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Cannabis company board blows whistle on own CEO

In a securities filing Monday, Corix Bioscience, Inc. said it terminated its CEO. The action came after the board's internal investigation found that about a dozen press releases from the company were partly inaccurate or entirely untrue.

The Arizona-based cannabidiol developer said Chief Executive Officer Michael Ogburn resigned after the board terminated his employment.

Corix is a penny stock that trades under the symbol CXBS.

The company's website says Corix "has invested millions into state of the art laboratories, grow farms and scientific research in order to find the best medical applications and treatments of cannabidiol."

"Corix has locations in the U.S., Africa and UK, manufacturing the best and safest CBD oils in the world," according to the website.

The board conducted a review of about a dozen press releases issued by Ogburn from March 2017 through the present, Monday's filing said.

Most of the press releases contained inaccurate statements, according to the review. The board warned the public not to rely "on the representations" in some of the press releases.

In March, activist shareholder George Sharp alleged that he'd "uncovered a litany of fraud committed by current CEO, Michael Ogburn, and former CEO, Sean Zarinegar."

Sharp cited sworn testimony that the signature of a director was forged on corporate documents filed with the SEC and that the director never gave his consent to join the board.

"In all the years that I have been an activist against penny stock fraud, I have never seen such brazen attempts to openly flaunt the law and defraud the public," Sharp said.

In April, the SEC suspended trading in Corix stock for two weeks.

The SEC said questions "have been raised about the accuracy and adequacy of publicly disseminated information concerning, among other things, the company’s assets and operations in Nevada."

OTC Markets said in April it "discontinued the display of quotes . . . for this security because it has been labeled Caveat Emptor (Buyer Beware)."

“Caveat Emptor” securities are marked with a skull and crossbones icon "to inform investors that there may be reason to exercise additional caution and perform thorough due diligence before making an investment decision in that security."

Corix said in Monday's filing that the "Board of Directors is in the process of interviewing candidates to serve as interim Chief Executive Officer and Chief Financial Officer."

*     *     *

Here are excerpts from Corix's Form 8-K filed with the SEC on June 18, 2018:

 . . . On June 5, 2017, the Company issued a press release titled “Corix Bioscience Announces Contract with Segra International, Inc,” stating in pertinent part, that the Company had contracted with Segra International Inc. to plan and construct a state-of-the-art tissue culture facility in Northern Nevada, and that the Company “…currently has over 200 acres of industrial hemp contracted that will sold as both dry flower and refined into CBD oil this fall.”

As a result of its internal investigation, the Board of Directors has determined that: (1) the agreement between the Company and Segra International, Inc., did not close and was not finalized, (2) the Company has not constructed a “tissue culture facility,” and (3) the Company, while it intended to develop a fully integrated process of growing and manufacturing cannabinoids, did not have systems in place at the time of this press release was issued. The Board of Directors advises that the public should not rely on these representations. . . .

On November 2, 2017, CFN Media issued a press release titled “Corix Looks to Standardize CBD for Athletes – CFN Media.” The press release stated, in pertinent part, that the Company “…currently grows industrial hemp on a 160-acre hemp farm in Genoa, Nevada that is expected to harvest 250,000 pounds of dry flower for extraction into oil, complemented by an 11,000 sq. ft. laboratory in Carson City, NV for genetic research and tissue culture. . . .

As a result of its internal investigation, the Board of Directors has determined that, at the time of this press release, the Company: (1) was not growing industrial hemp or cannabis, (2) had not purchased or began constructing the “genetic research and tissue culture” laboratory identified in this press release, and (3) did not hold any valid licenses to cultivate, handle, transport, process, distribute, export, or sell hemp or cannabis in Nevada or any other state in the United States. As such, the Board of Directors advises that the public should not rely on the representations in this press release.
On November 17, 2017, the Company issued a press release titled “Corix Bioscience to Co-Sponsor #90 NASCAR Xfinity Car with Joe DiMaggio Children’s Hospital.” The press release stated, in part, that, “Champ RX, a professional boxer-owned company with over 30 title belts between them has partnered with Corix and will have several Boxers and MMA Fighters on hand to tour DiMaggio Children's Hospital the morning of the race.”

As a result of its internal investigation, the Board of Directors has determined that, at the time of this press release, the Company had not officially partnered with Champ RX, i.e. had entered into a definitive operating agreement or related agreement memorializing the parties’ relationship . . . Additionally, the Company’s representation in the press release that, at the time, it was “growing” hemp or cannabis, or operated a laboratory and processing center in Carson City, Nevada, was not accurate. . . .
On March 20, 2018, the Company issued a press release titled “Corix Bioscience Announces Arrival of OG Group Personnel and Equipment in Adelanto; Installation of Custom-Made Extraction Systems Underway; Operating Team Targets Leadership Role in California Cannabis Industry.” . . .
As a result of its internal investigation, as stated above, the public should not rely on any representation that there is a definitive operating agreement between the Company and OG Group, even though the parties have been in ongoing negotiations, and [Corix Director Brian Werner] has met with the principals of OG Group who have confirmed their intent in entering into a definitive operating agreement this quarter.


Richard L. Cassin is the publisher and editor of the FCPA Blog.

Reader Comments (2)

This is almost unique in corporate law: A board behaving exactly as it should, albeit, belatedly. Netflix practice of having Directors participate in executive meetings should be the beginning of new "best practices."

June 19, 2018 | Unregistered CommenterProf Bruce W Bean
Except that the board members are in on it and are defendants in my litigation. This filings was about covering their tracks. Follow my blog for more news soon.
June 24, 2018 | Unregistered CommenterGeorge Sharp
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