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Technology Stocks : Zitel-ZITL What's Happening
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To: E Rosen who wrote (7339)5/27/1997 12:24:00 PM
From: CalculatedRisk   of 18263
 
This private placement appears to violate two securities laws.

First, the variable conversion ratio and pricing below fair market value, creates a "no risk" investment for the new investors. This is especially devastating for existing investors, since the dilution appears potentially significant. In this instance, the Company increased the authorized number of shares of Common stock from 20 million to 40 million shares. The Company has issued 15.2 million shares, so it is apparent that up to 25 million shares may be used to cover the conversion of these debentures.

Second, full disclosure of all material and relevant financial information is required. There is no way for you and I, or any other investor, to completely understand the impact of this transaction with the information provided. Most people would argue that a 50% dilution would be considered material! My experience suggests that there are other aspects of this transaction (interested parties?) that cannot stand scrutiny.
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