EC-Hold has decided to apply for a liquidation order.
The company says its liabilities exceed its assets by R12 million and its ability to continue as a going concern has been possible only due to the subordination of a portion of parent MGX`s loan account and a working capital support letter from MGX, subject to various conditions.
"The company`s running costs continue to be funded by MGX," chairman Norman Webster says in the commentary on the company`s latest results. "MGX is, in turn, funded by its financiers who are thereby indirectly funding the costs of continuing to run EC-Hold as a listed company. Clearly this situation cannot continue."
He says if EC-Hold were to sell its remaining asset, the costs of complying with JSE rules relating to the disposal would absorb a large part of the proceeds, making such a sale of little commercial benefit.
EC-Hold has a 70% stake in Barlow Communications, an exclusive distributor of Radcom, suppliers of network diagnostic equipment.
The group says although MGX agreed to provide the company with the funds required to delist, the Securities Regulation Panel indicated that until its earlier ruling for a mandatory offer of 240c a share to certain EC-Hold shareholders was complied with or a court judgment was made that no need for the offer existed, it would not condone an offer to EC-Hold shareholders for a lesser amount.
"As there does not appear to be any route available to the company to dispose of its assets at minimum cost, or to continue remaining listed at a reduced cost, or to delist without the probability of the additional costs of legal actions, the company has decided to apply for a liquidation order.
"EC-Hold will accordingly cease to function as a going concern," it says. MGX has indicated that it does not intend to renew the letter of support and the subordination agreement.
"MGX has indicated to EC-Hold that, subject to certain conditions, it will procure that all the current known creditors of EC-Hold are paid 100c in the rand. These are not expected to exceed R500 000."
The company incurred an attributable loss of R3.01 million in the year to 30 June, compared with a loss of R13.82 million the previous year. A headline loss of 3.8c a share (2003: 17.1c loss) was incurred.
Revenue of R12.23 million compared with a figure of R62.99 million previously. At the end of the period the group recorded a negative net asset value of 11.9c a share, compared with a negative 9c previously.
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