, разладена канцеларија

Во времето на објавувањето на договорот, Вик Нејфелд беше претседател / извршен директор на Aphria и претседател на скитската. Тој го нарече АБП "еден од водечките увозници и дистрибутери на лекови во државата".

Го посетивме "големопродажниот центар за дистрибуција на дрога" на АБП. Областа беше во голема мера трошни и станбени. Еве слика на влезот од Карти на Google заедно со слика од нашата посета:

Во внатрешноста, речиси никакви знаци на постоечки операции не видовме, освен една осамена биро и некои наредени кутии во она што изгледаше како недовршен, празен склад:

ABP: Практично нема дигитално присуство и неколку вработени

Како дел од нашето истражување за ABP, ја повикавме компанијата, ги посетивме нејзините канцеларии и ја исцрпивме веб за какви било знаци на бизнис присуство. Видовме практично нема дигитални знаци на живот и најдовме многу малку вработени.

Чудно, Фејсбук страница на ABP покажува дека нејзиниот прв пост беше во август, пет месеци после договорот со Скитијан беше објавен. Страницата имаше 7 допаѓања од ова пишување.

Сето раскажано, ние само можевме да лоцираме 3 вистински вработени во ABP, со исклучок на малопродажниот персонал. Двајца од нив беа колеџ студенти:

  1. Менаџерот, Гонзало Арнао, изгледа како да има вистинско лабораториско искуство, според неговиот профил на Линедин.
  2. Вториот идентификуван вработен известува за неговиот LinkedIn дека неговата главна професија е универзитетски студент.
  3. Третиот идентификуван вработен е 20-годишен човек кој ја опиша својата професија како фудбалер / тренер на неговата Фејсбук страница.

Компанија Соопштение за медиумите: ABP генерирани "приходи во износ од 11 милиони американски долари во 2017 година"

Vs.

Вработен Интервју: Приходите беа всушност USD 430 илјади

Во првичното соопштение на компанијата "Сфитиан" на Афиа, кое го објави писмото за намера да го купи АБП, насловот на соопштението се пофали:

ABP приходи во износ од 11 милиони американски долари во 2017 година и профитабилни

Насловот број нас не изненади, со оглед на тоа дека работењето на компанијата се чинело дека се состои од една мала малопродажна аптека и празен, недовршен магацин. Го проверивме Dun & Bradstreet кој објави дека годишните продажби на субјектот биле само околу 212.000 американски долари што се чинело повеќе во линија:

(Извор: Дан и Бредстрит)

Потоа разговаравме со вработениот # 2 (од делот погоре) и го снимивме повикот. На прашањето за годишните приходи на ABP, тој одговорил дека тие се околу 15 милиони аргентински пезоси, кои се претвораат на околу 430.000 американски долари.

На теренот во Аргентина: најавената набавка на ABP "Нарачка за нарачка" со локална болница беше всушност донација

Пред завршувањето на купувањето на ABP од страна на Aphria / Scythian, Scythian објави дека главната пресвртница се случила во потенцијалната подружница:

Скитјан го најави првото нарачка на АБП С.А. со Aphria Inc.-Нарачка за снабдување на Светската реномирана педијатриска болница за истражување и едукација

Нарачката беше наменета за нафтата на Абрија во КБР, која ќе ги поддржи клиничките истражувања во реномираната педијатријална болница во Гарран, Аргентина.

"Многу сум горд на ABP, кој работи со тимот на Scythian за постигнување на оваа нова пресвртница на првата нарачка …", изјави извршниот директор на Scythian во соопштението за печатот.

Тоа беше наводно да биде големо достигнување – налог за голема повеќегодишна студија која вклучува над 100 пациенти. Новоформираното аргентинско партнерство се чинеше дека генерира нови продажби, позајмувајќи го предложеното стекнување на Aphria дополнителен кредибилитет.

