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Group of Shareholders Oppose Plan of Arrangement Between Emerald Health Therapeutics and Skye Biosciences Inc.

·5 min read

MONTREAL, Aug. 4, 2022 /CNW Telbec/ - Certain shareholders (the "Opposing Shareholders") of Emerald Health Therapeutics Inc. ("Emerald") (CSE: EMH); (OTCQX: EMHTF), announce that they oppose the announced plan of arrangement (the "Plan") between Emerald and Skye Biosciences Inc. ("Skye") (OTCQB: SKYE).

Opposition to the Plan

On November 29, 2021, Emerald announced that it was exiting the recreational and medical cannabis business and pivoting to a pharmaceutical focus. It announced that it engaged an advisory firm to identify potential acquisition/merger candidates.

Six months later, on May 12, 2022, Emerald announced the Plan and stated that it "found" a merger candidate - Skye - after a search.

But the announcement was disingenuous because no such search was conducted, or ever needed because Skye is a company within the Emerald group of companies. Both Skye and Emerald are controlled by Emerald Health Sciences Inc. ("Sciences"), the largest shareholder of Emerald.  All three companies are related by common shareholders, directors and officers. All three are or were under the direction of Avtar Dhillon, Punit Dhillon and Jim Heppell.

Other problematic facts include:

  • Skye is a borrower of Sciences and owes it $2.5 million, and as such brings no financial benefit to Emerald under the Plan. Skye has incurred significant losses and expects to continue to incur significant losses and negative cash flow from operations in the future. In contrast, Emerald had cash reserves of approximately $16 million as at March 31, 2022, and owns significant non-cash assets, including those of its principal subsidiary Verdélite Sciences Inc. ("Verdélite").

  • No independent valuation of Skye or Emerald has been conducted or is proposed. The value of Emerald is significantly higher than the value of Skye, yet the directors of Emerald intend to saddle Emerald shareholders with Skye's liabilities and dim prospects, which can only benefit the insiders and related parties of Skye.

  • Emerald shareholders have been harmed by poor management and imbedded conflicts of interest with the Dhillon family managing its affairs, and has lacked and continues to lack, qualified independent management executives with a track record of operating profitable enterprises.

  • Of particular concern is Avtar Dhillon, a former long-term executive in all three companies, who was arrested by the FBI for securities fraud on August 6, 2021, and has also been charged by the US Department of Justice ("DOJ") and the Securities and Exchange Commission ("SEC") for securities fraud in connection with alleged pump and dump schemes carried out with Frederick Sharp. Sharp is accused of running a US$1 billion fraud scheme in Vancouver involving over 100 issuers.

  • Dhillon's nephew Punit Dhillon is the CEO and chair of Skye, and according to their SEDAR filings, he has worked with one of the same issuers as Avtar Dhillon that are engulfed in the DOJ and SEC cases with Frederick Sharp.

  • The Opposing Shareholders are concerned that Punit Dhillon will be involved in Emerald and become its CEO and chair, if the Plan is accepted.

  • The Emerald group is facing a new SEC investigation in respect of another of the companies in its group, Emerald Health Pharmaceuticals Inc. ("Pharmaceuticals"), for suspected securities fraud. The same players – Avtar Dhillon, Punit Dhillon and Jim Heppell – were part of this entity as well as all the other three entities. Punit Dhillon is the director of Pharmaceuticals and Jim Heppell is its chair.

  • These same two – Jim Heppell and Punit Dhillon - were directors of Emerald Health Bioceuticals Inc., another member of the Emerald group of companies, when it filed for bankruptcy in California on October 20, 2020.

  • Between 2015 and 2020, Emerald paid Sciences over $15 million in professional fees for various management consulting services. Sciences is not a management consulting firm with any management consulting experts according to the research conducted by the Opposing Shareholders. The purpose of the payment of these exorbitant fees and its beneficiaries remain unknown.

  • Emerald has accumulated more than $240 million in losses since 2015, while Sciences has cashed in on more than $50 million in fees paid and sales of Emerald shares, including a 2018 financing of more than 6 million shares sold for $5 per share. The shares have been trading at plus or minus 5 cents for several months.

  • The following links to media reports are worth reading in addition to this release:

https://www.vancouverisawesome.com/bc-news/bc-cannabis-company-loses-bid-to-suppress-disaffected-shareholder-5410361

https://www.richmond-news.com/bc-news/time-ticking-for-vancouver-man-charged-in-1b-international-stock-fraud-scheme-4767826

About the Opposing Shareholders

The Opposing Shareholders are recognized entrepreneurs and business leaders who have successfully navigated the cannabis ecosystem for many years. They are the founders and former owners of Verdélite, formerly known as Agro-Biotech Inc. In May 2018, Agro-Biotech Inc. was acquired by Emerald.

The Opposing Shareholders oppose the Plan and the continued involvement of the Dhillons in the management of Emerald, as well as the continued involvement of Jim Heppell in the management of Emerald. They have notified Emerald's management of their opposition to the Plan.

The Opposing Shareholders call upon the securities authorities to take prompt action and reissue the management cease trade order of Emerald shares, and postpone the annual and special meeting of shareholders. They intend to exercise all legal rights available to them to oppose the Plan, remove legacy executives from Emerald and improve the outlook and prospects for all the shareholders of Emerald.

The information contained in this press release does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable corporate or securities laws or otherwise.

Shareholders are not being asked to execute a proxy in support of the Opposing Shareholders opposition to the Plan or any other resolution relating to the annual general and special meeting of Emerald to be held on August 19, 2022.

SOURCE Concerned Shareholders of Emerald Health Therapeutics

Cision
Cision

View original content: http://www.newswire.ca/en/releases/archive/August2022/04/c5146.html