Ecofibre, an Australian medicinal cannabis company, is facing a legal challenge from its former chief science officer, Dr. Alex Capano, who claims that the company’s directors and executives acted in their interests and harmed its subsidiary, EOF Bio.
Ecofibre’s subsidiary, EOF Bio, focuses on endometriosis and ovarian cancer treatments
EOF Bio is a US-based subsidiary of Ecofibre that was established in mid-2023 to commercialize intellectual property developed by Ecofibre and the University of Newcastle in Australia. The IP relates to patents for treating endometriosis and ovarian cancer using cannabinoids.
Dr. Capano was Ecofibre’s chief science officer for more than five years before she was appointed president of EOF Bio. She was responsible for leading the research and development of EOF Bio’s products and overseeing its operations.
Dr. Capano accuses Ecofibre of undervaluing EOF Bio and firing its staff
In July 2023, Ecofibre announced that EOF Bio had a pre-money valuation of $30 million, which Dr. Capano alleges was a “baseless” figure that she was not consulted over. She claims that the valuation was inflated to boost Ecofibre’s stock value and attract minority investors.
In January 2024, Ecofibre raised $5 million by selling 15% of its stake in EOF Bio, with plans to reduce its ownership to a minority position over time. However, shortly after receiving the funds, Ecofibre fired all of EOF Bio’s employees except Dr. Capano without any explanation or justification.
Dr. Capano was then placed on “administrative leave” in February 2024 and replaced by a new CEO who had no prior experience in the cannabis industry or EOF Bio’s products.
Dr. Capano files a verified complaint against Ecofibre and its directors and executives
Dr. Capano has filed a verified complaint in the Court of Chancery for the State of Delaware, derivatively on behalf of EOF Bio, against Ecofibre and its board members Michele Anderson, Mark Bayliss, Bruce Robinson, and Vanessa Wallace, as well as its executives Jonathan Brown and Robin Sheldon.
She alleges that the defendants were “conflicted” in their roles and breached their fiduciary duties to EOF Bio and its minority members. She accuses them of engaging in “wrongful conduct” and “self-dealing” that unjustly enriched themselves and Ecofibre at the expense of EOF Bio.
She cites examples of the defendants’ misconduct, such as:
- Negotiating agreements with EOF Bio through conflicted directors who served on both sides of the deal and with terms that unfairly benefited Ecofibre and harmed EOF Bio.
- Failing to disclose material information to EOF Bio and its minority investors, such as the true value of EOF Bio’s IP, the reasons for firing its staff, and the potential conflicts of interest of the new CEO.
- Interfering with EOF Bio’s business and operations, such as by withholding funds, restricting access to resources, and undermining Dr. Capano’s authority and reputation.
Dr. Capano seeks to recover damages and equitable relief for EOF Bio, as well as to remove the conflicted directors and executives from their positions.
Ecofibre denies the allegations and vows to “vigorously defend” the legal action
Ecofibre has stated in response to Dr. Capano’s complaint, denying the allegations and asserting that they are “without merit.”. The company says that it has “acted in good faith and in the best interests of EOF Bio and its members at all times.”.
Ecofibre also claims that Dr. Capano’s complaint is “motivated by her agenda and dissatisfaction with her employment situation.”. The company says that it has “valid grounds” for placing Dr. Capano on administrative leave and that it will “vigorously defend” the legal action.
Ecofibre is an ASX-listed company that operates in three segments: Ananda Health, which produces and sells hemp-derived CBD products in the US; Ananda Food, which supplies hemp food products in Australia; and Hemp Black, which develops hemp-based textile and composite materials.