• The Concerned Shareholders call on this self-serving, self-interested and self-preserving Board to STAND DOWN to the will of nearly 40% of Australis’ shareholders.
  • Other Australis shareholders who are supportive of Board change are encouraged to contact Laurel Hill Advisory Group at 1-877-452-7184, or [email protected] to register their support.

TORONTO, Sept. 9, 2020 –  Terry Booth, Lola Ventures Inc., Roger Sykes, 1703469 Alberta Ltd., Duke Fu, Green Therapeutics LLC and Jason Dyck (the “Concerned Shareholders“) each of whom is a shareholder of Australis Capital Inc. (“Australis” or the “Company“) (CSE: AUSA) wish to comment on recent developments and the continued efforts of the members of the incumbent board (the “Board“) to protect their own interests rather than seek to create value for all shareholders of the Company. The Concerned Shareholders collectively own, direct or control approximately 7.9% of Australis’ outstanding common shares and have garnered indications of support of other shareholders of over 31% of Australis’ outstanding common shares – collectively, these holders of approximately 40% of Australis’ issued and outstanding common shares demand leadership change. This is in stark contrast to the members of the current Board who currently collectively hold only 2,193,6001 common shares or approximately 1.2% of Australis’ outstanding common shares.

After attempting to bury their embarrassing financial results by releasing them late on a Friday afternoon, the Board finally responded to the demands of the Concerned Shareholders and confirmed the date for Australis’ annual meeting of shareholders (the “Meeting“). Only after the Concerned Shareholders requisitioned a meeting did the Board take the necessary steps to confirm the November 17, 2020 annual meeting of shareholders, effectively forcing the Board to finally give shareholders an opportunity to choose the leadership path forward for Australis.

Additionally, the Board continued to show a lack of regard for shareholders and has taken steps to protect its own interests in how it settled matters with former Australis Executive Chairman and CEO Scott Dowty (“Dowty“). The fact is that Passport terminated the proposed related party Passport transaction, so we find it surprising and alarming that the Board released Passport from its break fee obligations, allowed Dowty to retain his previously awarded restricted share units, and agreed to issue him 4.25 million common shares of Australis. Furthermore, the settlement agreement precludes any future claims of any kind between the parties – a clear attempt to frustrate the eventual new Australis board and management from taking action to pursue Dowty for unwarranted Board-approved payments to Passport. The settlement with Dowty is nothing more than an effort by the Board to cover up its own past gross mismanagement.


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The Concerned Shareholders have been attempting to engage the Board in discussions so as to achieve a negotiated settlement. Recently, and after weeks of delays, the Concerned Shareholders finally pinned down the Board to discuss a possible settlement. The Concerned Shareholders offered the Board a fair and equitable settlement in which the Concerned Shareholders would appoint three nominees to the Board, with two existing Board members continuing to serve. This was done as the Concerned Shareholders wish to preserve Australis’ dwindling cash resources and quickly move forward with their plans for the Company, further demonstrating that the Concerned Shareholders have the interests of the Company and all of its shareholders in mind, The Board, however, continues to ignore the fact that the desire for leadership change is supported by holders of almost 40% of the outstanding shares. The Board did not attempt to make any counter settlement offer but instead has signaled that it will instead continue fighting while recklessly draining the Company’s coffers. 

It is clear that the three remaining Board members, John Dover, Harry DeMott and Roger Swainson, are attempting to preserve their jobs and avoid being held accountable for questionable decisions by canvassing for possible acquisitions. This is too little too late. This Board has had more than enough time to develop a clear, actionable plan for the Company – years in fact.  Regardless of what opportunities the Board is able to come up with in their desperate attempt to save their board seats, this is not a leadership team that can be trusted to execute given their atrocious track record of previously failed transactions. While at the helm of Australis, the Board oversaw the failed acquisitions of Folium Biosciences (“Folium“), burning $1.2 million of cash in the process, and followed that up with the failed acquisition of Passport – a deeply flawed transaction altogether which resulted in additional reputational damage to the Company. Accordingly, even if a stellar opportunity is identified, this Board cannot be trusted to conduct due diligence or negotiate the terms of any potential transaction.

Moreover, the Board’s repeated lapses in corporate governance are also deeply concerning and underscore the need for change:

  • The Board clearly failed to properly conduct due diligence for the Folium and Passport transactions prior to committing the Company down these two failed, costly paths. Had the Board conducted proper diligence before committing to those transactions like an effective board would have, Australis would not have burned significant resources and wasted years.
  • The Board has not yet publicly confirmed that the originally scheduled September 22, 2020, annual meeting of shareholders was postponed by a properly held meeting of the Board.
  • The Board is clearly attempting to avoid being held accountable for their track record of value destruction by unnecessarily delaying the Company’s annual meeting of shareholders by almost two months.

