Q. What role does Frank Wilson, former CEO of Quintis, have with the Co-op ?
A. Frank voluntarily resigned as a director of the Co-op on 1 November 2018 but remains a member and one of the largest and most knowledgeable private growers of sandalwood in the industry.
Q . Why did Frank resign from Quintis and what role did he play in the events at Quintis after he resigned?
A. Frank resigned from Quintis in March 2017 to try to privatise Quintis with the support of other parties and take it out of the control of short sellers and market speculators as he believed it was undervalued and TFS was better served as a private company. Regrettably the board of Quintis made it very difficult for Frank and made it clear that they would be reluctant to work with parties associated with Frank, and wanted to run the company without his involvement, which ultimately led to shareholders suffering large losses through their inept management. Frank himself as largest shareholder suffered the greatest losses.
During 20 years of Frank's involvement with TFS/ Quintis they always achieved significant plantation sales in each year. In his absence they achieved zero plantation sales after the board and the CEO of Quintis rejected his offer of assistance to help them with plantation and end product sales. The failure to generate any plantation sales in the June quarter of 2017 was the principal reason for the financial failure of Quintis.
When Frank resigned Quintis had over $30m in the bank and was heading into the June Quarter where the vast majority of Quintis annual revenue and cash flow was historically generated. In addition he had left the Board with a reputable replacement Chinese customer that was willing to enter into a long term wood off-take agreement that simply required the approval of the Board.
After Frank resigned, the Board and management of Quintis:
(i) failed to achieve any plantation sales in the June 2017 quarter;
(ii) failed to complete a contract with the replacement Chinese customer;
(iii) drove down the price of oil and wood by selling oil at a 33% discount to previously contracted prices to Young Living;
(iv) paid growers 40% less under the 2002 Project wood tender than growers received in the previous wood tender; and
(v) failed to lodge March 2017 quarterly accounts on time leading to breach of the bond covenants.
Q . What role did Frank play in the purported Galderma contract termination and the Chinese contract failure?
A. It was commercially unfortunate that the Galderma group acquired a rival product which together with a change in management at Galderma led to the withdrawal of support for the TFS Indian sandalwood based benzac product despite it receiving a very good response from customers. Although the Benzac (TM) product initially had enormous potential to drive a lot of demand for TFS oil it was never a significant proportion of TFS revenue and by 2017 it generated insignificant revenue for TFS. A termination agreement was purportedly entered into between Galderma and a subsidiary of TFS in December 2016. The first time Frank was aware of the existence of the purported termination agreement was in May 2017 after he had resigned. The panicked response to this purported termination was extremely poorly handled by the board of Quintis leading many shareholders to wrongly believe that the company had lost a major oil customer. Frank is currently suing the directors of Quintis for defamation in relation to their public ASX releases about the purported termination agreement with Galderma.
Much has been said about the Chinese contract falling over and why did Quintis deal with this customer. The customer was introduced to the company by a highly credible party as having both the financial resources and the demand to be a major long term wood offtake partner. Before signing the contract the principals behind this customer and their financial adviser visited TFS operations and met a number of company staff and executives. TFS executives and staff then visited the principals’ timber operations in China and were impressed by their size and scale , and their plans for expansion of the sandalwood market demand in China. Commercial negotiations then commenced and a contract was finally signed approximately 6 months after the initial meetings. The negotiations and investigations into the principals and their business operations were no different to the many other contract negotiations the company had successfully completed over the past 10 years with customers in India, Asia, China, Middle East, Europe and the US . Neither Frank nor any other director or executive of Quintis could have been expected to foresee an industry wide customs crackdown in China that subsequently engulfed not only the TFS customer but many other long standing parties and customers in the industry. Frank was disappointed the board did not complete a contract for a replacement customer which he had successfully negotiated before he resigned, and which he had offered his assistance to the board and the CEO of Quintis to complete. Like his offer of assistance with plantation sales such assistance was ignored much to the ultimate detriment of shareholders and growers.
Frank has lost a significant investment in shares and is determined to ensure the same does not occur for his plantation investment of over 400 hectares and that of other growers.
Q. Should I pay my annual lease, management, insurance fees?
A. Whilst this is advice only your financial adviser can give, as a general rule if you have entered into a contract it is good practice to honour that bargain especially if you wish to rely on the rights you have in that contract.