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Gold/Mining/Energy : Markatech - MKD (VSE) -- Ignore unavailable to you. Want to Upgrade?

To: Sam Johnson who wrote (196)	4/8/1998 11:42:00 PM
From: Ted Kosokowsky	Respond to of 416

The announcement is out! This confirms the deal, MKD will be 60% owner of a soon-to-be CD manufacturing plant. The guts of the deal are: 60% joint venture for 750,000 escrowed shares of the company payable after $450,000 in after tax income 4% royalty payable on gross sales $500,000 bond offering by CDI paying 12% and convertible to shares of MKD. Price unknown $500,000 equipment lease from a Los Angeles firm. $695,000 lease payments tied to production. $345,000 debenture convertible at $.30 for 1 post-consolidated share and warrant, plus 20% fees 500,000 employee and directors share purchase options at a post-consolidated price of $0.30 2 for 1 consolidation Like you, I grimaced at the consolidation. Despite being what I thought was close to this deal, it came as a surprise. At first I fumed, but after thinking about it and hearing the reasons, I think I accept it. 1. The company could not be financed. « million in speculative capital without a good discount just isn't out there today. The minimum value of placements is $.15 per share, but it only just broke through that level. The company needed financing and they needed it quickly before CDI went to another company. 2. The share price is now at a more promotable level. It may not seem too different to some of you, but to the big players a stock at $.50 is lot different than a stock at $.25 Plus they need to get over the stigma of trading at .06 3. The number of free trading shares is cut in half. OK, I figure about 6 million fully diluted. It loses in liquidity, but which short seller is going to touch this now? This is now so tight, that it will move up in price a lot more easily. 4. The cash flow per share is now larger. This will garner increased interest from institutions. 5. It will reach a share price that can be margined much quicker. Once the earning and cash flow numbers are public, a $3-4 share price will be justified. The ability to margin may propel the stock price up to industry standard multiples of 20-30X. These are my first thoughts, and I am sure they will change. Now let's see what happens. Ted

To: Sam Johnson who wrote (196)	4/9/1998 3:32:00 AM
From: BlueIce	Read Replies (1) \| Respond to of 416

Like you said, there are a lot of numbers in the press release, which takes a bit of time to digest. I'll call IR tomorrow and ask Lawrie to explain it to me in plain English to make sure I've interpreted everything correctly. Meanwhile, listen to Ted. He's been right on the money in the past and his analysis of this release should be equally accurate. It looks like MKD is going to issue more shares in a few different stages. They've disclosed everything for the next couple of years so there shouldn't be any surprises. In your earnings model, you can calculate a scenario with full dilution and see if it puts any significant dent in the earnings. If Ted's basic model is correct, the earnings potential is so great that the dilution isn't going to matter much. Overall, I'm excited to see the confirmation of what we've all been expecting. We're no longer wondering if the CD plant is going to happen. It is and it's coming very soon. Now we can switch our speculation towards production numbers, confirmation of customers (Spinner/CDI, the company in Seattle, and so on) and when production will start. A couple of months ago, MKD was shooting for June, 1998. I think it was last week when MKD went to look at the building where they were putting the plant. I'll have to ask them about the field trip. As far as promoting the company goes, I understand companies aren't allowed to promote themselves when they're financing. That's why during the past little while, MKD had to be quiet. Rest assured, they're going to promote their company as soon as they can because now they have confirmed substance forthcoming. This is what stockbrokers needed before they recommend MKD stock to their clients. It's an easier sell to say "MKD has a plan to build the first CD plant in Western Canada. They have the funds to build and operate it, and customers to fill the plant capacity already. Oh yeah, and it'll be in production in only a few months from now." I'm going to ask IR over the next little while about their promotion plans.