Reject Dissidents


Collapse all | Expand all

Dissident Director Nominees' Hidden Ownership Position in the Start-Up>

Mr. Durkacz, a director of the Company, with the support of former President and director Mr. Saeed, first brought a proposal for the Company to acquire the Start-Up in November 2020. At that time, Mr. Durkacz do not disclosed that he and/or his affiliates have a material financial interest in the Start-Up and stood to substantially benefit from the Company acquiring the Start-Up.

Putting aside the legal implications of this behaviour, Shareholders have a right to know if Mr. Durkacz as a Shareholder and director of the Company, and Mr. Saeed, as a Shareholder, former director and former officer of the Company, who purport to represent the interests of all Shareholders, stand to benefit from the transaction they demand – above and beyond the compensation they have received from the Company. The term for this is a conflict-of-interest and efforts to conceal a conflict of interest are a serious transgression in the capital markets.

Having been stopped by directors who take their duty to the Company and its Shareholders seriously, the Dissidents are now seeking to take control of the Company by way of a proxy contest. The Company and its leadership had hoped that the Dissidents would finally disclose their full interests in the Start-Up in the Dissident Circular, but when they failed to do so, the Company was left with no choice but to file a Notice of Application asserting that Mr. Durkacz and certain other Dissidents and their affiliates, have substantial interests in the Start-Up that they have not disclosed adequately, or at all, to Shareholders or to the Board, in contravention of applicable law.

Start-Up Psychedelic is the Wrong Investment at the Wrong Time>

When Mr. Durkacz and Mr. Saeed proposed acquiring the Start-Up, the Company commenced a due diligence review, as it would with any proposed transaction. This included a number of activities, including, personally reaching out to the Start-Up's CEO, reviewing numerous documents relating to its research and business and analyzing the viability of acquiring the Start-Up. Throughout the due diligence review, Mr. Durkacz and Mr. Saeed pressured, insisted and demanded that the Start-Up be acquired. Despite this inappropriate conduct, after completing its review, the Company concluded that it would not be in its best interest to acquire the Start-Up for a number of reasons, including that:

  • the Start-Up was planning to explore the pharmacological uses of psychedelics, but it did not have access to any psychedelics;
  • the Start-Up did not fit with the Company's strategy of focusing on clinical stage, rather than exploratory, drug development companies; and
  • the Start-Up had no track record or operating history, no psychedelic patents, no record of spending on R&D, no clinical or pre-clinical business and no meaningful cash on its balance sheet.

The Dissidents Seek Disproportionate Control of the Board, with a Plan to Double Down on their Failed Strategy>

The Dissidents state that they hold 26.31% of the Company's Shares. The vast majority of this position is a result of Mr. Durkacz and Mr. Saeed holding a total between them of 48 Class A Shares, with each Class A Share having 276,660 votes. There is no corresponding economic interest attached to the Class A Shares. The Class A Shares were acquired for nominal consideration of a few hundred dollars in connection with the Company's Canadian public listing as a medical cannabis company in early 2018. However, the Dissidents are now seeking 100% control of the Board. This is a disproportionate demand that should be concerning to all Shareholders. This is not a Board renewal – it is a Board coup by a group that, in the aggregate, holds only 2.7% of the Class B Shares, being the publicly traded shares of the Company.

When a dissident shareholder group seeks a majority – let alone total – control of a board of directors, proxy advisors require them to submit a fulsome alternative plan or a superior strategic plan for shareholders to consider. The Dissidents have failed to do this. Instead, the Dissident Circular provides five cursory bullet points that are vague and tactical in nature. The issue is not that the Dissidents are lacking a superior strategy; it is that the Dissidents don’t have any strategy for the Company. Certain Dissidents intend to advance their own financial interests by entering into speculative transactions with promises that are highly unlikely to materialize into actions or any real shareholder value.

The Dissidents have also failed to provide credentials of a qualified and experienced management.

Shareholders should pay special attention to the first bullet in the Dissident Circular where they state their intention to: "acquire biotechnology assets focused on legal medical cannabis and/or legal psychedelics to increase the Company’s drug development pipeline and reduce reliance on a single compound."[1]

There are two points of concern with this statement.

