I received the following e-mail from Fran in response to an e-mail sent her expressing the frustration that I had with KNIC's performance and final earnings report for the 4th quarter and '97. I had also passed along the comments via e-mail of many of the investors had posted in the various KNIC threads on-line to be sure she saw them and could convey them to Lou. This is the response I received and have gotten their permission to pass this e-mail along to you.
Regards, Ben Mackenzie
Subj: KNIC OPERATING RESULTS
Date: 98-03-31 09:45:10 EST
From: FranDani
To: BENMACKZIE
Dear Ben -
Responding to your e-mail, the results for the 4th quarter were disappointing to all of us. In reviewing same with our CFO and COO, I learned that in the revenue projection for the quarter was a scheduled show on QVC in London for Marie Osmond. Unfortunately, the show was scheduled the night of Princess Di's untimely death. Every human being was watching CNN and the show was a non-event. This impacted the 4th quarter by several million dollars. Also in the 4th quarter was an auction of the Duke & Duchess of York's jewelry scheduled by the Krasner Group for Kenneth Jay Lane at Sotheby's. Out of respect for Princess Di, the show was cancelled and rescheduled in the first quarter. The Marie Osmond show could not be rescheduled as it was already on the air. Both events unexpected and out of the Company's control.
Bob West, formerly with Franklin Mint during the four years of their historical turnaround, was brought on as acting president of Georgetown Collection where he did a wonderful job of turning those newly acquired units around. In January the Company relocated Bob to California to assume the post of Chief Operating Officer and to complete the consolidation of the six companies acquired in late 1996. Bob informs me that the consolidation which was more complicated and costly than expected is 90% complete and will be completed within the second quarter. Bob has in just a couple of months already cut $1 million in expenses from the bottom line for 1998.
The second quarter should be a significant one for LLK. Ontro is expected to go public by end of April, 1st of May. With regard to PEC, Lou and I had a conversation with the office of Director of Technical Utilization at the DOE. He informed us of the reasons for the delay which had to do with hearings scheduled on two matters which were ahead of PEC on their calendar. One of those hearings set for mid-April has to do with an extension of the legislation for fleets mandated to use alternative fuels to include the commercial sector (i.e.UPS, FedEx, etc.), which, obviously positively impacts the need for PEC's fuel. He also said the following: "A public register filing will be done in approximately 4 weeks; the normal hearing will probably be waived (as they don't believe it is needed); and the comment period will probably be shortened (as they don't expect many comments)." When asked by Lou and myself when the shareholders of LLK can look to a certification of PEC's fuel, he response was "an outside date of 90 days." We're getting there, Ben.
As for Arkenol Asia, it is developing as planned. The shareholders of LLK will come to understand what it can mean to them within a couple of months.
All in all, Ben, the worst is behind us. 1998 is shaping up to be a good year for LLK and the KNIC shareholders. Bob West has told me that beginning with the second quarter and forward, the results of the consolidation of the core business will be clearly reflected and that 1998 will be profitable.
I hope this answers some of your questions and I look forward to speaking with you soon. Thank you for your support.
Best regards,
Fran Daniels
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