Ergobilt (ERGB) - Ergonomic Chairs Message Board

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Biotech / Medical : Ergobilt (ERGB) - Ergonomic Chairs

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To: Anaxagoras who wrote (760)	3/23/1998 4:49:00 PM
From: Scott D. Hakala	Read Replies (2) of 900

A- The fundamentals have changed downward due to higher than expected operating expenses, just not enough to get to the current trading range. The current price of the stock implies that the Company is not producing earnings. Any conclusion that ERGB is not profitable is simply not true. In order for a significant downward departure, I would have to see the Company begin to lose momentum in sales and/or gross margins in the next year or two. That didn't happen happen last year. BodyBilt sales are up 38% in 1997 over the same nine months in 1996. Gross margins are still holding up and high. The higher than expected operating expenses included one-time chrages associated with CTSS, development expenses and legal fees that were not anticipated at the time ERGB was taken public. I would expect to see operating expenses come down over the next year as a percentage of sales. The Company was oversubscribed and taken public just on BodyBilt. BodyBilt has performed about as I expected. Thus, I would value just the BodyBilt portion of the business at in excess of a minimum of $8.00 per share. I discount very heavily the lawsuit involving Neutral having any long-term effect on ERGB. I've had the benefit of reading certain documents back when ErgoBilt was taken public that imply that ERGB has an unlimited right to manufacture its chairs. I also know a lot more about the history of the issue. Also, the patent claims of NTRL don't appear to have much strength. In effect, ERGB is covered two ways on this issue. Any representation that BodyBilt doesn't have the right to manufacture chairs directly contradicts and violates a written agreement between the parties. I would expect NTRL to be most at risk in the libel and slander claims raised by ERGB. I also know that the Foniks Writers have been adopted by at least 20 court reporting and transcription schools and by at least one major corporate customer. I have seen a number of demonstrations of the technology. In effect, the technology is new and does work. There is a substantial market for this technology. The Foniks Writers are selling and should begin to have a significant impact on revenues and earnings in 1998.

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