It could sell a block of its shares to raise the necessary cash but offloading the stock at current prices will not cover what Oculus is owed by Ariel.

Other corporate moves may also be considered but the firm has released no details.

The extraordinary situation, which Oculus revealed last week, arose after the firm decided to raise funds through a placement of new shares last year.

In a placement, a firm issues new shares in return for cash.

A major shareholder will sometimes lend its existing shares to the company so that stock can be speedily transferred to new shareholders. It will then wait until the new shares are eventually issued to be compensated.

This seems to have been the case with Oculus. Its controlling investor Ariel lent some of its shares to Oculus before the placement last July. The exercise raised about $15 million.

But in an unusual move, Ariel retained the cash in lieu of the stock it had lent. That would not have been a problem if the new shares had been issued promptly, allowing Oculus to return them to Ariel.

But Oculus said regulatory issues prevented it from issuing the new shares until last November. It also believes that Ariel used the funds in August and September to make its own investments.

It has further alleged that only Mr Low Shiong Jin, Ariel's main shareholder and a former executive director of Oculus, knew that this was happening.

Oculus did not provide details but a check of companies Mr Low is associated with shows that last September, Enzer Corp said it had issued shares worth $3.2 million to Ariel Singapore.

In that month, Mr Low bought 2.47 million shares of electronics firm SNF Corp. Ariel also purchased seven million SNF shares. They both then raised their stakes to 10 million shares each.

Mr Low held executive positions at both SNF and Enzer until recently.

The issue of the 'misplaced' $15 million came to a head earlier this year when Oculus tried to complete its year-end accounts. Half the money - $7.5 million - has since been repaid by Ariel and Mr Low.

Oculus then gave Ariel until Monday of this week to settle the balance. It also took a fixed charge over 54 million shares held by Ariel. This means the shares cannot be sold without the consent of Oculus.

The Monday deadline passed and Oculus announced it would take action. It can now enforce its rights over the shares, for example, by seizing or selling them.

But at yesterday's closing price of nine cents, the Oculus shares are worth only $4.87 million - a shortfall of $2.6 million.

The board is discussing with various parties what it can do with these shares. It is also evaluating its legal options against Mr Low and Ariel Singapore.

Mr Low is still a non-executive director of Oculus. His lawyers Rajah & Tann said he will continue to act in the best interests of the company in resolving the matter.

sushyan@sph.com.sg