Christchurch technology start-up IndraNet Technologies maintains it is not insolvent, because its intellectual property assets have a value in the opinion of directors, even though no value is attributed to them in its accounts.
IndraNet has assets of $78,800 and liabilities of about $1.59 million.
The two factors which determine if a company is insolvent or not, according to financial markets watchdog the Securities Commission, is whether it can meet its bills and whether its assets exceed its liabilities.
The telecommunications and energy development firm is trying to raise $6m with an issue of four million shares at $1.50 a share to further develop its "nGen" energy technology. Over the past 11 years it has raised about $20m, has just over 3000 investors and has 206 million shares on issue.
The company's intellectual property assets have been recorded at nil value. It has not commercialised its technologies.
Among its shareholders are Charles and Michael Kain, from a well-known Christchurch business family. French entrepreneur Louis Arnoux, who lives in France, holds nearly 20 per cent.
Shareholder and chairman Russell Fitts, quoting from the prospectus, said that while the accounts showed more liabilities than assets, in the directors' opinion, if the tax benefits together with the likely sale value of the technology and intellectual property were taken into account, there would be a material surplus after a realisation of the assets.
Although the directors could not put a value on the intellectual property, they believed it was considerable.
The prospectus also says that at the end of December last year the company had agreed "deeds of postponement" for loans from directors of $453,000 and for amounts due to contractors, $379,000, where repayment had been delayed till all creditors not agreeing to postponement had been paid and the company had enough cash to meet all its liabilities expected in the following six months.
Fitts said the directors decided in consultation with the auditors that it was easier and more practical not to have the intellectual property valued.
It was an expensive and complex exercise which he described as a "nightmare". If more young companies did it that way it would simplify their processes, Fitts said.
"For a young company, directors state what the value is. It is our opinion. We have done our homework as to what we consider to be a fair and reasonable value. And that's it."
Fitts said IndraNet had the licence for a compressed air motor for Australia, New Zealand and the Pacific Islands. It had patents for its "mesh" telecommunications technology and it had the intellectual property around the nGen energy systems and they had value.
Securities Commission general counsel Liam Mason said the obligation was on directors to make sure a company met solvency requirements.
Investors should read offer documents carefully and understand them, Mason said.
He declined to comment on IndraNet.
- © Fairfax NZ News
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