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Microcap & Penny Stocks : Zulu-tek, Inc. (ZULU) -- Ignore unavailable to you. Want to Upgrade?

To: Terry T. who wrote (11500)	7/28/1998 11:52:00 AM
From: Terry T.	Read Replies (1) \| Respond to of 18444

Warning: more boring numbers. I have to get this off my chest, and then I will hibernate for a while. I noted earlier that (i) use of stock values for merger/combination are bogus, because of apparent stock manipulation and/or lack of protection of ZULU stock over past 5 months, and (ii) as alternative, we need to look at investment value or asset value for a fair exchange ratio. I also noted earlier that if, hypothetically, ESVS were to provide 10% and ZULU 90% of the assets of the new combined entity, and if ESVS has 2.5mm shares outstanding today, ZULU shareholders (using common stock only) would need 22.5mm ESVS shares at about a 2 for 1 exchange to retain same control over 90% of the assets of combined entity. In contrast, the 10 for 1 exchange rate being tossed around would give ZULU about 5mm shares of ESVS for the 50mm shares of ZULU. The net result would be that ZULU shareholders own a 66.7% interest in the new combined entity. By comparison, a 5 for 1 exchange rate would give ZULU about 10mm shares of ESVS for the 50mm shares of ZULU, which gives ZULU shareholders about an 80% interest in the new combined entity. If you all could, please, for a moment, put aside the popular opinion that prospective stock prices of the 2 entities should dictate the exchange ratio (my major objection over the past week), would you help me understand (i) how ESVS will contribute more than 10% of the assets (including goodwill, NASDQ listing, etc.) to the combined entity and (ii) why anything higher than a 2 for 1 exchange ratio (1 share ESVS for 2 shares of ZULU) could be justified? I am willing to concede that a shell company could get 10% of total value of a new entity, if that improves marketability, liquidity, etc., in the newly combined company's stock. But I am not willing to concede 1/3 of the new entity for that sole purpose. Pray tell, ZULU's management had better be able to demonstrate that it scoured the investment community and market before it agrees to "pay" ESVS 1/3 or more of its assets for a NASDQ-listing, or that ESVS is providing something more to the new enterprise (other than with ZULU's funds, management, technical expertise, etc.) One has to believe ZULU could have struck a better deal than possibly giving up 1/3 of its business for a NASDQ-listing and apparently little or no "promised" financing. Again, all of the above, is based on (i) my position that the comparative stock prices have been rendered irrelevant and meaningless because of actions over the past 5 months and (ii) the need for a different valuation technique for dividing up stock in the merged/combined entities.