Man overboard! Life rafts launched from the WAYLing craft Maricann

Feature image courtesy Juneau Tours.

There isn’t enough space on the blog for even a full recent history on The Wayland Group (CSE:WAYL), so we’ll try and keep it to a brief preamble.

The Ontario-based cultivator is one of the more aggressive marketers in the pot boom. They’re always announcing a non-binding LOI for a world-beating, game-changing deal that’s going to put them ahead of their peers in an out-of-the-box way that their competitors will soon wish they’d have thought of. Few ever develop in any kind of material way, but that doesn’t stop CEO Ben Ward from piling them on. Clearly, the man values a fresh story.

1 year WAYL chart on Feb. 26th appears courtesy Stockwatch.

The most recent press releases out of Wayland were two one-liners announcing the departure of directors Micheal Stein and Dr. Eric Silver. The releases came a day apart, and gave no reasons for either director’s resignation.

As the former Maricann trades down below a dollar, the strong, but mercurial base of Wayland retail shareholders are getting anxious. A January deal to sell 50% of their international assets to International Cannabis Corp (CSE:WRLD.U), hasn’t yet moved beyond the letter of intent, and shareholders have thought about it for long enough to realize that $258M worth of WRLD.U stock, whose average daily trading volume is under $300,000, isn’t going to do much for them. These two resignations were blood in the water.

The Midas Letter‘s Ben Smith, a frequent champion of Wayland on twitter, who always seems to have some kind of coverage or comment, was recently asked by one of his readers how he’s feeling about the whole thing:

It isn’t clear if Smith – an equities reporter who reports on Cannabis stocks, including and especially The Wayland Group – is contractually bound to only report positive news, or if he’s cultivating a brand as the cannabis sector’s Regis Philbin, or if he just doesn’t realize that investors might also want to hear about challenges that companies are facing, because they’re as relevant as regurgitated press releases. Since Ben’s our favorite, we’re happy to fill in.

Who were these guys, and what did they mean to this WAYLing operation?

Sudden management departures send us to SEDI to look up the insider reports almost by habit. Stein had a boring 70,000 share position when he left on Feb 21, but Dr. Silver’s report was interesting.

Dr. Silver’s insider transaction report on SEDI includes a 613,700 share “correction.”

The last Wayland transaction on his SEDI profile occurred this past November, and it wasn’t a transaction at all, but rather a “correction of information.” An apparent retraction of a previously reported private series of acquisitions and dispositions carried out in “Caneri Holdings” the same company that holds the 7 million share position of his wife, Lori Etkin.

As originally reported, the transactions left Silver with a net balance of +613,700 shares of WAYL on Jan 30, 2018, before the correction reported on November 23rd, 2018 took it away. The entry isn’t a sale, it’s Dr. Silver telling SEDI that “whoops!” he counted wrong. Doesn’t actually own those shares at all.

The SEDI page for Etkin shows 7 million Wayland shares held in Caneri Holdings that haven’t budged since they showed up April 21, 2017.

We categorically deny anything happened… and it’s no big deal anyhow. You don’t have to make it a “thing.”

The period in which that correction was issued is notable for being followed by what has to be one of the greatest press releases in smallcap history. Wayland issued news this past Jan 31, at the request of OTC Markets, disavowing any knowledge of or part in questionable promotional activity that was happening at the time on Wayland’s behalf. The release explicitly states that:

a) they have no relationship with TheWolfofPennyStocks.com (the apparent source of this promotion)

b) that no directors, officers or controlling shareholders had sold or purchased any shares in the past 90 days, and that

c) those transactions (the ones that didn’t happen) were in accordance with the company’s trading policy, and were reported on SEDI.

After due inquiry of the Company’s officers, directors, controlling shareholders and third-party service providers, neither the Company, nor any of its officers, directors, and to the knowledge of the Company, any controlling shareholders or third-party service providers have sold or purchased the Company’s securities within the past 90 days. Such transactions were in accordance with the Company’s insider trading policy and were reported with the System for Electronic Disclosure (www.SEDI.ca).

-Wayland Group press release Jan 31, 2019

A look at SEDI shows some options being issued to Wayland directors during that period, the repatriation of a share loan that CEO Ward and fellow director Terry Lynn Fretz made in connection with the convoluted special warrant financing that the company did in 2018, and Silver’s weird “correction,” but nothing that is explicitly named an acquisition or disposition of securities. No explanation has been given about how Silver’s SEDI ledger was out 613,700 shares, and we doubt we’ll get one. Similarly, we’re without a reason for the departures themselves, so it’s worth looking at what’s been going on lately.

The Show Must Go On

The most recent non-resignation news out of Wayland was a Feb 20th corporate update full of aggressive projections about the company’s Langton, Ontario operations and the revenue they’re going to produce. They’ve done some kind of automation proof of concept with a company out of Rochester, NY that’s supposed to get their output up to “50 grams per plant,” the first we’ve ever seen of a grams-per-plant metric in the legal cannabis space (innovation!). The crew up in Langton says that they’re “currently harvesting 8,200 plants,” that are going to be ready in April, so stay tuned for those 410 kgs in Q2 of 2019.

The release goes on to make quarter-by-quarter revenue projections for 2019, including $7.7M in Q3 of 2019, which would represent a 3311% increase over the $225,000 in revenue they booked in Q3 2018. Which sounds like a real headline grabber, so we can’t understand why Smith says there’s nothing to talk about.

The revenue projections culminate in a lofty $20.6M in Q4 of 2019, but never get around to any guidance for Q4 2018, and tips us to revenues of $1,305,033 net of discounts in Q4 2018, which Wayland is due to report on any day now. It is the quarter in which the former Maricann saw its first exposure to the Canadian retail market. Our most recent product count had Maricann with seven (7) in-stock products at our sample provincial online portals. Jumps in unit sales from other LPs in calendar Q4 of 2018 range from Aphria Inc. (TSX:APHA)(NYSE:APHA)‘s 96% to Organigram (TSX.V:OGI)‘s 515%. Both companies’ reporting cycles put their Q4s with a month less exposure to the legal retail than Wayland.

We disqualified the Wayland Group from our sales count last year when calls to the company about why their sales numbers didn’t add up were actively ducked by company representatives, but it’s worth pointing out that to show on-paper growth in unit sales over their Q3, the number to beat is 19.5 kgs. Aphria sold 1,778 kg to the medical market in Q3 2018, Organigram 349 kgs.

There’s no way to tell whether or not Stein and Silver got a look at a draft of those Q4 financials before they decided that a future with the Wayland Group wasn’t for them.

WAYL!

CORRECTION: The original version of this post reported that Wayland had not provided any guidance ahead of their upcoming Q4 earnings release. They have in fact guided for revenues of $1,305,033 net of discounts. FH has corrected the error.

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