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Gold/Mining/Energy : Direct Focus Inc. (DFXI)

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To: trilobyte who wrote (432)	3/10/1999 12:51:00 AM
From: Gordo	Read Replies (1) of 768

Well, having scanned through the S-1 (at least the first half skipping the legal stuff at the end, here are my preliminary thoughts): Its very thorough and well written. Even though I have been following this company for a couple years and have done a fair amount of research, there was a number of things I learned by reading it. Anyone doing DD on DFX should DEFINITELY read it. It also clearly spelled out the risks inherent in the business and in the Nautilus acquisition. I was a bit surprised that this was the first time that we have heard about the Soloflex lawsuit given that it was filed in May of last year. Scheduled for trial in July. Some of the claims seem a bit specious - (i.e. DFX shouldn't be allow to film commercials with Potter in it or with images of Potter taking off his shirt??) Could drag out for several years with appeals, etc.... Trilobyte, in terms of the impact of the Nautilus acquisition on financials, the pro-forma numbers should be used (just over $3M detrimental to net income for 1998). This is because they are writing off a whole bunch of the Nautilus assets and thereby reducing the effective depreciation expense. Nautilus did lose $14.8M in the most recent fiscal year, and $6M after extraordinary items. Revenues have also been declining for the last three years. The S-1 lays out a number of strategies DFX will employ to try to revitalize Nautilus sales - I sure hope they work. At least in the risks section they acknowledge that their strength is in direct marketing, and not in selling to commercial establishments. I guess we will have to see what the pricing on the offering will be and how the market will respond. gord

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