Examining Australis’ Q2 2020 financials further confirms the Board’s mismanagement of the Company and the lack of strategic direction. When presented with the facts, the need for change is obvious:

  • Depleting the treasury. During the 3-month period, the Company’s cash position declined by CAD $3 million. What does the Board have to show for this irresponsible and wasteful use of shareholder capital?
  • Pathetic revenue generation. During the second quarter of 2020, Australis generated a meager $62,802 of revenue of which $48,337 was derived from consulting services to Body and Mind Inc. (“BaM“) and $14,465 consisted of merchant service fees derived from the Company’s wholly owned subsidiary, Paytron. The Company generated no revenue from plant touching cannabis operations which underscores the fact that, despite having strong access to capital, the Board’s inability to execute has led to missed opportunities to capitalize on an enviable and advantageous position.
  • Zero traction in Cocoon kiosk business. In contrast to the exaggerated business prospects for Australis within the dispensary kiosk business touted by the Board, the Company reported zero revenue from its Cocoon technology platform. Furthermore, in December 2019, the Company entered into a vendor agreement with RapidCash ATM Ltd. (“RapidCash“) for the purchase of kiosks to be used in conjunction with the Cocoon technology platform. Pursuant to the vendor agreement, Australis paid 5 million common shares of BaM valued at $2.7 million to RapidCash. What has the Company received in return for this investment? Unfortunately, nothing, as the Company recently disclosed that it has not yet procured any kiosks from RapidCash. How can the Board be trusted to continue leading the Company when it’s clear that the path they’ve gone down has been a complete failure?
  • Wasteful spending on bad deals. In November 2019, Australis paid 5 million BaM shares, valued at $3.6 million, to ASTOUND GROUP (“Astound“) in exchange for brand optimization and awareness services aimed at promoting the brand assets acquired from Green Therapeutics LLC (“GT“). As disclosed in the Company’s Q2 financials, the Company has only used $105,665 in services from Astound. This not only highlights the Company’s failure to advance previously acquired cannabis assets and take advantage of the opportunities in the Nevada market but also management’s track record of making bad deals. The agreement with Astound calls for a make whole payment if the BaM shares are valued at less than $0.72 per share on November 20, 2020. BaM shares are currently valued at $0.45 per share which equates to a make whole payment of approximately $1.35 million. Why is management squandering the Company’s resources on unutilized marketing projects and why is the Board allowing this wasteful spending to go unchecked?
  • Questionable compensation. The Company’s Q2 financial results revealed highly suspect head office spend and executive compensation when compared to the Company’s exceedingly poor recent share price performance and lack of execution. The Company paid $979,702 in salaries and benefits, of which $319,576 was paid to related parties and $137,000 was paid out as bonuses to management. How can the Board and management team which has seen its share price decline by over -90% since inception justify paying themselves bonuses? Clearly, the Board members are looking out for their own best interests and shareholders are picking up the tab.

This abysmal performance reiterates the case for the Board’s swift removal. The fact is, the current leadership of the Company is broken and not acting in the best interests of Shareholders. New stewardship is needed. The board nominees put forth by the Concerned Shareholders (see press releases dated August 17, 2020 and August 31, 2020) (the “Concerned Shareholder Nominees“) have significant experience in the cannabis industry (including in the United States) and will seek to restore shareholder value through disciplined capital allocation. The Concerned Shareholder Nominees will chart a new path forward for Australis focused on ramping up revenues derived from the Company’s existing plant-touching cannabis assets and acquiring additional assets that are synergistic to the goal of achieving profitable growth.

The Concerned Shareholders’ will share details of their plans with Shareholders in advance of the Meeting but can confirm that such plans are well advanced, unlike those of the current Board, which has had to resort to delaying the Meeting while it scrambles to come up with a plan to present to shareholders in order to save their positions with the Company.

We call on the members of this self-serving, self-interested and self-preserving Board to STAND DOWN to the will of the holders of nearly 40% of Australis’ outstanding shares.

For further information or to register your support for Board change, please contact the Concerned Shareholders’ shareholder communications advisor, Laurel Hill Advisory Group, toll free: 1-877-452-7184, International: +1 416-304-0211 outside Canada and the U.S., or by email: [email protected].

Additional Information

The information contained in this news release does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable securities laws.  In connection with the Meeting, the Concerned Shareholders intend to file a dissident information circular in due course in compliance with applicable corporate and securities laws.

Notwithstanding the foregoing, the Concerned Shareholders are voluntarily providing the disclosure required under section 9.2(4) of National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102“) and have filed a document (the “Document“) containing the disclosure required under section 9.2(6) of NI 51-102 in respect of the Concerned Shareholder Nominees in accordance with securities laws applicable to public broadcast solicitations. The Document is available under the Company’s profile on SEDAR at www.sedar.com.

