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Technology Stocks : GKI-GK Intelligent Systems

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To: RLM who wrote (132)	5/30/1998 1:52:00 AM
From: Robert Dwyer	Read Replies (2) of 143

I have attempted to be a voice of reason on this board. As I have stated in previous posts, I have known the management of GKI for 5 years and have followed the company from its status as a private company through its reverse merger with a shell to the listing on the Amex. I can say in no uncertain terms, that Gary Kimmons has always been forthright and 100% honest in everything he has told shareholders. I don't know where the "short" story originated but I did try to dispel rumors that there would be a massive short covering rally. The truth be told.......there may very well be individuals short GKI as many stocks have short positions......but......there is no public database of short positions for bulletin board stocks and there is no policy requiring the covering of these shorts. Enuff Said. As far as the what the future holds, with 23 million shares fully diluted, the market cap for GKI stands at approximatley $160 million depending on the actual close from day to day. Without revenues that is certainly a significant cap. The real question is wheher the technolgy and product line can justify such a valuation. My suggestion is that you consider using a 'venture capital' or 'gorilla game' model in trying to ascertain what future revenue and earnings streams may be and, then, discount them back using a rate of return. For example, if you anticipate revenues of $250 million in 6 years and margins of 60% for net income of $150 million and after tax income of $100 million divided by 25 million shares (keep the math simple) for earnings of $4.00 per/share times a 25 multiple= 100 per share. Discount that back for a 24% per year rate of return and today's price would be approximately 25. Discount it back for a 50% rate of return and you have a $13.00 per/share price (I'm doing this in my head at this hour so forgive any miscalcualtions) You get the idea. I am NOT suggesting that any of these numbers are real. They are all hypothetical......I am suggesting that you use this type of analysis in determining whether this investment is a good value at this juncture. I do believe that the technology has merit. Management is focused on builing the company at this point. I believe that they will succeed and am therefore, long. Good luck to all.

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