Еден проблем: Разговаравме со претставници на болницата и ни известија дека не направиле никакви набавки. Тоа всушност беше донација од компанијата.

Сликата од десната страна е на нашиот состанок со Лукас Шијафини, шеф на одделот во болницата.

Изложени на ризик, Merriam-Webster дефинира "купување" како "да се добие со плаќање на пари или нејзин еквивалент".

Додека Скитјан даде впечаток дека има обезбедено голем мултигодишен договор за купопродажба, во реалноста тоа беше скитскиот купување … од Африја. Производот за возврат беше даден бесплатно за крајниот потрошувач.

Болницата подоцна го потврди ова јавно. На соопштение за медиумите објавено од болницата (преведено од шпански):

Медицинскиот канабис кој се користел во овие испитувања бил обезбеден од лабораторијата Aphria во Канада, која ќе биде донирајте лекот во текот на студијата и за сите пациенти во кои се докажа дека работи.

Вработениот во болницата рече дека се благодарни за донацијата, но тој ни се пожали дека претставникот на компанијата во Аргентина продолжил да ги налути да издадат повеќе соопштенија за печатот за партнерството.

Аргентина: Неоткриена инсајдерска самоуправа?

Значи, кои беа среќни инвеститори во "приватниот" школка ентитет, кои беа платени 27 милиони американски долари за аргентински средства?

Канада корпоративните досиеја покажуваат дека лицето на школка беше наречено Delavaco MMJ International, но беше сменето пред јавниот оглас на договорот:

Како потсетник, Delavaco е името на Aphria Insider и актуелниот личен приватен капитал на компанијата Scythian претседател Енди ДеФранкеско.

Ако сеуште постои сомнеж за тоа што се случува овде, можеме да се свртиме кон приватната Instagram сметка на Andy DeFrancesco. Ова е инстанграм пост датиран една недела пред објавувањето на Скитијан за да се здобијат со "приватни" аргентински средства:

Да, тоа е Aphria инсајдер, Скитски инсајдер, и сегашниот Скитски Претседател и главен инвестициски директор Енди ДеФранцеско фали за купување аптеката на ABP во сопствената лична приватна компанија за капитал една недела пред да го префрли на Скитија за 27 милиони долари. Тој дури има и ознаки на #GreedIsGood.

Ние можеме да потврдиме дека тоа е иста фармација. Еве ја сликата од нашата посета на истиот дел од продавницата земени под поинаков агол:

Африја во вредност од 84 милиони долари Колумбиската набавка: Колкана САС

Во април 2018 година, Скитјан потпишал писмо со намера да се стекне со канадски ентитет наречен MMJ Colombia Partners, кој беше опишан во поднесоците како "приватна компанија од Онтарио" (стр 24). Во времето на објавувањето, MMJ Колумбија беше во процес на купување на 90% од акциите во Colcanna SAS со седиште во Колумбија. Со други зборови, Скитјан влезе во писмо со намера да се стекне со "приватно одржан" ентитет кој сè уште не поседувал ништо.

Скитјан подоцна го продаде писмото за намери заедно со своите други "Лата" "средства" за Африја. На крајот на краиштата, Африја платила 84 милиони американски долари за акциите, што му помогна на Скитија за добивка од 45 милиони долари.

Во меѓувреме, неименуваните инвеститори во "приватно одржани" MMJ Колумбија партнери банкарство речиси 39 милиони долари.[3] Ние ќе покажеме докази дека тие инвеститори вклучуваат Aphria / Scythian инсајдер Енди ДеФранкеско, заедно со неименувани соработници.

