The following excerpts are from the excellent "J. Taylors Gold and Technology newsletter" of Sept 11/00. Thanks to SI guy for this find.
In early 1999 Jordex Resources transformed itself into a company that would invest in emerging technology companies and would provide incubation services for such companies.
With this change in business, the company changed its name to iTech Capital and restructured its management team with an impressive group of men capable of understanding the rapidly changing investment climate in technology. The areas of focus for this company are in the Internet B2B, telecommunications and wireless devices.
While there are seemingly an endless selection of investment opportunities in high-tech, management believes the real key to building significant shareholder value is being selective and funding only those companies that have strong management teams, persuasive business models and reasonable valuations. In addition, iTech expects to fund only those companies that have the potential to emerge as significant and dominant players in their respective business sectors. To date, iTech is confident it has made such investments.
A major positive development for the company was a November 1999, agreement entered into with the Argentum Group, the general partner of four equity funds totaling approximately US$280 million. Argentum has significant deal flow, a strong investment record and an experienced internal staff to perform due diligence. Under this agreement, iTech has granted Argentum 500,000 options to purchase its shares for a five-year period. Argentum has agreed to offer iTech the opportunity to co-invest with Argentum in amounts ranging from US$500,000 to US$1,000,000, at iTech’s option, in all transactions in which Argentum has the opportunity to invest at least US$3.0 million.
Also in November of 1999, iTech Capital entered into an agreement with MF Private Capital, Inc. (MFPC), a Boston-based investment group that is an investment affiliate of Manulife Capital Corporation, an indirect subsidiary of one of Canada’s leading financial services firms. MFPC is led by four experienced investment professionals and has invested/committed approximately US $100 million over the last 20 months. An affiliate of MFPC, MFPCVI, Inc., as general partner of MF Private Capital Ventures, LP (the Fund) is raising capital for the Fund. Manufacturers Life Insurance Company (USA), the indirect majority owner of MFPC, is participating in the Fund by contributing a percentage of its originals deals, that were sourced and are managed by an affiliate of MFPC, as its equity contribution.
iTech has agreed in principle to invest US $1.5 million in this new Fund, and MFPCVI, Inc. has agreed that iTech will be offered an opportunity to co-invest in the Fund’s investments in emerging companies. William Staudt will join the Fund’s Advisory Committee. The majority of MFPC’s investments are in communications infrastructure, technology, medical devices technology, and Internet B2B companies. Since the two parties entered into the agreement, iTech has co-invested in three transactions, including Bizfon Inc., Elastic Networks and PinPoint. (See below)
Overall, iTech’s strategic alliances are designed to be at the core of the company's investing decisions. In the current environment, the lifecycle of companies has been significantly compressed and emerging companies are in need of ever-larger amounts of capital. I believe the alliance with Argentum and MFPC, should allow iTech to benefit not only from their technology expertise but also their contacts and their competitive drive required to succeed in the highly dynamic technology fields. In addition, shareholders in iTech gain the benefit of diversity, much as you would if you invested in a high technology mutual fund.
None of these companies have yet gone public, but when they do, we anticipate a considerable increase in the book value of iTech. The first stock expected to go public in the iTech portfolio is Elastic Networks Inc. This company is a leader in advanced "Next Generation" (DSL) digital subscriber line communications, providing high-speed bandwidth over existing copper telephone wires. iTech owns 281,479 shares of this company, which it acquired for $1.5 million. We would expect the stock to go public at a price somewhere between $10 and $30, which would result in an asset valuation of between $2.8 million and $8.5 million.
As in most of its investment transactions, iTech has agreed in the Elastic Networks deal to restrict its sale of shares for a six month a six-month following the IPO. Elastic Networks has said publicly that it plans to go public this month though a definite date has yet to be set. In theory, iTech could sell its shares, in roughly six months if it chose to do so but that will depend on management’s assessment of Elastic Network’s prospects vis-à-vis other opportunities after evaluating the stock’s potential during the six month lock up period.
The iTech Portfolio
We do not have sufficient space to provide the level of detailed information on each of the companies invested in by iTech. For more information you should contact iTech or even better, visit their respective web sites as noted below in the following brief business description of iTech’s investments.
Medsite.com is the physician's home on the Internet offering a comprehensive range of user-friendly solutions in the categories of medical e-commerce, medical e-information, and e-communications services. www.medsite.com.
HorizonLive.com connects geographically dispersed individuals via the Internet, allowing real-time and recorded presentations in an interactive, seminar-like atmosphere. www.horizonlive.com.
Bizfon Inc. products provide an easy to use communications solution for the small business by providing them with a full featured phone system at a price point (under $2,000 for complete system) that is more affordable than the $5,000 to $20,000 cost of a typical full featured phone system. www.bizfon.com.
Applied Data Systems, Inc. is a leading manufacturer of ARM (ARMHY:NASDAQ) based single board computers designed exclusively for the embedded market such as in process control, medical instrumentation, fleet management, POS and industrial data management. www.flatpanels.com.
PinPoint Corporation is the leading producer of Electronic Asset Tracking Systems that utilize digital radio frequency technology. www.pinpointco.com.
Enviromation, Inc. (100% owned by iTech) designs, manufactures, installs and services control systems for water treatment facilities both commercial and municipal. www.enviromation.com
WholesalePortal.com. This company’s wholesale portal is an Internet-based B2B market place, transaction service, and information portal targeting the $100+ billion wholesale specialty food industry. The Company facilitates transactions between suppliers and buyers in the wholesale trade. www.wholesaleportal.com.
SUMMARY & CONCLUSION
Regular subscribers to this letter know I am skeptical about our government’s productivity statistics, which they claim are bolstered significantly by high technology. Yet, I recognize that we are still in the “early innings” of a major revolution in a host of high technology fields related to information as well as medical and bio-pharmaceutical technologies. To better understand these fields and thus reduce risk and enhance returns, reliance on expertise is advisable. iTech’s management hold a high level of expertise Internet, B2B and wireless industries that I believe should serve investors well. And, of course, with iTech already invested in eight different technology stocks in these fields, risk is further reduced as a result of this diversification factor.
For these reasons, I believe purchase of iTech as part or complete fulfillment of an 18% allocation to the technology portion of our portfolio allocation would make perfect sense. For additional information on iTech, call Jim Graham, Vice President, Investor Relations at 800-675-1749 or visit the company’s web site at www.itechcapital.com. |
