Itemus Tuesday said failure to secure additional financing has led the company to file for bankruptcy.
Less than two weeks ago the Toronto Stock Exchange said it was examining the Toronto-based firm to assess whether it was still eligible for a listing. Its board of directors and president Jim Tobin have since resigned, leaving behind a trail of creditors who will be turning to A. Farber & Partners as trustee in bankruptcy.
Itemus, whose name is derived from the Latin verb “to go,” was formed in 2000 from mining company Vengold, which bought up incubators, service companies, software developers and consulting firms. It was to act as a hybrid that would invest in emerging startups while providing software and consulting expertise. Though it invested in more than 20 firms over the course of last year, it has since been trying to sell many of these assets off in an effort to raise capital. In May, the company reported a first quarter US$5.6 million loss.
Many of Itemus’ financial woes stemmed from a majority stake it took in New York-based Shooting Gallery, a digital firm and production company which saw several contracts deferred and its debt grow. Shooting Gallery, which would have needed more than US$10 million by September, has also declared bankruptcy.
“This isn’t a situation where the company has filed under the Companies Creditors’ Arrangement Act,” said Itemus spokesman Michael O’Connor Clarke. “It has basically shut the door and ceased operations.”
Itemus’ demise leaves several of its key partners in limbo. Late last year the company merged with Don Tapscott’s company, Digital 4Sight, for US$22 million. It also bought the assets of incubator Name Inc. Tapscott, who briefly served on the Itemus board of directors, refused to comment on the record about Itemus or the future of Digital 4Sight.
“If they chose to spin out and re-start in some other form, I guess that’s an option,” O’Connor Clarke said. “But they would have to separate themselves and put some space between them.”
Itemus gained an early champion in Compaq Canada, which added to its credibility and endorsed its business plan by taking a 12.6 per cent interest worth US$10 million as part of its strategic investment fund.
Rob Ireland, manager of corporate and public relations with Compaq Canada in Richmond Hill, Ont., said the company does not regret its decision, but the current business climate would
“You can’t form a closer partnership than through an equity investment,” he said. “Compaq is still willing to invest in companies; we are still investigating companies to invest in. That intent has not changed. But certainly the context in which we’re evaluating things with this economy has.”
Though Itemus tried to operate in many areas at once, Gartner Group of Canada analyst Hung LeHong said diversification was not the cause of its downfall.
“I think it’s a lack of investors, really, to put in VC money into any of the new prospects that come up,” he said. “I think the money will start flowing again, but it’s going to go in other places.”
LeHong said he had faith in what he called ‘the real-time enterprise,’ which is the concept of an enterprise having availability of all their data in a real-time format. “That means seeing what their inventories are, their orders, financial measures and so forth,” he said. “There are VC firms that are starting to pour money into companies that are developing the technologies for that.”