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ASX-listed cannabis company Epsilon Healthcare enters administration

Duncan EvansNCA NewsWire
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Camera IconNot Supplied Credit: Supplied

Board warfare and allegations of financial impropriety have erupted at Australian marijuana business Epsilon Healthcare, putting at risk 25 jobs and the largest medicinal cannabis manufacturing facility in the southern hemisphere.

Epsilon announced on December 17 that it had appointed administrators Ian Purchas and Hugh Armenis from SV Partners to take control of the company and conduct an “urgent assessment of the company’s business operations and financial affairs”.

Mr Purchas, speaking with NCA NewsWire, said the “underlying” businesses were strong and the move into administration had come about due to “disunity” at board level.

“They (a majority of the board) formed the view the uncertainty at the board level may cause creditors to make claims, which the company may not have been able to pay,” he said.

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The company’s ASX announcements in recent months reveal a chaotic shuffle of board and management positions and allegations of potential financial impropriety.

Epsilon Healthcare manufactures medicinal cannabis products at a facility at Southport on the Gold Coast. The company entered into administration on December 17. Epsilon Healthcare
Camera IconEpsilon Healthcare manufactures medicinal cannabis products at a facility at Southport on the Gold Coast. The company entered into administration on December 17. Epsilon Healthcare Credit: News Corp Australia

On November 20, the company’s deputy chairman Alan Beasley proposed an extraordinary general meeting (EGMS) to appoint Peter Giannopoulos as a director of the company and remove Xiao (Josh) Cui as a company director.

Mr Cui is the board’s chair.

On November 21, the company announced Mr Giannopoulos’ termination as chief executive before the end of his probationary period.

On December 14, Mr Cui called for an EGM to remove Mr Beasley as a director.

In the November 20 announcement, Mr Beasley said Mr Cui may have engaged in financial impropriety, including the nondisclosure of payments from Epsilon to Watercrest Asset Management, which Mr Beasley says is owned by Mr Cui.

“Based on ASIC records, Mr Cui controls 100 per cent of Watercrest through a series of holding companies,” Mr Beasley said.

“The payments to Watercrest have not been disclosed to shareholders.

“The quantum of payments is unclear to me.

“When I wrote to Mr Cui, I expressed my concerns that the payments not only were not disclosed, but they were, as far as I am aware, never approved by the board of EPN and I was not aware of any agreement to support the payments.

“In his written response, Mr Cui said to me that the payments ‘have been made pursuant to a consultancy agreement dated December 5, 2022, executed by Stuart Cameron as director on behalf on EPN (Epsilon)’.”

Ian Purchas from SV Partners met with Epsilon employees on Tuesday on the Gold Coast. Supplied
Camera IconIan Purchas from SV Partners met with Epsilon employees on Tuesday on the Gold Coast. Supplied Credit: News Corp Australia

In the December 14 announcement, Mr Cui rejects Mr Beasley’s allegations and says payments from Epsilon to Watercrest constituted remuneration for his consultancy work with Epsilon and the payments were not hidden from Mr Beasley.

Mr Purchas has cancelled the EGMs as he assesses the business.

“As administrators, we haven’t formed a view one way or the other on those (the allegations),” Mr Purchas said.

“We have the ability to appoint and remove or replace directors if we think that is in the best interests of the company.”

Epsilon operates a medicinal cannabis manufacturing facility at Southport on the Gold Coast and a medicinal marijuana clinic under the Tetra Health brand.

The $8m company has 25 employees and Mr Purchas told workers at the Southport facility on Tuesday that he had no plans to make cuts.

“There are no job losses in the pipeline, it is not even being considered,” he told NCA NewsWire.

“But that is based on available information to date.”

Epsilon has lost about $44m in the past four years of trading, but Mr Purchas said he saw “strength” in the business.

“They are getting strong forward orders,” he said.

“From my visit there yesterday, they seem to have their processes and procedures going well and strongly. They seem to have a good supply chain.”

Originally published as ASX-listed cannabis company Epsilon Healthcare enters administration

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