The Pot Seat: Haim Cohen says eSense has ‘suffered enough’ and 2019’s contracts will stick
Health & Biotech
Health & Biotech
Link copied to
The battle royale for faux-cannabis terpene maker eSense Lab (ASX:ESE) over the 2018 summer was so damaging it fundamentally slowed the business, says CEO Haim Cohen.
Mr Cohen, who was voted off the board at the AGM two weeks ago, says only in the last few months has the company been able to start moving forward again.
“You think it all stopped on the 29 of March last year, when [with] the results of the AGM Otsana was out of the company. It’s not true. Of course they lost [but] some things are still in court in Israel.”
eSense’s troubles began in late 2017, when an increasingly vicious war of words broke into the public sphere between the year-old company’s Australian corporate advisor at the time, Perth-based Ostana Capital, and a group with Mr Cohen at its centre.
Over the summer the stoush shifted into the legal sphere and the Australian directors accused the Israeli board members of signing deals that created no value for the company or shareholders.
The Israeli directors accused the Australians — two of whom work for the company’s now-ex corporate advisor Otsana Capital — of working for their own interests and trying to take control of the company.
Sacked chairman Brendan de Kauwe went so far as to create his own website to rebut the accusations.
A shareholder vote at the end of March 2018 supported the Israel faction.
Since then the company’s share price has been in freefall — aside from a spike in October when it announced a then-half cooked deal.
Mr Cohen is prophesying a more sunny year ahead.
They are supplying a US e-cigarette business called VaporSpec with vaping liquid, and a UK company called e-Quits which makes cannabidiol blends with eSense’s terpenes, the fragrant oils found in plants that carry flavour and aroma.
The cannabis varieties carry the pungent odour of cannabis and offer some medicinal properties — but they don’t contain THC or CBD.
“I’m pretty sure 2019 will be good for eSense, because now we can work at last,” he told Stockhead. “Until a few months ago we still have all the noise because of what happened with Otsana. The damage for eSense was unbelievable in the market in Australia.”
Almost all of the contracts eSense signed before the UK e-Quits deal was revealed in October have fallen through.
When asked why shareholders should believe that this time it’s different, Mr Cohen said they were no longer selling through channel partners.
“The difference with previous deals and the Vaporspec agreement is we’ll be selling our product exactly to the retail distribution chains, and they will integrate our product directly.”
The big contracts were in 2017: US company Allor Vaporisers owed, as of last year, $385,000; Singaporean Advanced Technology Management was supposed to buy at least $540,000 of the oils also in 2017; and Dubai company IC Access — which allegedly had a Bulgaria connection — signed a $1.1m deal.
The Allor and IC Access deals have completely fallen through.
eSense sent about 500 samples to Allor in the US, but after buying about 30 litres, the company realised it couldn’t sell it.
“The experience with them from my point of view was unsuccessful for many reasons. I think Allor was not ready for a marketing campaign based in the US,” Mr Cohen said.
And, “in the beginning our product was not very good.”
Mr Cohen says they could take Allor to court, but the company had “suffered enough” through the legal system last year.
When asked if eSense will see any money down from IC Access, he said “no”.
“On January 13 we get an email from the people that were dealing with IC. The email was sent to our VP of business development Shaul Schneider… Please be informed that IC Access was sold and has new ownership [and your contract is no longer valid].”
Mr Cohen blamed the breakdown of this contract on the boardroom stoush: they signed the deal and IC had to use a third party — the Bulgarians — to get product from Israel into Dubai.
This was raised with the ASX, which started investigating and suspended the company for the duration. IC Access started asking questions and ultimately, for a bank guarantee to ensure eSense could deliver, “and then everything blew up” in the boardroom.
Other contracts to work with beer companies such as Young Henrys in Australia and a chocolatier in the US fell over after they asked for financial help in creating formulations or with marketing.
Mr Cohen says eSense simply didn’t have the money to co-create a new product – especially when the chocolatier was asking for $200,000 for marketing and branding.
“It’s all a matter of timing. Today we are completely confident in our product, but it takes time…. We need to find the right company to work with.”
The only pre-2018 contract that might stand up is the Singaporean one.
“Two weeks ago the CEO of ATM emailed to say the Ministry of Health in Singapore has authorised to import eSense terpenes into Singapore,” Mr Cohen says.
The ministry required ATM to test each of the 35 terpenes in the blend for safety, which took six months.
The next step is to send samples, which should happen in the next few weeks.
Mr Cohen expects new orders from e-Quits to be forthcoming soon — they’ve sold 9 litres to that company so far.
They’re also looking to bring in another vaping liquid deal and a cosmetics deal with a company in Israel.
But he has to do this as a CEO who isn’t on the board.
Mr Cohen says this isn’t a problem — especially in Israel, where it’s almost frowned on for a CEO to sit among the people who are supposed to keep management in line.
“You can see who votes, I know who voted against me… it’s ok with me. I don’t care, I have a good relationship with our board members and the chairman.”
“You won’t find any Israeli public company where the CEO is also a board member; it’s too much responsibility.”
In Australia, of course, it’s a problem and new chairman Piers Lewis is visiting Israel in a few weeks to figure out what can be done.