IT Capital partners float rescue plan

5.00pm - By ADAM GIFFORD

Shareholders in IT Capital will be asked to approve a rescue plan in which its new management team will contribute private equity investments and cash in exchange for a 41 per cent stake.

According to the plan to be put to the annual meeting on July 23, exo-net founders Maurice Bryham and David McKee Wright will contribute $1.2 million cash and stakes worth $5.5 million in three companies.

This includes 40 per cent of mobile phone application company Datasquirt, 70 per cent of boatbuilder Sealegs International and 50 per cent of electric motor developer Conceptual Solutionz.

Bryham and McKee Wright will hold 41.4 per cent of the company, which could increase to 47 per cent if ambitious bonus targets over the next three years are met.

The pair have lined up a further $2.5 million in cash from other investors, including board member Jay Snider.

"That $3.7 million in cash is enough to support the new companies, Deep Video Imaging and ITC's administration for the next 18 months," Bryham said.

Deep Video Imaging, which is developing technologies for video screens, is the only one of IT Capital's previous investments still considered worthy of management attention. Deep Video Imaging is currently looking for capital in the United States.

New media company Terabyte Interactive is now trading profitably, but is not expected to make back the $8.4 million paid for it.

Investments in Streamline, Golden Orb and Virtual Spectator have been written down to zero, and Virtual Spectator's assets have since been sold to entrepreneur Neville Jordan's Endeavour Capital.

Bryham and McKee Wright's management company, Platinum Management, will be given a three-year contract to run the business.

Bryham said he and McKee Wright will be on salaries of $150,000 - a far cry from the $307,000 plus bonuses US-based former chief executive Jeff Dittus took out of the company last year.

Their bonus plan, involving 50 million options in three tranches over 30 months, requires them to increase the share value by 35 per cent compounding in each of the next three years.

Bryham said once IT Capital buys their stakes in Datasquirt, Sealegs International and Conceptual Solutionz, he and McKee Wright will have no outside equity investments.

"This is about aligning our interests with those of other IT Capital shareholders," Bryham said.

"We only make money if the share price goes up."

"We have got a lot of skin in the game," McKee Wright said.

An independent report on the proposal by share valuation specialist Grant Samuel said the 4c a share the pair will buying in at was at the upper end of the fair value range.

It said the amount being paid for the target companies was also fair, given there were few if any early stage investment opportunities likely to accept IT Capital scrip. IT Capital traded at 5c on Friday.

Acquiring such a diverse portfolio spread IT Capital's risk, and the company also got the benefit of an experienced management team whose interests would be aligned with shareholders.

"IT Capital was too exposed to one sector. We couldn't rebuild it as a pure IT investment company," Bryham said.

Grant Samuel said IT Capital had little prospect of raising new equity any other way, and at the current rate it was burning cash it would be insolvent by early 2003, rendering its shares worthless.

Bryham and McKee Wright invested in the companies after selling their stakes in accounting software firm exo-net to Solution 6 two years ago.

Datasquirt, which involves another former PC Direct and exo-net executive, Mark Loveys, has developed the Textcode product which allows mobile phone users to use SMS text messaging to order products or services.

Its wireless application messaging engine (WAM-E) platform supports, Telecom, Telstra and Vodafone networks.

Sealegs is developing a boat with motorised, retractable and steerable wheels, so it can be driven in and out of the water while its occupants stay dry.

Bryham said the company expects to be producing boats by the end of the year and to be profitable within two years.

Conceptual Solutionz is developing a new electronic motor, the Radial Electric Engine, which is supposedly more efficient at converting electrical to mechanical energy than anything else on the market.

Its inventor, electrical engineer Peter Parsonage, use to run a high school electronics club Bryham attended.

"I came across him again when I was looking for motors for Sealegs," said Bryham.

He said concerns over pollution in major cities meant there was a guaranteed market for electronic vehicles.

"Most of the work is going into trying to make the fuel cells or batteries more efficient. Peter's engine will allow vehicles to have a longer range with fewer batteries."

IT Capital