Beleaguered IT company Brainware, which issued a profit warning last week, has been dealt another blow with the cancellation of private equity fund Rock-IT`s planned R10 million investment in the company.
The loan transaction, which was subject to suspensive conditions, was earmarked for business expansion, and Brainware said at the time of the deal it expected it to boost investor confidence in the company.
"No drawdown on the funding facility that would have been created by the transaction has taken place and Rock-IT furthermore has never exercised its option to acquire a shareholding in Brainware," the board says.
No liability exists as a result of the cancellation of the deal, it adds.
Rock-IT CEO Nic Venter confirms that no money was put in and the fund is not exposed at all to Brainware.
"Certain conditions precedent were not met, so we did not complete the transaction," he says.
He adds that Brainware, which is trading under cautionary, is expected to clarify its position this week.
Rock-IT director Christo Scholtz was appointed non-executive chairman of Brainware in terms of the arrangement. Brainware says he will remain a non-executive director until the next shareholders` meeting.
Rock-IT Participations is a niche-focused private equity and venture capital fund management company. The Rock-IT fund focuses on the IT and electronic communications sectors and principally looks to inject capital and industry know-how into unlisted companies.
Last week Brainware warned that it expects to report a substantial loss for the year to end-June, contrary to expectations at the interim stage, when it sustained an attributable loss of R3.98 million, compared with an earnings figure of R16.7 million for the year-earlier period.
It also announced the resignations of non-executive director Piet den Boer founder and former executive chairman, and executive director Koot du Plessis.
The board is also considering proposals and says a detailed announcement will be made within a week.
By late Monday morning the Brainware share had shed 3c or 42.9% off Friday`s close to trade at 4c, well off its highest close of 570c in March 1998.
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