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On Monday, Gandalf filed its annual Form 10-K report to American securities regulators, admitting its borrowing from the Royal Bank of Canada already exceeds the authorized line of credit. "While the bank has indicated that their support for Gandalf remains unchanged," said the company in a terse statement issued late on the eve of Canada's July 1 holiday, "there can be no assurance that the bank credit facilities will remain in place or will provide sufficient credit capacity to meet the company's ongoing credit requirements."
Gandalf also admitted that it has received no formal offers from possible purchasers. Seeking a purchaser or major investor since February, Gandalf has said up to now that it had received several expressions of interest and was talking to possible partners.
Over the past three years, Gandalf has moved from complex communications technology into remote-access products aimed at a broader market. The remote-access market is consolidating fast, as shown by recent developments such as 3Com Corp.'s takeover of US Robotics Inc. and Compaq Computer Corp.'s buyout of Microcom Inc. To avoid being crushed by larger competitors, Gandalf needs to be acquired by, or at least form an alliance with, a bigger company.
"You've got to have people standardizing on your products," said Richard Woo, a Montreal-based investment analyst. Woo, who follows Gandalf for Thomson Kernaghan & Co., told Newsbytes recently that the company also needs economies of scale in order to compete with larger producers.
Recent financial losses complicate Gandalf's position. As a result of its shift in product focus, the company moved a year ago from direct sales to using telephone companies and distributors in a two-tier sales model.
Company spokeswoman Wendy Burgess told Newsbytes the shift caused a lot of turnover in sales staff, leaving Gandalf with a largely inexperienced sales force. Woo described it as "a total meltdown" in the sales organization.
Last week Gandalf's landlord, Glenview Corp., demanded two and a half months' rent in advance and then locked the company's headquarters and adjoining manufacturing facilities when Gandalf refused to pay.
Gandalf employees were back at work Friday, after the company obtained a court ruling that forced Glenview to restore its access to the facilities and pay C$3,000 to cover legal costs. On Friday, the company's vice- president of marketing, Pam Minelli, told Newsbytes Gandalf was considering a lawsuit to obtain further damages from the landlord.
Gandalf stock closed at C$1.09 on the Toronto Stock Exchange Monday, up eight cents on the day. It was trading as high as C$3.05 in late May.
(19970701/Press Contact: Wendy Burgess, Gandalf Technologies, 613-274- 6550, e-mail firstname.lastname@example.org/Reported By Newsbytes News Network: http://www.newsbytes.com
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