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Microcap & Penny Stocks : IMGX, currently $3.50 -- Ignore unavailable to you. Want to Upgrade?

To: George Young who wrote (537)	12/9/1997 8:57:00 PM
From: Jay Morrison	Respond to of 665

George, Most of this is old news that I have known for a while. I can fill in a few gaps that seem up in the air. My information is nothing but rumors, but it fits with much of this article. I did learn a few things. <<Network Imaging Corp. was given an ultimatum by the Nasdaq National Market a month ago - get into compliance with the market's standards by year's end or be delisted.>> That is not an issue. They just got money from Zanett Capital for reaching goals. The stock will not be delisted. <<According to sources, the company came up with a resolution for those stockholders the week of Nov. 17. The resolution has not been announced yet, but will likely require approval by other shareholders.>> It is already a done deal. It was release in a filing last week. The preferred stock will be converted and the ratio will depend on the average stock price for 20 days after Dec 31, 1997. The minimum is 8 million shares and the maximum is 15 million shares. Holders cannot be force converted till the end of 1998. The least amount of dilution occurs if the average price of the stock is over $1.75 for the 20 days. The worst dilution occurs if the stock stays low and nobody converts. They still get stock dividends for a year. Leto already has enough votes to approve this plan. (to be continued....)

To: George Young who wrote (537)	12/9/1997 9:13:00 PM
From: Jay Morrison	Respond to of 665

continued.... <<The second class of preferred stock Leto considers a problem is owned by Credit Lyonnais, a French bank that is in receivership. Leto said that Network Imaging could realize the $6 million needed for Nasdaq compliance if it could get a fair value for the French class.>> I think Dorotech has already been sold and the deal will close before the end of the year. This is strictly a rumor. <<Alan Jacobs, an analyst for Avalon Research Group Inc. in Boca Raton, Fla., said Network Imaging should sell its French subsidiary, Dorotech, to solve the problem. Dorotech, which employs 100 workers and accounts for about one-third of Network Imaging's revenue, has stunted Network Imaging's revenue growth, Jacobs said. If the French business is sold, the French preferred stock will be eliminated.>> My sentiments exactly. That will solve the Nasdaq problem. <<Still, Leto is confident that his cards will fall into place in time for the Nasdaq deadline.>> That is my confirmation that it will happen by December 31st. <<Although government work is a small percentage of Network Imaging's sales, the company has already signed contracts with the Treasury Department, Department of Defense and Department of Health and Human Services this year.>> Hopefully the IRS will be added to that list, thanks to Constance. <<Furthermore, the company has established sales-channel alliances with Sybase Inc. of Emeryville, Calif., and Intergraph Corp. of Huntsville, Ala., Leto said that 12 other relationships are under discussion with Microsoft Corp., Oracle Corp., Sun Microsystems Inc., Digital Equipment Corp. and other companies.>> That sounds like bullshit that he was feeding to a reporter. Sybase and Intergraph are true, but the rest have already been beaten to death. In summary, I have got to believe that they have a plan to get the average stock price for the 20 day period above $1.75. Bankers Trust / Alex Brown negotiated that deal for IMGX and has credibility on the line. They must have something planned. :-) Also, 450,700 shares traded today and it was mostly tax loss selling that we anticipated. If you noticed, the stock was down most of the day, but bounced back as soon as the 1 1/8 offers were gone. If you look at time and sales, most of it came from one market maker. Jay (all of my comments are simply my lousy opinion and reflect the opinion of nobody but myself)

To: George Young who wrote (537)	12/9/1997 9:46:00 PM
From: Jay Morrison	Read Replies (3) \| Respond to of 665

George, Do you remember the posts a few weeks back about the range that most software companies trade in? 5X sales is a typical figure. Even if you assume the worst numbers possible, 12 months trailing revenue of $23 million for US domestic revenue (non-Dorotech) and assume 50 million shares (worst case dilution) the stock of IMGX should still be over $2.25 per share. If you assume average numbers of $32 million next year from $8 million this quarter and times it by 4, then assume 45 million shares outstanding. I get $3.50 per share with that calculation. That means flat revenue with no growth from adding Sybase and Intergraph, etc. If you assume that they will reach $8.5 million this quarter in US revenues and can continue to grow that going forward to about 43 million in revenue for the 1998 year and they can keep the shares at 40 million. With those number I get a share price of $5.37 per share. If you look at 1999 estimates of 80 million in revenue, that would make them about $15 million profitable which would be 37 cents per shares times about a 50 p/e and I see $18.75 per share. Since companies trade on 1999 earnings in the year before, we could see such a scenario by the 2nd half of 1998. What would it take for this scenario to occur? Convert the preferred and keep the dilution at 40 million shares. Sell Dorotech for what you can get. This removes the two big question marks hanging over IMGX. It can then trade at a level that other software companies typically do. That only gets us back to the $2 or $3 area. The other big test will come in February. They will report for Q4 of 1997. If they report over $8 million in US revenue, then we have a growth story. Sequential quarterly growth. Q2 1997 was $5.5 million, Q3 1997 was $6.5 million and Q4 1997 will be $8 million plus. Once the company has demonstrated that sequential quarterly growth, people will believe the companies estimates going forward. This is a crucial quarter for IMGX. If the preferred stock and Dorotech are not taken care of, the cloud will continue to hover and keep a cap on anything real happening to the stock price. Jay