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Non-Tech : York Research (YORK)

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To: Gunther Karger who wrote (794)	7/18/1999 5:27:00 PM
From: Gunther Karger	of 800

Comment on Projected earnings Projected net Earnings/share = (gross revenue - all expenses)/ present shares outstanding X VI where VI = growth in options grants. Options grants have been substantial over the years and reached 5% increase in shares just last year with the 3 million proposed options another 20% Expenses also are subject to significant change where just last year, the G/A increased by more than 30% thus negatively impacting earnings. Based on the trend, this will continue to increase. Last year alone, just increased benefits and salary increases of $1.1 million represented a 7 Cent/share reduction in earnings vs the earnings which would have been booked had management h eld this line item just unchanged from the prior year. The positive variable factor is a potential refinancing of the 12% bond but that savings will be negatively offset by a new round of refinancing costs to be amortized over the bond period. For example, last year, about $600,000 was amortized for this line item and this alone contributed a 4 Cent/share reduction. Another factor going forward in projecting the earnings is the impact of the next round of options and potential intereset free loans associated with these. If last year's granted options were exercized and the CEO used the "promissory Note at no interest" provision, that would create a $2.5 million effective loan at no interest. The interest alone represents an approximate 1 Cent/share earnings reduction while removing about $2.5 million from the cash assets of the company thus marginally reducing growth opportunities. What's the answer here for share value enhancement? It looks like either a corporate restructuring of expenses or a sale of the company where the present high yield loan and high rent Park Avenue office plus high corporate expense structure are significantly reduced. Could these factors explain the continued absence of street coverage i.e CSFB and others and a continued relative depressed share value and continued low institutional holdings level?

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