Head of Ecofibre textile business joins lawsuit, resigns

Two senior executives from Ecofibre's (ASX: EOF) highest revenue-generating division have resigned after the board refused to yield to an ultimatum seeking to oust chair Vanessa Wallace and director Michele Anderson.

Ecofibre Advanced Technologies (EAT) president Jeff Bruner cited "irreconcilable differences with the board regarding its management of the company" as the reason for his departure, as well as the exit of the subsidiary's vice president of development and commercialisation, Mehdi Ghafghazi.

In correspondence observed by Business News Australia that was sent to various stakeholders, Bruner explained that he and Ghafghazi had joined the group's chief scientific officer Dr Alex Capano in a lawsuit against Ecofibre and several directors including Wallace and Anderson on 16 April.

Bruner is the founder of high-performance textiles manufacturer TexInnovate, which was acquired by Ecofibre for US$42 million ($59 million) in July 2020 - a level worth almost triple Ecofibre's entire current market capitalisation. He was then made president of the Hemp Black business, which has since been renamed to EAT.

In the email, Bruner noted that Ecofibre had not announced his or Ghafghazi's participation in the lawsuit that is currently pending in the Court of Chancery in the State of Delaware.

He explained that on May 6, he wrote a letter to the Ecofibre board advising that, due to issues outlined in the amended complaint before the court, the pair would leave the company unless Wallace and Anderson were to resign from the board and any other positions at Ecofibre.

"We explained that we did not want to resign and instead wished to continue our important and valuable work for EAT. The board did not respond to or acknowledge our letter, and Vanessa and Michele did not resign," he wrote.

"Having received no response, on May 10, 2024, Mehdi and I submitted a letter to the board formally providing notice of our resignations from EAT."

In the letter, Bruner said their respective terminations were to take effect no later than 21 August, 2024.

"Because of these issues and our view that the board has demonstrated an ongoing lack of respect for and transparency with us, our letter advised you that we view our relationship with you and the board as irreparably broken," Bruner alleged.

"As stated, we believe our continued employment under the current board's management is untenable."

At the time of publication, Ecofibre is yet to make a formal announcement of these resignations or the participation of the executives in the US lawsuit.

Yesterday it did however announce a successful leaseback agreement and US$10.4 million ($15.8 million) sale of its North Carolina manufacturing operations, and that Wallace would be stepping aside from her additional interim CEO role to make way for John Foley, who has been acting as an advisor to the business and will be on a monthly contract.

In the email correspondence, Bruner also noted how the price of EOF shares has fallen from $0.77 when Wallace was appointed to the board on 1 July 2021, to $0.059 at the time of the email.

Today, prior to publication of this article and in the absence of any official announcement from the company, shares are down 10.17 per cent at $0.053.

Bruner and Mehdi did not "share the rosy view expressed by the company in its recent public announcements" and did not believe a turnaround would be possible with Wallace and Anderson on the board.

"The work, customer relationships, and business partnerships we have developed are important to us. But, absent any change in leadership and without us, it is not clear how any of this work (or the relationships and partnerships that depend upon it) can continue, nor whether the board has a viable alternative plan for the success of our business in our absence," Bruner wrote.

"While we hope Vanessa and Michele will voluntarily choose Ecofibre's future over their own continued participation in its management, we are not hopeful.

"In fact, earlier today, Vanessa responded to our resignations by indicating that the board has accepted them and providing a lengthy explanation as to why she disagrees with the bases for our decision. Nevertheless, should Vanessa and Michele persist in their refusal to step aside, our litigation against the board and the company will continue to its just conclusion, no matter the personal cost."

Business News Australia reached out to Ecofibre for comment on these matters.