Колумбиски корпоративни документи: нулта оперативна активност и вкупни средства од 16.000 долари

Колумбиската корпоративна евиденција покажува дека Колкана е основана на 27 декември 2017 година, и затоа била само неколку месеци кога Скитјан го потпишал своето писмо со намера да го купи. Новоформираниот ентитет објави точно нула оперативна активност и вкупна актива во вредност од околу 16.000 американски долари:

На теренот во Колумбија: Активна канцеларија! Но, не многу други

Colcanna има канцеларија и некои имот во Колумбија. Еве слики од посетата на нашиот истражувач во средината на ноември. Тој рече дека има околу 5 луѓе кои работат таму:

Што се однесува до развојот на имотот, сепак не се чини дека многу се случува, сепак. Веб-страницата на Colcanna има a пилот стаклена градина:

Другите слики од веб-страницата се прилично недоволни:

Колумбија: на лиценци за канабис од Кокананот – беше едно од околу 73 лиценцирани ентитети во време на договор

Многу беше направено од Колканна како прв ентитет кој добива дозволи за канабис во конкретниот регион на Колумбија, каде што се наоѓа:

Colcanna е првата компанија во кафе-зоната на Колумбија со лиценци за одгледување и производство за производство на медицински екстракти од канабис

И покрај тоа што први ги добија тие лиценци во зоната за кафе, до крајот на септември 2018 година, во близина на времето на затворањето на договорот Африа, Колумбија издаде дозволи за 73 различни колумбиски ентитети.

Соодветно на тоа, експерт од индустријата не извести дека, додека Африја ги земала лиценците за кафе, другите оператори го избегнувале регионот поради нејзината клима и услови. Експертот ни објасни дека кафените зони не се пожелни за одгледување на канабис. Тие се премногу влажни и ладни, што е добро за кафе, но може да доведе до проблеми со мувли во канабисот. Планинските региони се, исто така, природно помалку достапни, со што се зголемуваат трошоците.

Колумбија: Но, чекајте … Колкана не е целосно лиценцирана!

Кога нашиот истражувач на терен побарал информации за купување производи на Колкана, претставникот на компанијата изјави дека се уште се наоѓаат во процесот на лиценцирање и дека не се во близина на производството.

Индустриски експерт ни го даде следниов увид во клучната лиценца Колканна се чини дека недостасува:

Јас не мислам дека Colcanna е една од четирите компании одобрени да се направи карактеризација. Ова е неопходен услов за одгледување.

… Ако компанијата нема лиценца за карактеризација тогаш тоа е огромно црвено знаме. Мислам дека сегашната влада не се брза да ја стимулира индустријата. Луѓето едноставно ги превртуваат палците во владините оддели во моментот.

Colcanna has received some of its required cannabis licenses per Ministry of Justice and Ministry of Health records, but until they receive сите their required licenses they appear to be in the thumb-twiddling business along with the local government.

Colombian Comparable Transactions: Aphria Overpaid Relative to Peers for Land/Licenses

When comparing the purchase price of Aphria’s acquisition relative to other Colombian cannabis producers we see that they stand out:

(Sources: Company filings, company press releases, and local experts)

The cannabis space is replete with debates about valuation, but putting that aside, the fact that Aphria’s purchase stands head and shoulders above the rest of the industry speaks for itself.

Colombia: Undisclosed Insider Self-Dealing?

Who were the shareholders in the privately-held shell entity that banked C$39 million for selling a newly-formed, stalled Colombian operation?

Canadian corporate records show that two months prior to the Scythian announcement MMJ Colombia had a different name: Delavaco Colombia Partners. Recall that Delavaco is the name of Andrew DeFrancesco’s personal private equity firm. Also recall that DeFrancesco is the current Chairman of Scythian and a key insider of both Scythian and Aphria. The entity was registered in the name of DeFrancesco’s spouse:

The timing of the name change looks prescient. Delavaco Colombia’s name was changed on February 16, 2018—the very day that Colcanna received its first license for cannabis R&D from the Colombian government, suggesting that the acquisition plan may have been set in motion upon receipt of the license (pg. 54).