  1. The Dissidents refer to acquiring "legal psychedelics", they are referring to the non-arm's-length transaction to acquire the Start-Up, where Durkacz and certain other Dissidents stand to benefit at the expense of other Shareholders.
  2. The "legal medical cannabis" strategy was Mr. Durkacz's and Mr. Saeed's strategy when they were both directors and officers of the Company. That strategy failed and was replaced in the fall of 2018, when the Board – including Durkacz and Mr. Saeed – made the decision to shift the Company’s focus to biotechnology and FDA approved pharmaceutical R&D, under the strengthened leadership of Dr. Bokhari and the incumbent Management Director Nominees.

The current strategy and recovery from Mr. Durkacz's and Mr. Saeed's past mistakes are already gaining positive momentum in the capital markets, but the Dissidents want to take the Company backwards and return to the errors of their ways.

[1] FSD Pharma Inc. Dissident Circular, March 17, 2021

Material Concerns with the Dissident Director Nominees>

There are a number of significant independence, conflict of interest and competency concerns with the Dissident Director Nominees. This suggests that they are not well-positioned to represent the interests of ALL Shareholders. At the centre of this concern is Mr. Durkacz, First Republic Capital Corporation and pre-existing and interlocking relationships among the Dissident Director Nominees.

We also note that Mr. Durkacz and Mr. Saeed are non-independent, and even ignoring the interlocking relationships among the Dissident Director Nominees, the overall independence level of the Dissident Director Nominees is only 60%. To the extent that Mr. Latowsky is determined not to be independent, by virtue of his relationships with Mr. Durkacz and his affiliates, there would be fewer than three independent Dissident Director Nominees. In that circumstance, the Company may be in violation of applicable securities laws, including the policies of NASDAQ and the CSE, which may place the Company's NASDAQ listing in jeopardy.

In addition, while the Dissidents are spending pages in the Dissident Circular criticizing the loss of Shareholder value under Dr. Bokhari's leadership, it is puzzling that during such period while Mr. Durkacz and Mr. Saeed were on the Board, with one being Co-Chair of the Board and one being President of the Company, why both were silent about the Company’s strategic direction if they truly disagreed with Dr. Bokhari's vision.

Dissident Director Nominees>

Anthony Durkacz

Mr. Durkacz is a director and Executive Vice-President of First Republic Capital Corporation, which has an interest in the Start-Up he continues to insist that the Company purchase. He continues to obfuscate his ownership position in the Start-Up.

Mr. Durkacz has also forced the Company to incur expenses in the hundreds-of-thousands of dollars in unnecessary costs as it seeks to have the Ontario Superior Court of Justice force him to provide full and complete disclosure to all Shareholders, as well as in costs associated with a litigation and proxy contest that Mr. Durkacz foisted upon the Company after the Board refused to rubber-stamp the Start-Up transaction.


Zeeshan Saeed

Mr. Saeed is the former President and a former director of the Company who eagerly supports the plan for the Company to purchase the Start-Up. The Company understands that Mr. Saeed also has a conflict of interest in relation to the Start-Up, though the nature and extent of his interest has not been disclosed to the Company or its Shareholders.

Mr. Durkacz and Mr. Saeed were in large part responsible for the Company's struggles in the cannabis sector through unsuccessful cannabis investments.

Mr. Durkacz and Mr. Saeed have no drug development experience and, outside of the Company, have no senior public board experience.


Nitin Kaushal

According to the Dissident Circular, Mr. Kaushal sits on at least eight company boards. It is not clear how Mr. Kaushal would have the requisite time to serve the Shareholders should he be elected to serve as a director. Mr. Kaushal would also be deemed to be over-boarded by the standards of external proxy advisors, who do not believe that a director can provide adequate consideration when their attention is spread so thinly.

Among the numerous boards that Mr. Kaushal sits on is High Tide Inc., which has used Mr. Durkacz's First Republic Capital Corporation as an agent in the past.

The Dissidents have also disclosed concerning history regarding 3 Sixty Secure Corp. ("3 Sixty"), a company where Mr. Kaushal continues to serve as a director. On June 9, 2020, 3 Sixty announced that it was not able to file its annual financial statements and accompanying management's discussion and analysis for the financial year ended December 31, 2019, within the period prescribed for such filings. 3 Sixty made an application for a management cease trade order (the "MCTO") and, on June 18, 2020, the MCTO was issued by the Ontario Securities Commission (the "OSC") which restricted all trading in securities of 3 Sixty by its directors and officers until two business days following the completion of the required filings. On July 15, 2020, the OSC revoked the MCTO and issued a failure-to-file cease trade order (the "FFCTO"), ordering that all trading in the securities of 3 Sixty would cease, except in accordance with the conditions of the FFCTO, if any, for so long as the FFCTO remains in effect.


