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iTech Capital Corp - News Release
iTech paints pretty picture of investment portfolio
iTech Capital Corp
ITE
Shares issued 30,544,357
Apr 23 2002 close $.190
Tuesday Apr 23 2002
News Release
Mr. William Staudt reports
ITECH CAPITAL CORP.: SHAREHOLDER UPDATE
(All figures in Canadian dollars except where otherwise noted.)
iTech Capital has provided information on its corporate activities and each of the
companies in which it has an investment.
Strong financial position
As of Dec. 31, 2001, iTech's balance sheet reflects unrestricted cash of
$4.3-million, long-term investments of $6.5-million, current assets of $6.0-million,
current liabilities of $1.3-million, restricted cash of $750,000, long-term debt of
$1.0-million and shareholders' equity of $12.7-million. The current ratio is 4.4:1
and long-term debt is 8 per cent of shareholders' equity.
The long-term investment account of $6.5-million consists of investments in
Medsite Inc., Applied Data Systems Inc., HorizonLive Inc., Elastic Networks
(now Paradyne Networks) and Loma de Niquel. In addition, iTech owns 100 per
cent of Enviromation Technologies Inc.
Medsite
Medsite filed a registration statement in early 2000 that was withdrawn due to the
market conditions in June, 2000. Since then the management and board have
adjusted Medsite's business model to meet the demands of the market, with a
focus on becoming cash flow positive. Medsite has transformed itself into an
innovative pharmaceutical services and e-marketing company, and is emerging as
a leader in this industry. Medsite currently has in excess of $7.5-million (U.S.) in
cash and projects that it will shortly be operating on a cash flow positive basis.
Medsite expects to be solidly profitable in 2003.
iTech invested $2.5-million (U.S.) in Medsite, $1.5-million (U.S.) of which was
invested in a participating preferred security with a 3.5x participation, which has
the highest priority of Medsite's equity securities. Under the terms and conditions
of this participating preferred security iTech could reasonably expect to receive a
minimum of $5.25-million (U.S.) if Medsite continues to perform well. iTech has
also invested $1.0-million (U.S.) in a preferred security with lower priority. If all
preferred holders are paid what is due pursuant to their securities, iTech will
receive a total of approximately $6.25-million (U.S.). To the extent value is
created in excess of what is necessary to pay all of the preferred holders, iTech
would receive a greater amount on an as-converted basis. Medsite is performing
well, value is being created and iTech has reason to be optimistic.
Applied Data Systems
Applied Data Systems (ADS), a leading developer of application ready RISC
(reduced instruction set computing) based embedded systems, was profitable
(based on preliminary results) for the fiscal year 2001. ADS anticipates revenue
growth of approximately 60 per cent over the next two fiscal years. The
fundamental value proposition of ADS's solutions (faster time to market, reduced
development cost and enhanced design) remains sound, as evidenced by the
increasing number of customer wins being generated. These project wins have
well positioned ADS to grow rapidly as the economy improves and customers
begin to accelerate shipments. An example of a recent ADS application is the
Phraselator, a hand-held computer that translates languages. ADS designed and
built the Phraselator's computer platform and implemented the operating system.
In addition, Phraselator was designed for a harsh environment and is currently
being used by troops in Afghanistan. ADS executives envision commercial use for
the product in public safety, hospital care and education. In addition, ADS was
recently named to the Washington Techway prestigious "Technology Fast 50," a
ranking (ADS was 29th) of the 50 fastest growing technology companies in the
Washington, D.C., to Baltimore area. Given the market acceptance of ADS's
products, its results to date and its order backlog, iTech is reasonably anticipating
a significant return on its $500,000 (U.S.) investment.
HorizonLive Inc.
HorizonLive provides a leading platform for live teaching, learning, interaction,
collaboration and community building over the Internet. In 2001, iTech wrote
down its investment in HorizonLive from $691,250 (U.S.) to $230,400 (U.S.).
Since Jan. 1, the chief executive officer resigned at the request of the board, a
managing partner of one of its major institutional investors has stepped in as acting
CEO, head count has been reduced, space has been consolidated and the
organization has become sales centric. One immediate result of these changes is
that HorizonLive was awarded a substantial multiyear contract with the potential
to generate multimillion dollar sales.
iTech recently invested an additional $38,250 (U.S.) as part of a financing round
of $510,000 (U.S.), with each institutional investor participating on a pro rata
basis. It is anticipated that this investment will be sufficient for the company to
achieve positive cash flow. In addition, because the e-learning industry is growing
rapidly, there has been interest from other companies in the industry to acquire or
merge with HorizonLive.
Elastic Networks
Elastic Networks, a leader in next-generation DSL technology and high-speed
Internet access solutions, completed its merger with Paradyne Networks. While
an iTech representative did not serve on the board of Elastic Networks iTech was
in favour of the merger because of the installed base of Paradyne and its marketing
reach. Hopefully the product synergies will be realized and Elastic will contribute
to the results of Paradyne.
Loma De Niquel
Loma De Niquel, an operating laterite nickel mine in Venezuela, is currently
carried on iTech's books for $1.02-million. The mine is projected to begin
returning cash to the shareholders in 2004. Based on discounted cash flow, iTech
is quite comfortable with the recorded amount of the investment.
Enviromation
Enviromation's results for the quarter ended March 31, 2002, confirm the
turnaround the company experienced through the last six months of 2001.
Preliminary results (subject to a possible adjustment in sales commissions) show
sales and pretax earnings for the first quarter of $1,038,100 (U.S.) and $44,500
(U.S.) versus sales and losses before tax for the comparable quarter in 2001 of
$565,000 (U.S.) and $153,600 (U.S.). iTech's management is very pleased with
the results to date and is cautiously optimistic about the results for the entire year
2002.
Future investments
iTech is actively looking to make an investment that will give it a significant
ownership position in an operating company with a strong management team and
significant growth opportunities. iTech has looked at a number of opportunities
and is currently actively evaluating an investment that would meet its criteria.
While there is no certainty that iTech will realize the returns outlined above, iTech's
management is encouraged about the future of its portfolio companies. Its portfolio
companies have demonstrated versatility and flexibility in meeting the demands of
rapidly changing markets and each should emerge from the economic downturn as
an enduring participant in its industry.
(c) Copyright 2002 Canjex Publishing Ltd. canada-stockwatch.com
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