Zaptronix in Make-Or-Break Deal
ALTX-listed technology group Zaptronix said last week it has agreed to acquire I to I Technology Solutions as a going concern for R6.6m. Zaptronix's survival hinges on the success of the acquisition, after a warning by the auditors last year that its solvency remained a concern.
Zaptronix has been managing the business of I to I since March and has previously indicated its intentions to buy the company.As part of the agreement to buy I to I, Zaptronix is entitled to the net profits generated by I to I, which is owned by Gandalf Trust, from March until last month.
"The future solvency of the company is highly dependent on the success of the I to I acquisition, which will furthermore expand the vision of Zaptronix by increasing the skills and product offering to clients that seek operational control systems," the company said in May when it reported its interim results to February.
"The cross-selling opportunities between these companies are expected to show results in the financial year." The acquisition will be settled through the issuing of 440-million Zaptronix ordinary shares for 1.5c per share.The deal is subject to conditions including shareholder approval, and the settlement of R3.8m of loans owed by Zaptronix to Strider Holdings and Gandalf Trust.
The loan will be paid through the subscription and issue of Zaptronix ordinary shares for cash at 3c per share. Zaptronix's auditors warned in the annual report for the year to August last year that the solvency of Zaptronix remained a concern. "The effect of reassessment and increase of provisions on the balance sheet filters through the income statement and thereby erodes the equity of the company," Zaptronix said.
"The company is generating cash from its business but due to Zaptronix being undercapitalised, the company requires more working capital for growth." Zaptronix reported a R1,8m loss for the six months to February from a loss of R968 422 in the previous period. It had cash of R765 172 at the end of February.
Zaptronix attributed the poor performance to one-off accounting provisions of R1,5m. "The provisions result from a robust review of debtor balances, which revealed that the provision for bad debts needed to be increased," the company said.