Aphria’s “Option” to Pay $24 Million+ for a Newly-Formed Brazilian Entity Which Appears to Own Nothing but a Pending License

On July 23, 2018, Scythian announced a letter of intent to acquire a stake in “Brazilian Investments Inc”, a private British Columbia-based entity.

Canadian corporate records show that “Brazil Investments” had also undergone a name change. It was originally named “MMJ Brazil Investments” and was incorporated only on March 14, 2018. We were unable to find its original owners, but its name was changed to the nebulous “Brazil Investments Inc” on June 15, 2018, about a month before the announced deal:

The acquisition of LATAM provides the Company with an option to purchase 50.1% of a Brazilian entity for $24 million (USD), once it secures a medical cannabis licence from the Brazilian government and a right of first offer and refusal on another 20-39% of the Brazilian entity. (Pg. 23)

Brazilian corporate records show that the ultimate target, “Green Farma Brasil”, had informally operated as of early 2017 but had only taken the step of legally constituting months after the announced deal, on August 23, 2018:

The company was formed with capital worth only about US$27,000.

Thus, it seems that Aphria purchased an option to buy a recently formed entity with no known operations except a pending Brazilian cannabis license. For the sake of their investors, we sincerely hope they don’t choose to exercise this option and shovel $24 million (or more) into this new shell.

We can only guess who might have a stake in the related “privately-held” Canadian entity.

Part II: Who is Andy DeFrancesco?

Andrew DeFrancesco is the Founder of the Delavaco Group, a private equity and advisory firm based in Toronto and Florida. His biography was recently removed from the Delavaco site and his spouse is currently listed as the Chairman and CEO of the firm.

Andy DeFrancesco’s Deep Relationship with Aphria

As described briefly above, Andy DeFrancesco has been a key figure with Aphria from the beginning.

(Source: Andy DeFrancesco’s private Instagram account)

DeFrancesco’s biography on the Delavaco website stated that he was “founding investor to Aphria, leading all rounds of financing and strategic advisor to the company since inception.” Despite the recent removal of his biography, we can still see the original through Web Archives, which also shows that he was formerly listed as “Founder, Chairman & CEO” of the firm:

Additional links to Aphria include:

  • DeFrancesco’s Delavaco Group is named as a “special advisor” to Aphria in the company’s press releases relating to all of their bought-deal financings (1,2,3,4,5,6,7).
  • DeFrancesco’s private equity firm, the Delavaco Group, was the advisor in Aphria’s reverse-merger into a shell entity named Black Sparrow Capital Corp. That transaction took Aphria public.
  • The COO of Delavaco Capital was the CEO and CFO of the Black Sparrow shell.
  • DeFrancesco was the self-described “architect” of the Aphria/Nuuvera deal which we previously identified as being laden with undisclosed related party conflicts.

Andy DeFrancesco’s Deep Relationship with Scythian BioSciences (Now Renamed Sol Global Investments)

DeFrancesco also has a close relationship with Aphria’s ‘sister’ company, Scythian BioSciences/Sol Global Investments:

  • Going back to the beginning, the “finder” of Scythian’s reverse-merger deal to take the company public was the COO of the Delavaco Group. The Delavaco Group is DeFrancesco’s personal private equity firm.
  • Until recently, Scythian’s head office was listed as 366 Bay Street, Suite 200, Toronto, the very same address and suite number of DeFrancesco’s Delavaco Group Toronto office (pg. v).
  • Scythian’s former CFO, Jonathan Held, served in the role until late September. Held operates his consulting firm ALOE Finance out of the exact same address and suite number as the Delavaco Group’s Toronto office.
  • In September, DeFrancesco was named Scythian’s Chairman of the Board and Chief Investment Officer. He is now in charge of allocating Scythian’s fresh batch of money received from Aphria through the LatAm deals.

In short, DeFrancesco has played an integral role with Aphria, Scythian, and the LatAm transactions as outlined above. We view him as the architect of these questionable transactions.

Now, we will explore his background and associations.

