IT Capital faces DVI lawsuit

By PETER GRIFFIN IT writer

IT Capital is facing a legal challenge for its stake in 3D screen developer Deep Video Imaging - the investment company's last hope for a significant gain.

Hamilton-based Power Beat International - the developer of DVI's technology and the inventor of the never-go-flat car battery - has mounted a case against IT Capital, demanding the return of more than 370,000 shares it sold to it in May 2000 and an undisclosed amount in damages.

In a second legal action, Power Beat alleges "oppressive conduct" in the way it was treated as a shareholder of DVI. IT Capital is listed as one of six defendants.

In a statement released to the Stock Exchange, IT Capital said Power Beat was seeking an interim injunction to block a proposed issue of DVI shares, prevent capital restructuring of the company and set aside convertible notes worth $4.9 million that DVI had issued.

A defiant IT Capital said in a statement that Power Beat's claims were "without merit" and that it would "vigorously defend the proceedings".

But, with few resources, the last thing IT Capital needs is a costly lawsuit.

Power Beat inventor Peter Witehira and present DVI director Gabrielle Engel came up with DVI's breakthrough screen layering technology in the late 1990s. Seeking a capital injection, Power Beat sold 34.6 per cent of the company to IT Capital. Warehouse founder Stephen Tindall had earlier bought about 40 per cent.

The remaining shares were held by the founding shareholders, including Engel and Power Beat.

Tindall's investment adviser, Brian Mayo Smith, refused to confirm or deny that Tindall was involved in any legal action.

IT Capital shares have been subject to a trading halt since Friday as the company absorbed news of the legal challenge. IT Capital, which last year shed its loss-making investments and brought new management aboard, lost $1.4 million in the six months to September 30, 2002. It is left with stakes in DVI and Sealegs, a manufacturer of boats with retractable wheels.

Power Beat continues to operate after the commercial failure of its battery technology. But its accounts for the year to March 31, 2002, note an accumulated deficit over several years of $12.3 million and uncertainty about its future.

"The directors cannot confirm the ability of the company to raise all necessary cashflow requirements," the accounts read.

It had revenue in the period of $1.2 million.

The accounts noted that Power Beat had "reluctantly" sold down its shareholding in DVI to IT Capital, leaving Power Beat with a shareholding of 10 per cent, later diluted to 6 per cent.

Power Beat recorded an investment in DVI of just under $2 million and a $1 million investment in U-Clic, a company it has a 25 per cent stake in. Stephen Tindall held the balance of U-Clic shares.

Neither DVI, IT Capital nor Power Beat returned Herald calls.