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Technology Stocks : Zitel-ZITL What's Happening -- Ignore unavailable to you. Want to Upgrade?

To: Steven M. Kaplan who wrote (18020)	8/10/1999 9:28:00 AM
From: Daniel Chisholm	Read Replies (2) \| Respond to of 18263

Zitel will issue approximately 2,200,000 shares of its common stock upon closing of the merger So that's about $3.3M worth of shares for the 69% they don't already own. That would imply a value of about $5M for 100% of Matridigm. MatriDigm was formed in 1995 .... remediation of code for Year 2000 compliance, has not generated significant revenue... nine-month period ended June 30, 1999, MatriDigm had net sales of $3.7 million and a net loss of $6.1 million. MatriDigm currently projects additional working capital needs at least through the end of calendar 1999. Doesn't sound like much of a businessman's risk to me. One might ask why Zitel doesn't simply walk away from a business that has a track record of losing money, and promises to require more money to keep it going. Even if Matridigm is in possession of valuable technology that will ultimately produce positive cash flow, the fact is that Zitel's weakened market cap makes it very difficult for them to raise additional funds to finance Matridigm's working capital requirements. It might make more sense to sell Matridigm to a financially stronger company. Mr. Jack H. King, who officially retired as President and CEO of Zitel Corporation at the end of July, said, "As my last announcement for the Company, I am pleased to announce that we have successfully concluded a transaction which has been planned for a long period of time As a matter of fact they announced on 5 Oct 98 that they planned to merge with Matridigm, paying Matridigm shareholder about $45M worth of Zitel stock at that time - #reply-5922623 #reply-5922820 It looks like the price has come down since then. From $45M to $3.3M(!) Zitel owns approximately 31% of the outstanding stock of MatriDigm on a fully-converted basis But when they announced the cancellation of their first merger attempt, they said that they would own 58% of Matridigm! (from the 31 Dec 98 8-K filing) FREMONT, CA, December 21, 1998 -- Zitel Corporation (Nasdaq: ZITL) today announced that it has re-structured the planned transaction to combine with MatriDigm Corporation. Instead of the planned merger, Zitel will convert $3,200,000 of notes receivable plus accrued interest into MatriDigm preferred stock. Zitel's resulting ownership in MatriDigm will increase to approximately 58%. As part of the revised plan, the merger agreement is being terminated. The modified transaction is expected to close in January 1999. Discussions to combine the companies have been suspended but may be re- instated at a later date. - Daniel