Canadian Regulators: DeFrancesco Has “Little Regard for the Truth”

A 2009 IIROC complaint mentioned Andy DeFrancesco’s prominent role in a scheme that led to the subsequent industry ban of a broker. For context, IIROC is the national self-regulatory association for Canadian investment dealers, similar to FINRA in the U.S.

IIROC’s complaint made several conclusions about Andy DeFrancesco and the broker, who both worked at Standard Securities Capital Corporation (SSCC):

Both the respondent’s and Andy DeFrancesco’s conduct in this matter showed they have little regard for the truth.

Andy DeFrancesco was deceptive in his conduct with respect to his wife.

He was deceitful to his employer, SSCC, in managing (a client’s) account by placing his own assets in her account.

Both the respondent and Andy DeFrancesco were involved with the SSCC new account application form of (the client) which contained the false signature of (the client).

Per earlier SEC filings, DeFrancesco had served as the Managing Partner at SSCC, a firm that was the recipient of multiple regulatory sanctions (1,2,3,4). SSCC was eventually absorbed by another brokerage firm.

DeFrancesco’s Business Ties to Barry Honig, Who SEC Prosecutors Allege to Have Engaged in Multiple Pump and Dump Stock Schemes

DeFrancesco has several close business interests with Barry Honig, a controversial financier who was recently alleged by SEC prosecutors to have orchestrated multiple pump and dump schemes.

SEC and Canadian records show that Honig and Andrew DeFrancesco (along with family accounts) have cooperated on a slew of deals, including:

  • Riot Blockchain (formerly named Venaxis Inc.): DeFrancesco’s spouse reported a key ownership stake in Venaxis Inc. and even joined Barry Honig in an activist campaign to oust the prior board of directors.

DeFrancesco advocated for Honig’s new director slate, which included John Stetson and John O’Rourke, two individuals who were later alleged by the SEC to have participated in multiple pump and dump schemes along with Honig.

Venaxis later “pivoted” business models several times, ultimately becoming Riot Blockchain. Documents show that DeFrancesco had a key role in Riot as well…

(Source: Cap IQ)

As we alleged in an earlier report, Riot at one point made an irregular acquisition that is reminiscent of Aphria’s LatAm transactions: the company bought equipment by purchasing it through a newly-formed privately-held shell entity rather than just buying it on the open market. The equipment cost ~$2 million, but Riot paid ~$12 million for the entity, netting holders of the shell a roughly $10 million gain in about 2 weeks.

So, who owned the shell? None other than DeFrancesco’s spouse together with Barry Honig (pg. 23).

DeFrancesco / Delavaco’s Ties to a Stealth Stock Promotion Ring

Delavaco was recently named in an exposé by investigative reporter Chris Carey relating to an “army of writers, both real and imaginary” that have produced hundreds of bullish articles on clients of investor relations firm IRTH and about companies backed by Barry Honig. The article is entitled “Pretenders And Ghosts: Stealth Promotion Network Exploits Financial Sites To Tout Stocks.” Per the article:

The stealth promotion ring began posting stories last year about companies with financial ties to The Delavaco Group… The touting ring has spotlighted at least four companies in The Delavaco Group’s investment portfolio: MassRoots (OTCQB:MSRT), Aphria Inc., Liberty Health Sciences Inc. and Breaking Data Corp. (OTCQX:BKDCF).

DeFrancesco’s Business Ties to Bobby Genovese, Who SEC Prosecutors Allege to Have Engaged in a Manipulative Penny Stock Scheme

An SEC complaint filed August 2017 accused an individual named Bobby Genovese of “a penny stock promotion, manipulation and unlawful distribution scheme”. The complaint was related to an Ontario-headquartered and TSX-listed company called Liberty Silver Corporation.

The IIROC complaint mentioned earlier provided insight into DeFrancesco’s business relationship with Bobby Genovese. Per the complaint, DeFrancesco had apparently illicitly deposited shares into a fake client account as payment for “services rendered from past transactions” that he had done with Bobby Genovese.

