Epsilon Healthcare, a medical cannabis company, is under significant investigation by its administrators, who are looking into the allegations and disputes that have plagued its board and finances. The administrators, from KordaMentha, have told shareholders that they are conducting a comprehensive review of the company’s affairs and have received various matters from creditors that require further examination.
The administrators were appointed on December 23, 2023, after Epsilon failed to repay a $4 million loan from India Resurgent ARC, an Indian asset reconstruction company. India Resurgent ARC acquired the debt from Epsilon’s former lender, Westpac, in October 2023. Epsilon had claimed that the loan was unlawful and unenforceable and had sought to challenge it in court.
Epsilon’s boardroom battles and legal troubles
Epsilon’s financial troubles were compounded by its boardroom battles and legal troubles, which have been ongoing for months. The company has been embroiled in a power struggle between its former chairman and CEO, Jarrod White, and its largest shareholder, Merchant Funds Management. Merchant Funds Management, which owns 19.9% of Epsilon, had accused White of mismanagement and conflict of interest and had sought to remove him from the board.
White, who resigned as CEO in November 2023, had denied the allegations and launched a counter-attack against Merchant Funds Management, alleging that it had breached the Corporations Act and the ASX Listing Rules by failing to disclose its true intentions and associates. White had also claimed that Merchant Funds Management had colluded with the India Resurgent ARC to force Epsilon into administration.
In addition to the board dispute, Epsilon had also faced legal action from its former partner, THC Global, over a terminated supply agreement. THC Global had sued Epsilon for $2.6 million in damages, alleging that Epsilon had breached the agreement and had misrepresented its ability to produce medical cannabis products. Epsilon had denied the claims and had counter-sued THC Global for $1.5 million, alleging that THC Global had failed to pay for the products it had received.
Epsilon’s prospects and challenges
Epsilon’s administrators have said that they are exploring all possible options for the company’s future, including a deed of company arrangement, a sale of the business or its assets, or a liquidation. They have also said that they are working with the company’s management and staff to maintain its operations and preserve its value.
Epsilon, which was formerly known as THC Pharma, operates a medical cannabis cultivation and manufacturing facility in Queensland, Australia, as well as a network of clinics and telehealth services in Australia and New Zealand. The company had reported a net loss of $5.4 million for the financial year ended June 30, 2023, and had reduced its revenue guidance for the current financial year from $12 million to $8 million.
Epsilon’s prospects and challenges will depend on the outcome of the administrators’ investigations and the creditors’ meeting, which is expected to be held in late February or early March 20242. The company will also have to resolve its board and legal disputes and restore its reputation and credibility in the medical cannabis industry.