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Microcap & Penny Stocks : Work Recovery (WRKE) - A New Era! -- Ignore unavailable to you. Want to Upgrade?

To: Jatin Kadakia who wrote (85)	11/13/1997 6:39:00 PM
From: David Haith	Read Replies (1) \| Respond to of 96

Here is a copy of the letter from Work Recovery. Dear Fellow Shareholder: October 14, 1997 I have written this letter in place of a formal annual report for the fiscal year ended June 30, 1997, due to the cost of printing and mailing an annual report. Although the Company emerged from bankruptcy in February of this year, we continue to suffer from limited cash, recurring losses and a working capital deficiency, all as a result of disappointing sales of the Company's sole product, the ARGOSY System. The months since I have been chief executive officer of the Company have been challenging ones. Immediate actions were initiated to deal with massive financial and operational mismanagement and fraud by prior management. These actions included closing or selling over forty service centers, canceling various licensing and other agreements, reducing staff and other expenses, selling excess assets, and raising working capital. In spite of these efforts by current management, the depth of the Company's problems required the Company in May 1996, to seek protection from creditors under Chapter 11 of the Bankruptcy Code. I am particularly pleased that the confirmed Plan of Reorganization provided for equity participation by our then existing shareholders. But the effects of the bankruptcy and mismanagement by prior management have seriously hampered sales of ARGOSY Systems Consequently, the Company has reported recurring losses and a deteriorating financial condition. As a result, the Company recorded a $37.8 million impairment loss as of June 30, 1997, for the unamortized excess reorganization value established upon emergence from bankruptcy. In spite of the significant challenges facing the Company today, I remain convinced that the ARGOSY System employs the most advanced and comprehensive leading-edge technology available for conducting functional capacity evaluations. We estimate the current demand in the United States for functional capacity evaluations is in excess of five million evaluations annually or $2.5 billion, at existing prices. The Company is attempting to increase demand for the ARGOSY System by marketing the cost saving benefits from the use of the ARGOSY System to employers, insurance carriers, governments, managed care organizations, and third party payors In addition, we are actively working at the state and federal levels to effect legislation that will provide for the increased use of functional capacity evaluations using testing methods, such as the ARGOSY technology, in the area of benefit determination. Our aim is to establish the ARGOSY System as the leader and standard for functional capacity evaluations. The Company recently engaged an outside company to direct the sales and marketing of ERGOS Systems. The principals of this company are highly experienced and successful in medical product sales and marketing. We are hopeful that their addition to the Company's management team will provide enhanced opportunities for increased sales of ARGOSY Systems. In addition, we have recently expanded our global market by entering into an exclusive distributorship agreement with Work Recovery Europa BV, an unaffiliated Dutch company, to market and distribute the ERGOS System within Europe. In August of this year, Vernon S. Schweigert was hired as the Company's President and Chief Operating Of ficer, Mr. Schweigert has extensive financial and operating experience and is a valuable addition to the management team as we seek to rebuild shareholder value. The Company filed its Form 10-K for fiscal 1997 with the Securities and Exchange Commission on-time. However, the financial statements for fiscal 1997 that are included in the filing are unaudited due to a lack of funds. You may request a copy of Form 10K for fiscal 1997 by contacting the Company however, in an effort to reduce printing and mailing costs, I suggest you visit our Home Page at www.ergos.com to view the 10-K. There is no guarantee that the Company will be able to emerge from its current financial condition but we are making every effort to turn Work Recovery around. I appreciate your continued support and interest. Since rely, Dorcas R. Hardy Chairman and Chief Executive Officer