Zylotech turns cold shoulder on $1.5 million bailout

He said the synergies between MVSS and Zylotech are very similar; both companies using the same channel partners, IBM and Avnet; both use very talented engineers; and both use the same BDM sales managers.

The two companies also share customers. MVSS maintains UNIX servers for an airport where Zylotech set up the security infrastructure, said Fraser-Clay.

However he has not been able to figure out why, for the past 10 years, Zylotech "hasn't run at a profit". Fraser-Clay alleged the company has been burning money and hasn't been focused on moving forward.

"On top of the in-fighting between the current directors of the company, there are just too many directors all looking for power," said Fraser-Clay. "The company is struggling and the board needs to get on with generating revenue.

"I am willing to put $1.5 million of my own money into the company and help it get back on track. My condition is that the entire board stand down because I have no faith in them being a part in the company moving forward."

Fraser-Clay said the three replacement directors put forward in his requisition were business minded people who have industry experience and could better lead the company.

Fraser-Clay said that he will wait for a couple of weeks for Zylotech's board to call an EGM, as demanded by his requisition. Otherwise, he said he will call an EGM himself as entitled by his holding of more than five percent of shares.

"They have been less than transparent in their actions which need to be accounted for. When they held an Annual General Meeting (AGM) to get rid of Sikiotis the board brought three new members on board without informing shareholders.

"Another AGM was held on the 2 February and again they didn't forward the new directors, and that's unethical."

Zylotech signed up with Avnet in November 2007 and deals with 10-15 resellers.

Michael Costigan, marketing director of Asia Pacific at distributor Avnet, said he didn't wish to comment on the internal problems at the company. However, Costigan said the space the Zylotech plays in is coming into its own right now.

"Avnet's growing regionally and we are looking at India, where Zylotech has already won tenders," he said.

"Our resellers are embracing the product and we haven't done a hard push on the product." 

Extracts from the faxes sent by Fraser-Clay's lawyers and Zylotech's ASX announcements can be viewed in CRN, issue 264, out now.