FREMONT, Calif., July 28 /PRNewswire/ -- Zitel Corporation (Nasdaq: ZITL) today reported operating results for the third quarter of fiscal 1998 ended June 30, 1998.
Revenue for the third quarter of fiscal 1998 totaled $5,340,000, as compared to $3,352,000 in the year ago quarter. Net sales for the current quarter were $4,591,000 versus $2,215,000 in the same quarter of the prior year. The net loss for the third quarter of fiscal 1998 was $18,527,000, or $1.07 per share, versus net loss of $7,973,000, or $0.52 per share, for the comparable fiscal 1997 quarter. Included in the quarter's results, the Company recorded losses related to the operation and sale of its storage unit of $7,189,000 and anticipates approximately $800,000 in additional costs in the fourth quarter. In addition, the Company wrote down its Deferred tax assets by $6,547,000, recorded a debt discount charge of $1,111,000 related to the $10 million private placement, and charged operations $658,000 for revaluation of goodwill and intangibles. Weighted average shares outstanding in the third quarter of fiscal 1998 were 17,235,000 compared to 15,280,000 for the third quarter of fiscal 1997.
For the nine months ended June 30, 1998, the Company reported total revenue of $17,678,000 versus $11,708,000 for the first nine months of the prior year. Net sales in the current year were $16,137,000 versus $7,057,000 in the prior year. Net loss for the nine months was $28,514,000 or $1.73 per share versus net loss of $10,455,000 or $0.69 per share for the same period of the prior year. Weighted average shares outstanding in the first nine months of fiscal 1998 were 16,528,000 compared to 15,157,000 for the first nine months of fiscal 1997.
Jack H. King, President and CEO of Zitel, said, "This quarter has brought with it a dramatic change in the face of the Company. For such a long time Zitel has been known as a storage company. With the sale of the storage unit and the restructuring of the remainder of the business, Zitel has become a software and services company. With this change, Zitel has become a leaner organization. At the beginning of this year, Zitel had 246 employees and, after the completion of the disposal of the storage unit, the Company will have approximately 139 employees. With completion of the $10 million private placement, the Company ended the quarter with $11.8 million in cash and is well positioned to grow its Solution Services and its Datametrics Systems businesses. Both of these businesses have exciting prospects for the future."
Mr. King continued, "Since the beginning of this last quarter, Zitel Solution Services has announced three Year 2000 remediation contracts and activity for additional business has intensified. Likewise, MatriDigm Corporation's code remediation activity and opportunities have continued to improve substantially. Mr. Arthur L. Chait, Vice President and General Manager of the Division, has been heavily recruited for some time. He has accepted an offer that represents an outstanding opportunity in a different industry. Art did an exemplary job of defining the Year 2000 problem, of explaining the benefits of MatriDigm's tools and of Zitel's support, and of recruiting a strong staff. Art will remain available to Zitel on a consulting basis after his departure at the end of August. The Division will report to me, effective immediately."
"During this quarter, Datametrics Systems software has been endorsed by more computer companies. Both Sequent Computer Systems, Inc. (Nasdaq: SQNT) and Stratus Computer, Inc. (NYSE: SRA) consummated partnering agreements for Datametrics' ViewPoint software. ViewPoint software continues to attract more attention in the market place."
Mr. King concluded, "Subsequent to the end of the quarter, the remaining outstanding $5,985,000 of the $27.8 million Subordinated Convertible Debentures converted to common stock. These conversions improved the debt-to-equity ratio to 1.2:1.0. This coupled with the Company's cash and working capital position provides a strong Balance Sheet for the Company's future."
This press release contains projections and other forward-looking statements regarding future events or the future financial performance of the Company. These statements are only predictions and actual events or results may differ materially. Refer to the documents the Company files from time to time with the Securities and Exchange Commission. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in the projections or forward-looking statements in this press release.
Zitel Corporation is an Information Technology company specializing in systems optimization, modeling and search technology. The Company's Year 2000 services include consulting, project management, planning, analysis, code conversion, and testing. Zitel's headquarters are located at 47211 Bayside Parkway, Fremont, CA 94538. Telephone: 510-440-9600 or 800-622-5020. FAX: 510-400-9696. zitel.com. For information on Year 2000 services, call 888-FIND-FIX. Visit Zitel's web site for information and instructions to receive press releases via e-mail.
NOTE: Zitel is a registered trademark of Zitel Corporation. All other product names and brand names are trademarks or registered trademarks of their respective holders.
Zitel Corporation
CONSOLIDATED SUMMARY OF FINANCIAL STATEMENTS
Consolidated Statements of Operations
(In Thousands Except Per Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
6/30/98 6/30/97 6/30/98 6/30/97
Net sales $4,591 $2,215 $ 16,137 $7,057
Royalty revenue 749 1,137 1,541 4,651
Total revenue 5,340 3,352 17,678 11,708
Cost of goods sold 4,445 1,707 10,240 6,243
Research & development expenses 1,616 1,671 5,567 4,906
Selling, general and
administrative expenses 7,614 3,291 19,474 8,789
Loss on impairment of assets 1,956 -- -- --
Acquisition of in-process
research and development -- 6,600 -- 6,600
Operating loss (10,291) (9,917) (17,603) (14,830)
Other expense 1,689 1,163 4,364 128
Loss before income taxes (11,980) (11,080) (21,967) (14,958)
Provision (benefit) for
income taxes 6,547 (3,107) 6,547 (4,503)
Net loss $(18,527) $(7,973) $(28,514) $(10,455)
Basic and diluted net
loss per share $(1.07) $(.52) $(1.73) $(.69)
Number of shares used in
basic and diluted per
share calculation 17,235 15,280 16,528 15,157
Consolidated Balance Sheets
(In Thousands)
(Unaudited) (Audited)
June 30, Sept. 30,
1998 1997
Assets
Current assets
Cash and cash equivalents $11,751 $4,224
Short-term investments -- 9,596
Accounts receivable 3,762 6,547
Inventories 207 3,050
Deferred and refundable taxes 208 3,540
Other current assets 1,935 993
Total current assets 17,863 27,950
Fixed assets, net 1,442 3,700
Other assets, net 13,977 17,644
Total assets $33,282 $49,294
Liabilities and shareholders' equity
Current liabilities
Accounts payable $4,200 $4,768
Accrued liabilities 4,523 4,419
Total current liabilities 8,723 9,187
Long-term debt 15,372 24,161
Shareholders' equity:
Common stock 48,835 27,081
Accumulated deficit (39,648) (11,135)
Total shareholders' equity 9,187 15,946
Total liabilities and shareholders'
equity $33,282 $49,294
SOURCE Zitel Corporation
/CONTACT: Larry B. Schlenoff, Chief Financial Officer of Zitel
Corporation, 510-440-9600, or 800-622-5020/
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