SAN FRANCISCO, July 01, 2020 (GLOBE NEWSWIRE) -- A proposed complex transfer of assets between subsidiaries of privately-held cannabis testing company Steep Hill, Inc., and competitor EVIO, Inc., would dismantle Steep Hill and strip shareholders of value, an attorney for Steep Hill’s former CEO and Chairman Jmichaele Keller said today.
“The plan also includes a series of internal transactions that would dilute existing shareholders from 100% of Steep Hill’s equity down to just 4%,” said Keller’s attorney, Thomas H. Vidal of the law firm PryorCashman LLP in Los Angeles.
Earlier this year, Keller filed suit in San Francisco Superior Court against Steep Hill and various insiders, alleging abuse of fiduciary duty, abuse of control, corporate waste, fraud and concealment, and misrepresentation of stock ownership and proxy voting, as well as other wrongful activities.
Defendants involved in the suit with Steep Hill include Merida Capital Partners, Mitch Bryan Baruchowitz, Jeffrey M. Monat, Gotham Green, Richard Jacinto II, Stephen Joseph Finfer, Randy Slifka, Jane Wright-Mitchell and Dr. Andrew Rosenstein.
The suit questioned the validity of all actions taken by the company’s Contested Board and Contested Management since 2018 because of improprieties in ousting Keller. As a result, the Board and management are “contested.”
Under Keller’s leadership, the suit says, Steep Hill was expanding throughout the U.S. and globally, but he was forced out beginning in August of 2018. The suit alleges Keller was terminated in retaliation for resisting efforts by a “cabal” of investors seeking to enrich themselves at the expense of shareholders.
In a matter of months thereafter, the Contested Board and Contested Management “ran the company into the ground” and “squandered between $75 million and $200 million of shareholder value,” according to the lawsuit.
This included disposing of key assets such as the company’s genetics-related intellectual property and genetics team that had been built over years and made Steep Hill a leader in the industry, the suit says. Contested Management also dismantled Steep Hill’s proprietary MyLab software and development team.
From the outset of their involvement with Steep Hill, the suit alleges, it was apparent that the defendants sought to enrich themselves and dilute other shareholders, especially minority shareholders. Such unjust enrichment included warrants, options, compensation, uncollected licensing fees, insider debt obligations and other benefits, the suit says.
Thomas H. Vidal
Partner, PryorCashman LLP