chemeq to open south african office, page-3

During the 2005 year, Gadfly Consulting Pty Ltd, of which Mr JR Nicholls is a director, provided consulting services to the value of $937,500 to Chemeq. This over and above the directors fees and expenses paid to him. How nice.

In January 2005, an executive management team led by Nicholls was appointed to advise CMQ on a daily basis and Nicholls reported directly to the financiers. When called upon to pay for the bonds underwritten for the share options not taken up by shareholders on 30 June 2005, the financiers QUESTIONED whether CMQ had fulfilled the covenants and delayed the payment. You have to wonder what Nicholls & Davies were doing at board meetings and stranger still what Nicholls and his executive team were doing daily in CMQ. There were no publicly released information to indicate CMQ may have breached the covenant.


Now in 2006, the auditors Ernst&Young had stated the $1.7M SA sale may not qualify as revenue and CMQ may be in breach of the revenue covenant.

Consider these material facts:
1. South Africa accounted for almost 100% of CMQ’s total sales for the 04/05 fy.
2. The $1,470,000 disputed SA contract is in excess of 82% of CMQ’s total sales ($1.78M) for the 05/06 fy
3. South Africa has a $1.5M sale contract CMQ announced it will fill in the second half of 2006 – the ONLY groundbreaking sale for poultry.
4. South Africa is only 1 of 2 countries for which there is approval for poultry. In the 05 AGM, Mr Williams told shareholders the potential annual sales to SA exceeds $41.4M (pigs $3.6M and poultry $37.8M).
5. Potential poultry sales is supposedly 10 times that of potential pig sales.
6. No new sales announced in the last 7 months.

A company will be mad to sue its key strategic partner responsible in excess of 82% of the company total annual sales, the ONLY mentionable poultry sales on the table, and the gateway to poultry sale success that is 10 times the pig sales.

UNLESS THERE IS A GREATER THREAT TO NOT SUING THE KEY STRATEGIC PARTNER. It is not rocket science to work out the financiers’ position could be responsible for CMQ legal action – the from the frying pan into the fire?

CMQ had shot its KEY MARKET and this must set the timetable back by years if it has not pushed it over the edge.

Cheers