Zaptronix, which delisted at the end of April, has put a proposal on the table that would see its creditors being paid out less than they are owed, but more than what they would get if the company liquidated.
In the document, a copy of which is in ITWeb's possession, Zaptronix explains its dire financial situation was due to deteriorating market conditions, and the failure of the site risk business, which it acquired from I-to-I Technologies.
In September 2010, Zaptronix said it would buy I-to-I Technology Solutions for R6.6 million, and will issue 440 million shares to pay for the acquisition. I-to-I Technologies is owned by Gandalf Trust, which bought the company in December 2008.
I-to-I Technology Solutions provides CCTV surveillance, access control, fire detection and electronic article surveillance infrastructure and systems for business operational use.
Zaptronix says the unit incurred losses due to high overhead costs, and its annuity book was insufficient to cover the losses, and Zaptronix's tracking and metering business, which suffered in the downturn, could not carry the new unit.
It last reported revenue, in the six months to May, of R14.1 million and a net loss of R2.845 million. The loss was due to the cost of downsizing the group rolling into the first quarter of the current financial year. The first quarter of 2012 accounted for 70% of the reported loss.
In the proposal, Zaptronix indicates it decided to get funding, but was unable to do so and eventually closed down the company and retrenched staff. At the end of March this year, the company had 58 staff members in total. A number of positions that became vacant before this were not filled, and some staff resigned in addition to the retrenchments.
No choice
Zaptronix MD Jan Nel says the alternative to the proposal is liquidation, and all value would have disappeared out of the company. He adds that only staff attached to the tracking subsidiary - 19 employees and two executive directors - remain to implement the restructure. "The business is more than the sum of its parts."
The "proposal of compromise and scheme of arrangement" was sent to creditors earlier this month and indicates that, if approved, concurrent creditors will get 1% of what they are owed, and will also write off 5% of their claim and cede the balance to Zaptronix's controlling shareholder.
Preference creditors will receive 12c to a rand, write off 5c to the rand, and cede the balance to the controlling shareholder. The staff that are still owed backpay and other claims will be paid a total of R153 303, and the South African Revenue Service will get R1.5 million, while it would only have gained R181 351 in the event of a liquidation.
Secured creditors, except for I-to-I Services, will be paid in full to the limit of their value on the implementation date, while it will collect its security on the sale of Site Risk Solutions. Zaptronix says revenue is based on a proposed R1.5 million earn out.
Nel explains that Site Risk was capital-intensive and banks were not forthcoming with funding, which is why it secured finance from I-to-I Services. He adds that the companies do have a common shareholder, but the related parties are not entitled to dividends and this has been fully declared.
The controlling shareholder, I-to-I Technologies, is set to reinvest some R300 000 into the company, and current shareholders will not see their holdings diluted. Creditors will meet on 24 July to vote on the proposal. The Gandalf Trust controls I-to-I Technologies, according to the proposal.
Nel says the company needs to be restored to solvency and, based on the investment injection, should be able to go back to building an annuity business.
I-to-I Technologies' directors are Karl Gribnitz, a Zaptronix non-executive director, and Jan Nel, MD of Zaptronix.
Zaptronix, which was initially suspended by the JSE for failing to submit its results for the year to August within the stipulated three-month timeframe, also failed to appoint a designated advisor and did not have the "required audit committee composition".
The stock was suspended earlier this year for not publishing results and last traded at 1c.
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