LISTED automotive parts manufacturer Safe Effect Technologies has hit some bumpy ground in its efforts to take its wet brake technology to the world.
The company called a trading halt on August 1 and the shares were removed from official quotation two days later.
Now Safe Effect chairman Thomas O’Brien has sent out a letter to shareholders outlining the company’s woes and a possible solution.
Safe Effect listed in May 2002 with the aim of further developing its oil immersed disc brake that it claims outperforms its dry counterpart.
According to the company’s website it has developed wet brakes for the Toyota LandCruiser, Un A Trac coal haulers and Hummers – the civilian version of the US Army’s HumVee vehicles.
It is also working on a range of brakes for light and heavy trucks.
However, its initial public offering that was designed to raise between $4 million and $5 million only managed $3 million.
Adding to these woes is the 49 per cent beneficial interest in the wet brake tech-nology being held by Safe Effect Technologies International Ltd, which has not been a financial contributor to the new efforts.
Further pain has come from the company entering into an agreement with a Sydney firm to underwrite a rights issue aimed at raising $5 million.
That money was to be used to buy a manufacturing facility in Thailand and launch into the US.
The rights issue concluded in March and the leftover shares were given to the underwriter but despite various commitments from the underwriter only some of the money came.
A revised agreement was negotiated and the underwriter undertook to pay the shortfall by August 31.
It defaulted, leaving Safe Effect with a receivable from the underwriter of about $3.6 million.
This has meant that the company’s Thailand acquisition plans and US push have been put on hold.
Safe Effect has appointed Sydney-based Claymore Capital as its primary funding and corporate advisers.
In the letter to shareholders Mr O’Brien says Claymore has "mandated to realise the outstanding debt of $3.6 million and to provide the company with sufficient working capital to fund its various initiatives with further funds to be raised over time for offshore acquisitions".
"Claymore believes that this exercise will take some eight to 12 weeks as these funds will be raised via an on-sale of the shares initially issued to the underwriter of the rights issue and sold in an orderly manner over time to ensure minimal impact on the company’s share price."
The news is not all bad for Safe Effect. It has identified a suitable partner to introduce its technology into China.
Mr O’Brien says ongoing funding is essential to the company’s timely progress and long-term success, along with simplifying its complex corporate structure.
"It is the company’s view that in the best interest of the shareholders (keeping in mind that Safe Effects Technologies International shareholders are also shareholders in the company) that the company should acquire SETI," he says.
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