This was published 11 years ago, however relevant to some of the circumstances OBJ/Wellfully find themselves in today.
Biffo on boil as OBJ putsch gathers steamBy Ian McIlwraithDecember 12, 2008 — 12.00am
IF YOU enjoy a bit of corporate biffo, and are in Perth in mid-January, the John Worsfold Room (named for the former West Coast Eagles hard man) at Subiaco Oval might be the place to be.For years Castle Lancelot has had an electric kettle that makes so much noise when it is boiling, the volume on the TV has to be doubled and people hide in corners to make phone calls.But for the equivalent of around two BHP shares, and 80 minutes of queuing, Lancelot recently managed to purchase a new kettle with a clever technological wrinkle — it apparently produces smaller bubbles — and makes so little noise that it needs a bell (for those old enough to remember, the sound is reminiscent of an old typewriter carriage return) to let you know it's time to make the cuppa.As he sat back to enjoy his "stealth" tea yesterday, Lancelot noticed that in the case of the tiny OBJ Ltd, no matter how good the technology, investors are not always patient forever.OBJ, for the last few years, has been specialising in skin patches for drug delivery. Lancelot, due to the excesses of a sadly distant youth, has some experience with the conventional version of these so-called transdermal patches.OBJ's additional technological wrinkle is that its patches use two types of technology involving magnets to enhance the passing through the skin of the drugs.It also brought cervical cancer drug developer Professor Ian Frazer on board as a scientific adviser.In recent weeks OBJ has been working with an unnamed company, absurdly initialised in OBJ's market releases as an FMCG (Fast Moving Consumer Goods) company, to do a feasibility study on those delivery methods.And it has recently begun branching out into a hopefully cash-generating business by trying to tie up a deal with Melbourne group BreatheAssist.Whether it gets to deliver on any of that is now a moot point, because a ginger group of investors, led by Queenslander Rob Douglas and including Perth property developer John Simpson and family, are trying to unseat the incumbent board.The meeting on January 19, which could be a close-run thing judging by shareholder voting numbers at the annual meeting just a few weeks back, seeks to depose existing directors Glyn Denison, Jeff Edwards and Chris Quirk.Douglas, whose reform ticket includes Queensland consultant Roger Mychajlyk and long-term OBJ investor Sum Meng Fong, are unhappy that OBJ is paying a couple of juicy salaries to executives, its scientific progress and that it has begun issuing lots of shares — including a current rights issue supported by Perth broker Paterson Securities.OBJ is reasonably financially healthy for a small biotechnology company. At the beginning of the last financial year it had $2 million in cash, whittled down to about $1.3 million by June 30 even though the group received revenue from grants and a potential commercial partner evaluating its technology.Jeff Edwards, who is the sole executive director, picked up almost $150,000 in 2008. Lancelot knows Edwards is hard working because when he rang him yesterday he said he couldn't talk because he was in the middle of an experiment, and needed to write down some numbers. Edwards said he'd call back, but obviously got stuck in the lab.OBJ's chief operating officer, Leearn Hinch, took home more than $250,000, including a $20,000 bonus. OBJ director Glyn Denison, who cut his public company teeth at ticketing group ERG, says Hinch's remuneration is unexceptional, that the company has to pay what the market dictates.Still, to Lancelot's mind, it is a lot in a company with a market worth of less than $3.5 million. Mind you, given OBJ's teeny share price of 0.5¢, giving Hinch stock instead of cash could have resulted in her getting about 4 million shares as a bonus.OBJ demonstrated the effects of converting debts to shares in September when some little-known convertible notes, covering $265,000 of debt, were converted to 68 million shares. About a quarter of those went to Monarch Corporation, which is associated with the Palermo family. Palermos, young and old, have been associated with OBJ and John Palermo is currently company secretary.Denison says the notes reflect people having taken equity in kind for services rendered and it was effectively cheap for OBJ.Lancelot hears, however, that some lawyers' letters may well have been exchanged querying the conversion price of 0.5¢ a share.OBJ's disclosure document for the new 3-for-10 rights issue, priced at 0.5¢ each, also reveals there is a "litigation risk" against the company."The company is aware of certain allegations raised in relation to its technology development process and the verification of external test results … that one or more reports in relation to external test results is not independent because one or more of the scientists involved in the preparation of the reports hold securities in the company," said the documents.Most of OBJ's testing was done at Curtin University, with some checks done at Queensland University, which didn't fully bear out the Curtin outcomes. OBJ has hired a third party to look into the discrepancies.Speaking of QU, Professor Frazer yesterday relinquished his advisory role to OBJ, saying he hadn't heard from the company in a year and had plenty of other things to keep him busy.Interestingly, an old colleague of Frazer's, Ken Donald, joined the OBJ board in May, but was gone by late September. He and Gil Shearer, who joined at the same time, left at the same time.Lancelot understands the initial appointment of the two men was backed by the shareholders now in Rob Douglas' putsch.How far Douglas and his team can get under the skin of OBJ remains to be seen, but they think they have perhaps as much as 200 million shares, or 40 per cent, backing them.
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