re: **contingent assets and liabilities** 6. CONTINGENT ASSETS...

re: **contingent assets and liabilities** 6. CONTINGENT ASSETS AND LIABILITIES
A claim from ASIC for breaches of the continuous disclosure provisions of section 674 of the
Corporations Act 2001 (“the Act”) and rule 3.1 of the ASX Listing Rules. ASIC claims
Chemeq failed to inform the market in a timely manner on seven separate occasions
between February 2003 and 6 October 2004. The specific claims by ASIC include:
i) Between 15 November 2002 and 30 July 2004, Chemeq failed to inform ASX
of a Sunset Condition contained in a South African Purchase Order details of
which had been announced on 15 November 2002;
ii) Between 30 April 2004 and 30 July 2004, Chemeq failed to inform ASX that
the above Sunset Condition would be triggered and that the South African
Purchase Orders would lapse;
iii) Between 10 February 2003 and 11 September 2003, Chemeq failed to inform
ASX that the costs of the manufacturing facility in Rockingham, Western
Australia, had increased in the order of $10 million;
iv) Between 30 September 2003 and 6 August 2004, alternatively between 22
December 2003 and 6 August 2004, Chemeq failed to inform ASX that the
costs of the manufacturing facility in Rockingham, Western Australia, would be
in the order of $50 million, alternatively $59 million, a further increase of
approximately $15 million;
v) Between 1 July 2004 and 27 August 2004, alternatively between 6 August
2004 and 27 August 2004, Chemeq failed to inform ASX that it had incurred
costs of $10.3 million in construction of the upgrade to the manufacturing
facility in Rockingham, Western Australia;
vi) Between 8 June 2004 and 27 August 2004, Chemeq failed to inform ASX that
its cash resources as at 31 May 2004 were approximately $0.6 million and that
it would require a further $21.75 million in order to pay existing creditors and
provide for working capital requirements for the 7 months to 31 December
2004; and
vii) Between 28 September 2004 and 6 October 2004, Chemeq failed to inform
ASX that it had been granted patent protection (pending) in the United States
until the year 2020.
Under the Act, the court may impose a penalty of up to $200,000 for each contravention prior
to 1 July 2004. Following the commencement of the CLERP 9 legislation, this penalty has
increased to $1 million for a contravention by a body corporate that occurs after 1 July 2004.
Chemeq has advised ASX that the Company is denying each claim and will contend them.
As this action is currently at an early stage it is not possible to quantify any probable liabilities
reliably.