itemus files for bankruptcy

Once a high-profile Internet incubator, itemus inc. announced Tuesday it is filing for bankruptcy.

The company said its board of directors has authorized the company to make an assignment into bankruptcy under the Bankruptcy and Insolvency Act. The bankruptcy firm said it expects that the assignment will be filed with the Official Receiver Tuesday in Toronto.

In mid-June, itemus revealed that its Shooting Gallery subsidiary, a film production company, was unable to meet its debts, and that itemus might be forced to take on up to $10 million in Shooting Gallery debt.

itemus said at the time that it needed a financial infusion of $10 million to $15 million by the third quarter due to the cost of running Shooting Gallery.

The incubator managed to sell privately-owned Personus for approximately $1 million in much-needed liquid securities to Cognicase Inc.

"Although some sales were made, the company was unable to raise sufficient funds. Continuing difficulties in settling with Shooting Gallery creditors precluded success in financing or divestiture pursuits," itemus said in a release.

"Based on an assessment of itemus' opportunities and the lack of prospects to raise additional financing, the board of directors determined that there was no viable alternative to bankruptcy, and therefore authorized the voluntary assignment for the benefit of its creditors under (bankruptcy laws)," the company added.

Before remaking itself into into a high-tech incubator in February, 2000 amid the Internet craze, itemus was a mining company, Vengold Inc.

Jim Tobin, former executive vice-president of Bell Canada and founder of BCE Emergis, took the helm at itemus, which proceeded to buy Internet guru Don Tapscott's Digital4Sight in 2000 and Internet developer Name Inc. this year.

The $23-million-US stock-swap acquisition of Shooting Gallery caused itemus' problem when the film production company ran into debt problems.

In May, itemus posted a first-quarter net loss of $5.6 million US. The company had revenue of $2.8 million, with an operating loss of $2.7 million.

Shares of itemus hit their peak of $4.83 on the TSE back on March 7, 2000. Since then, the stock went into a decline and has been trading under 10 cents since July 3. When it was halted before the start of trading on Tuesday, the stock price stood at 3 cents.

itemus' board of directors have all resigned and the company has withdrawn its previously filed preliminary short form base shelf prospectus. A. Farber & Partners Inc. has been tapped to act as trustee in bankruptcy of the company.

In a letter posted on itemus' web site, Tobin suggested the company may pursue legal action against Shooting Gallery.

"The fall of itemus will be blamed on the company doing too much too fast, on poor markets, and on strategic and tactical moves that in hindsight were ill-conceived," Tobin said.

" In my view, itemus would have withstood all those challenges if we hadn't encountered so many "bottomless" problems related to our Shooting Gallery acquisition. I will advocate that itemus' trustee pursue legal actions to seek recourse against appropriate persons in the Shooting Gallery context," he said.