According to a 2010 deposition of Andy DeFrancesco in an unrelated matter, he similarly referenced his business relationship to both Bobby Genovese (and the banned broker, Phil Vitug) (Pg. 27).

In sum, when reviewing DeFrancesco’s past associations and regulatory run-ins, we view his role in Aphria’s irregular acquisitions as totally unsurprising.

Part III—Aphria’s Side Business: Low-Quality Cannabis

As shown in our introduction, Aphria has dedicated much of its cash to international ‘investments’

(Source: Cap IQ)

Aside from its questionable acquisitions, however, the firm has also made investments into its greenhouse operations in Canada which produce a variety of cannabis products.

The firm believes they have an edge in the competitive production space. They have repeatedly touted their ability to produce cannabis at lower cash costs than competitors, which enables them to deliver “one of the highest adjusted gross margin levels in the industry”.

We spoke with a former worker at Aphria’s facility which described the Aphria approach in rather different terms:

The motto should be quality over quantity, but it’s probably the other way around. It’s more quantity over quality.

As far as management:

A lot of the people who are running the show are young, possibly not very experienced in what they are doing

This has led to issues such as audit failures, mold, and bug infestations:

We were constantly running into errors and not passing audits with Health Canada and having issues with bugs…it kind of became a bit of a circus.

We had a lot of issues with mold and right now the facility is infested with bugs.

Every single room that has product in it in that (Leamington) facility right now has bug problems.

Another source with experience in Canadian and Colombian cannabis companies said the following:

Aphria is a big company but is yet to deliver product. There is huge customer turnover. They get a lot of newbies to get prescriptions and get signed up, but first orders receive 3 times market value for low grade.

It seems that Aphria could be sacrificing quality and its long-term brand in order to generate temporary high margins. Regardless, the strategy appears to be failing as Aphria is not generating positive cash flow from operations. A money-losing, poor-quality, low-cost operation does not strike us as a winning formula.

Additionally, competition is only intensifying as more producers come on-line. Aphria had an early-mover advantage with its licensing and facilities, but that advantage dissipates with every new entrant. With their best times behind them we don’t think Aphria will ever generate meaningful positive cash flow from its Canadian growing operation.

The ‘Blunt’ Truth: Aphria is Uninvestable

All told, Aphria’s international deal spree has resulted in about C$736 million being deployed to its questionable “investments”, including the Brazilian purchase option:

(Source: Company filings, press releases and user calculation)

We hope this information has been informative and has given readers a sense of what is going on at Aphria. We believe the conduct of Aphria’s executives and deal partners has been deeply unethical and possibly criminal. With a slew of highly questionable transactions, negative operating cash flow, and a low-quality product, we ultimately see no credible path forward for this company.

We’ll leave it at that (for now).


Tickers mentioned: (APHA) (OTCQB:SOLCF) (RIOT)

[1] Note: To arrive at this number we apply the final deal value (based on Aphria’s share price at closing) to the percentage allocated to Marigold per the transaction’s formal valuation opinion

[2] Scythian purchased MMJ International for 6,176,320 shares of Scythian as of the closing price on the date immediately prior to the closing date of September 21, 2018 Scythian’s closing price on September 20, 2018 was 4.35, hence the transaction value of 6,176,320 * 4.35 = C$26,866,992

[3] See Scythian Biosciences Closes Acquisition of MMJ Colombia Partners which includes US$6,200,000 in cash advanced previously to deal closing, US$5,000,000 in assumed debt (both converted to CAD at an exchange rate of 1.3 CAD/USD, and C$24 million in Scythian shares.


Editor's Note: We spoke with Hindenburg Investment Research and Quintessential Capital Management about this idea on Behind the Idea. Listen to this podcast if you'd like more background on this idea and the research process:

Disclosure: I am/we are short APHA.

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