This news release and any solicitation made by the Concerned Shareholders in advance of the Meeting is, or will be, as applicable, made by the Concerned Shareholders, and not by or on behalf of the management of Australis. All costs incurred for any solicitation will be borne by the Concerned Shareholders, provided that, subject to applicable law, the Concerned Shareholders may seek reimbursement from Australis of the Concerned Shareholders’ out-of-pocket expenses, including proxy solicitation expenses and legal fees.

The Concerned Shareholders are not soliciting proxies in connection with the Meeting at this time, and shareholders are not being asked at this time to execute proxies in favour of the Concerned Shareholders (in respect of the Meeting). Proxies may be solicited by the Concerned Shareholders pursuant to an Information Circular sent to shareholders after which solicitations may be made by or on behalf of the Concerned Shareholders, by mail, telephone, fax, email or other electronic means as well as by newspaper or other media advertising, and in person by the Concerned Shareholders, who will not be specifically remunerated therefor. The Concerned Shareholders may also solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, conveyed by way of public broadcast, including through press releases, speeches or publications, and by any other manner permitted under applicable Canadian laws. The Concerned Shareholders may engage the services of one or more agents and authorize other persons to assist in soliciting proxies on behalf of the Concerned Shareholders.

The Concerned Shareholders are not requesting that Australis shareholders submit a proxy at this time. If and when the Concerned Shareholders commence a formal solicitation of proxies in connection with the Meeting, proxies may be revoked by a registered holder of the Company’s shares (i) by completing and signing a valid proxy bearing a later date and returning it in accordance with the instructions contained in the accompanying form of proxy; (ii) by depositing an instrument in writing executed by the shareholder or by their attorney authorized in writing, as the case may be: (a) at the registered office of the Company at any time up to and including the last business day preceding the day the Meeting or any adjournment or postponement of the Meeting is to be held; or (b) with the Chairman of the Meeting prior to its commencement on the day of the Meeting or any adjournment or postponement of the Meeting; or (iii) in any other manner permitted by law.  If and when the Concerned Shareholders have commenced a formal solicitation of proxies in connection with the Meeting, proxies may be revoked by a non-registered holder of the Company’s shares at any time by written notice to the intermediary in accordance with the instructions given to the non-registered holder by its intermediary.

None of the Concerned Shareholders or the Concerned Shareholder Nominees or, to their knowledge, any of their associates or affiliates, (I) has any material interest, direct or indirect, in any matter proposed to be acted on at the Meeting, other than the election of directors or (ii) has had any material interest, direct or indirect, in any transaction or proposed transaction since the commencement of the Company’s last financial year that has materially affected or could materially affect the Company or any of its subsidiaries (if applicable) other than as set forth below in respect of Dr. Fu.

Green Therapeutics, LLC, a company in which Dr. Fu owns, directs or controls 49.5% of the shares, completed a transaction with Australis in May 2019 to acquire Green Therapeutics, LLC’s Tsunami™, Provisions™, and GT Flowers cannabis brands, certain operating assets, intellectual property and the right to assume, complete and expand the construction of a state-of-the-art 55,000 square foot cultivation and production facility in North Las Vegas, Nevada.  Pursuant to the terms of the transaction Australis issued 7,831,855 common shares valued at $6.4 million upon the signing of the definitive agreement. An additional $800,000 are to be issued when a new cultivation and production facility in North Las Vegas is fully licensed and operational and an additional $800,000 in shares are to be issued if certain performance goals are reached utilizing the acquired assets within specified timeframes per the definitive agreement. In a separate transaction completed in May 2019, Australis acquired from Meridian Companies LLC, a company in which Dr. Fu owns, directs or controls 37.5% of the outstanding shares, an 8.9-acre parcel of land in North Las Vegas in exchange for $2.93 million USD of its common stock or 3,585,521 Australis common shares where the new cultivation and production facility will be located. Full details of these transactions can be found in the Australis public disclosure record. 

Based on public disclosure documents, it is our understanding that the head office of Australis is 376 E. Warm Springs Road, Suite 190, Las Vegas, Nevada 89119.

The Concerned Shareholders have filed this press release, which contains the information required by section 9.2(4)(c), and the Document which contains the information required by section 9.2(6) of NI 51-102 and Form 51-102F5 Information Circular in respect of the Concerned Shareholders Nominees, under Australis’ profile on SEDAR at www.sedar.com.

_________________________
1 Source: SEDI filings

SOURCE Concerned Shareholders of Australis Capital Inc.

Australis Board Continues to Protect its Own Interests to the Detriment of Shareholders and Takes Action Only When Compelled by the Concerned Shareholders

For further information: please contact the Concerned Shareholders’ shareholder communications advisor: Laurel Hill Advisory Group, Toll Free: 1-877-452-7184, International: +1 416-304-0211 outside Canada and the US, By Email: [email protected]