June 08, 2004

ESTEC ANNOUNCES SHUTDOWN OF SUBSIDIARY

On Friday June 5, 2004 ESTec Systems halted the trading of its stock pending an announcement by the board.

ESTec Systems Corp announces that it is shutting down its manufacturing subsidiary, ESTec Oilfield Inc. After almost two years of financial difficulties a major creditor of ESTec Oilfield has made a formal demand for payment under the terms of its security agreement. This action has triggered the bank to seize all of the assets of ESTec Oilfield Inc. We expect that the assets under fire sale conditions will not realize enough to cover the bank loan. Several directors of ESTec Systems Corp. have guaranteed the bank, and will have to make good on their guarantees.

Over the past two years the management of ESTec Systems has tried to turn around the fortunes of ESTec Oilfield Inc. We have also attempted to sell the company, and to raise additional financing for the company. All of these attempts have been unsuccessful.

We also started a "shares for debt settlement" in late August of 2003 with some of our creditors. We are at this moment awaiting approval or rejection from the Alberta Securities Commission. Under the current circumstances we suspect the settlement will be rejected as ESTec Oilfield Inc. will no longer be a going concern. An announcement will be made as soon as we have a formal response from the Alberta Securities Commission.

There is a chance that one or more of the people who had expressed an interest in purchasing the company will want to purchase the assets of the company. Under this scenario, ESTec Systems Corp. stands to receive a royalty on the design. The top drive design and some of the patent filings are owned by our subsidiary, Allan R. Nelson Engineering (1997) Inc. Anyone who wants to manufacture the top drive will have to negotiate a royalty deal similar to the one that was in place between Allan R. Nelson Engineering (1997) Inc. and ESTec Oilfield Inc.

The immediate result of this action will be ESTec Systems Corp. writing off close to $1,000,000 invested in the subsidiary. On the positive side of the event this will stop the losses that had been occurring in the ESTec Oilfield subsidiary and return ESTec Systems Corp. to profitability. Our lawyers have advised us that there should be no on-going liability associated with closing the subsidiary beyond the loss of our investment in the subsidiary.

On behalf of the board,

Anthony B. Nelson
Director

Back to recent news main page.