BURNABY, BRITISH COLUMBIA – May 7, 2001 – Dexton Technologies Corporation (the “Company” or “Dexton”) (CDNX: DXT) announced today that it has substantially restructured and refocused its operations. Despite the recent decline of the public equity markets particularly in the high-tech sector, the Company has preserved its operating capital of approximately $1.4 million cash plus investments with a current market value of approximately $4.7 million. The Company’s operating companies and investments include:
· RapidFusion.com, which houses the businesses of hardware sales, network
installations, and web software development;
· Fountainhead Corporation;
· Illusion Systems;
Following a profitable fiscal year 2000, the Company incurred losses of approximately $1.69 million through operations plus a write-off of $1.34 million of goodwill in its first three quarters of fiscal 2001. During the course of the three quarters and in light of the diminishing high-tech market, management perceived these failures and restructured its operations accordingly to prevent further losses and generate positive cash flow. The Company re-evaluated its operations and put less emphasis on its faltering divisions, particularly the struggling browser-based ASP development services and the computer retail division, and placed more emphasis on its profitable web development division, portions of the proprietary Point of Sale (POS) software division, and the network services. The Company now sustains positive cash flows with minimal operating losses.
The losses sustained by the Company stemmed primarily from the failure of the acquisition of the business of Integrated Technology Solutions Group Inc. (ITS) by the Company’s subsidiary RapidFusion.com Technologies Inc. In February 2000, the Company purchased the assets of ITS in consideration of $350,000 in cash, 350,000 shares of Dexton at a deemed price of $1.00 per share, the assumption of certain current liabilities of ITS, and the issuance of a minority equity interest in RapidFusion.com to ITS. A key provision of the asset purchase agreement provided that the liabilities of ITS assumed by RapidFusion on closing were not to exceed $265,000. Another provision of the agreement was that if, within 120 days of the closing date, RapidFusion had not collected, after reasonable efforts, accounts receivables totaling at least the aggregate amount of the liabilities as of the closing date assumed and paid for by RapidFusion, ITS was to pay RapidFusion the difference between the accounts receivable actually collected and the assumed liabilities. The founder and President of ITS, Tom Waters, joined RapidFusion as President and CEO on closing of the ITS acquisition and Mr. Waters continued to manage the operations. When financial statements of RapidFusion were prepared in August and September 2000, Dexton’s management determined that the liabilities assumed and paid for by RapidFusion were $304,268.28 greater than the collected receivables. Mr. Waters, as President of RapidFusion, had authorized payment of the excess liabilities. ITS has breached the terms of the asset purchase agreement and has failed to pay the sum of $304,268.28 which is owing to RapidFusion. The Company has recently launched litigation against ITS in the British Columbia Supreme Court to recover the excess liabilities plus other unspecified general and punitive damages.
In July 2000, Abdul Ladha, the Company’s President, and Ron Miller, the Chief Financial Officer, initiated the restructuring plan and reviewed the financial performance of all of its divisions. They determined, with Board approval, that if any subsidiary or division was not profitable in the near future, that entity would either be sold or discontinued. Each division manager was then given the task of presenting operating budgets for their responsible areas for the upcoming year. At that time, the computer hardware and software and network divisions showed that profits could be generated once certain expenses were either curtailed or decreased. These divisions were then reorganized by reducing costs, including certain salaries and rent, and are now realizing small profits without draining valuable cash resources.
During the budgeting process, the President of RapidFusion, mainly in the POS division, presented a budget that showed significant profits being realized in July 2000 and onwards. In August 2000, the financial statements for RapidFusion were generated and their outcome presented significant losses, contrary to what was presented in the budgeting process. The President and Chief Financial Officer of the Company lost confidence in the management of RapidFusion, terminated the employment of most of the employees of RapidFusion, and discontinued the loss-producing operations in this division. Tom Waters, the President of RapidFusion whose employment was terminated, has countered the law suit against ITS by filing a wrongful dismissal action. The Company believes that it had just cause to terminate the employment of the President and will vigorously defend the counterclaim in court.
The Company is considering selling the business or assets of RapidFusion.com and Dexton Enterprises as a going concern. These businesses operate in a highly competitive industry with significant downward pressure on price. These subsidiaries currently do not consume cash, and have recently become profitable. A valuation of this business is being sought from an independent firm of business valuators to determine a reasonable sale price. Any sale of RapidFusion’s business would be subject to approval by the Board of Directors and CDNX.
”We have implemented our immediate program to restructure operations, divest our nonperforming divisions, and realign the Company on the track of profitability” stated Abdul Ladha, President and CEO. “It is also prudent for us to reassess the Company’s long term goals and restructure management to attain those goals.”
Dexton also seeks to conclude a profitable sale of its shareholdings of Ableauctions.com, Inc. in one or more private transactions at prices negotiated by the Board of Directors or through the facilities of the American Stock Exchange. Full particulars of any such sale would be announced following completion.
About Dexton Technologies
Dexton Technologies Corporation has evolved into an incubator and merchant bank for leading technology firms, with its principal activities focused on the development of privately held early stage and emerging growth companies with the potential for exceptional growth.
Dexton’s Advanced Technology Restructuring (ATR) model aims to develop intimate long-term working relationships with its group of companies, making significant contributions to their success by providing capital, financial assistance, management and technical expertise through their full developmental cycle.
Since 1997, Dexton Technologies has been forging successful partnerships and demonstrating the kind of superior management guidance and growth performance that has ranked the company in the top segments of industry.
This release and prior releases are available on the Company’s Internet web site located at www.dexton.com.
BY ORDER OF THE BOARD OF DIRECTORS
Abdul, Ladha, President
The Canadian Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.