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

To: NYBellBoy who wrote (13262)	12/8/1997 12:39:00 PM
From: CalculatedRisk	Read Replies (2) \| Respond to of 18263

BellBoy, RE: "Going Concern". At the end of fiscal Q1 (12/31/97), Zitel will have about $8.5M in cash and short term investments. Their burn rate is about $4M to $5M per quarter. The Company also has a $3.0M bank line of credit which expires 1/31/98. IMO, this places the auditors in a difficult situation. Without a significant operating change or additional financing, Zitel will be bankrupt in a few months. IMO: 1) The auditors cannot rely on promises of Y2K business. 2) The auditors must be skeptical of additional "hard money" financing. So my question is: Can the auditors rely on promises of cost cutting? Management announced their intention to cut costs during last quarter's CC - but we have not heard of any layoffs yet. Maybe Zitel is planning on significant layoffs after the holidays. Can the auditors rely on promises of layoffs when they issue their opinion? Zitel's lease expires on their "Taj Mahal" in March '98. But moving to smaller facilities will only help a little. IMO, the auditors must insist on cost cutting NOW - or issue a "Going Concern" warning. Regards, Bill