Lawrence (Larry) Latowsky

Mr. Latowsky is CEO of Canntab Therapeutics Limited, for which Mr. Durkacz's First Republic Capital Corporation acts as an agent. This presents two concerns for the Shareholders. The first is that Mr. Latowsky and Mr. Durkactz clearly have a longstanding relationship. While Mr. Latowsky may meet the strict technical definition of "independence" from the Company, it is reasonable to question if he would act independently of Mr. Durkactz at the boardroom table.

The Shareholders should also question Mr. Durkacz's relationship with Canntab Therapeutics Limited and how this could affect Mr. Latowsky's ability to put the interests of the Company and the Shareholders first, at the same time as Mr. Durkacz and First Republic Capital Corporation affects the prospects of Canntab Therapeutics Limited.

As with Mr. Durkacz and Mr. Saeed, Mr. Latowsky has no drug development or senior public board experience and is best known professionally for his association with cannabis start-ups.


Fernando Cugliari

The Dissident Circular describes Mr. Cugliari as an investment advisor with a legal background. He does not appear to have any experience as a director of a public company and it is unclear how his background positions him to add value as a director of a dual-listed, specialty biotech pharmaceutical holding company.

Disingenuous Dissident Claims are Aimed to Distract Shareholders from their Attempt to Take Control of the Company >

The Dissidents purport to have a number of concerns with the Company, but that is not what this proxy contest is really about. On its face, this is about the Dissidents seeking 100% control of your Board on the back of Class A Shares, which they neither earned nor acquired for value. The Dissidents want control to push through a non-arm's-length transaction, for an unattractive asset, in which Mr. Durkacz and other Dissidents stand to benefit at the expense of the interests of all other Shareholders.

The Dissidents' feigned and unsubstantiated concerns are an attempt to distract and confuse Shareholders just enough to allow them to take control of the Board. See "Background to the Meeting – Rebuttal of Dissident Allegations" below. If Shareholders aren’t paying attention or fail to support the Management Director Nominees on the BLUE proxy, the Dissidents' strategy might work.

The Dissidents have failed to acknowledge their role in the Company's past loss of Shareholder value. While the Dissidents have been quick to criticize Dr. Bokhari's leadership, Mr. Durkacz and Mr. Saeed, as longstanding Co-Chair of the Board and President of the Company, respectively, and champions of its failed medical cannabis cultivation strategy, are responsible for the Company's performance. Furthermore, if Mr. Durkacz and Mr. Saeed truly disagreed with Dr. Bokhari's vision, it should be troubling to Shareholders that they were unable to articulate their concerns and/or propose alternative solutions in the Dissident Circular. They have not presented any names or credentials of the management that they will put in place should the Dissident Director Nominees be elected and have also not offered a comprehensive strategic business plan that they will follow to create shareholder value.

It is also disingenuous for the Dissidents, and especially Mr. Durkacz and Mr. Saeed, to suddenly feign concern with the Company's compensation, as it is an approach they approved as directors and supported until very recently, when the other directors of the Company refused to put Mr. Durkacz's interests ahead of the interests of all other Shareholders and push through the acquisition of the Start-up.

Similarly, Mr. Durkacz and Mr. Saeed previously approved the Company's approach to issuing equity in order to fund its drug development, with Mr. Durkacz's First Republic Capital Corporation playing a central role in the past. Both Mr. Durkacz and Mr. Saeed are well aware of the Company’s need to fund its operations and development and the significant upside for the Company and its Shareholders, should the FDA continue to approve its compounds.

In a proxy contest, it can be difficult for Shareholders to separate fact from fiction. In this instance, Shareholders need not take management's word for it. To further highlight the disingenuous nature of the Dissidents' allegations, in November 2020, Mr. Durkacz gave a presentation to the Executive Committee of the Board and to Company management in which he was complimentary of management. He said that management "outperforms", and that the Company has an "institutional quality Board".

Increase the value of your investment.

Vote Blue Now

Speak to a Live Agent

Send us your questions, comments, and/or feedback and we will get back to you as soon as we can.