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Gold/Mining/Energy : Direct Focus Inc. (DFXI) -- Ignore unavailable to you. Want to Upgrade?

To: Clement who wrote (135)	11/4/1997 10:11:00 PM
From: trilobyte	Read Replies (1) \| Respond to of 768

Hi Clement, thanks for your explanation. It would be interesting if it were possible to dig out the most recent balance sheet to have a clearer picture of what is happening. Did you call the company to inquire about this question? However, I found out that the informercial, last Q, represented about 25% of their marketing expenses. So the amount is not extremely large... over what was spent last year, unless, of course, they've increased their other marketing channels in an unusually large and rapid way. I called BFX. Here's what I learned... first, you had concerns with respect to the way they book their revenues if a sale is made on credit. BFX recognizes the full revenue on the date of the sale. However, they have a non-recourse agreement with a big financial company (10 billion company) that essentially takes on from there. BFX is paid, I think, 98.5% of the sale from the lending institution which then must get the money from the purchasor. If the purchasor defaults, BFX is safe as the bad debt falls on the shoulders of the lending institution. There is therefore nothing to worry about, I believe, from that point of view. BFX is covered. Subassembly of BFX products are made in Washington. Pro is made in the US, motivator parts are made in Taiwan. Currency fluctuations not expected to have an impact om results. Rod Rice told me BFX was comfortable with 9cts per share this quarter. Christmas Q not necessarily their best as they don't do much advertising during the last 2 weeks of the year (it takes several days to ship a training machine). Also, most of their unit sales are larger than 500$. 9cts per share would represent another excellent quarter! And they do expect to start the new year with an advertising bang... They don't expect to see any seasonality for another 2 years as they're Q over Q growth appears to be very strong. They view their company as a direct marketing company -not necessarily an exercise machine company-- and therefore are looking for new products to start selling in this manner. They feel they have developed expertise in this method of selling goods and plan to use their experience to grow the company. The insole product is more or less dead. They're still selling a few, but not much. They want to focus on products with tag prices above a few hundred dollars. THey may acquire a small company with their cash if the price is right. They're also hoping very much to move to Nasdaq! I believe they think the share price of BFX is NOT fairly valued at 3$ given the numbers they have been putting up. Rod Rice seemed pretty convinced that the share price would continue appreciating... but hey! he might be a little biased. Still good to hear positive management. After all, they've delivered several great Q's in a row. They have just added new 18000 square feet capacity to their manufacturing capability! and increased significantly their number of stations to 45 (I guess this represents the number of receptionists answering the phone when informercials are running)... So this company is on the expansion track for now. Finally, a trip to Toronto by Rice and the CEO greatly increased the visibility of the company to the financial industry (this explains our rise from 1 to 3$ to some extent). They're happy of having seen the trading volume increase, although they would like this to improve significantly more. Maybe moving to Nasdaq will do the job! Well, Clement, I hope you quizz Rice about your concern. He's surprisingly accessible. Got through to him on my first try! I do believe that at current levels, BFX represents an excellent investment with excellent potential. regards, Trilobyte