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To: David Fitz who wrote (15424)	7/23/1998 1:12:00 AM
From: DanZ	Respond to of 53068

AGP. David, The chart looks scary and at first glance, the valuation looks extremely low based on price to sales and price to book. However, after further review, the biggest problems on the balance sheet are very high debt, very poor debt to equity ratio, intangible assets nearly equal the total of all their current assets, negative retained earnings, and continued operating losses. They are paying 13% interest on about 30% of their debt and interest expense exceeded their operating earnings in the March quarter. This looks like a tough situation to recover from and I consider it highly speculative. If they make it, the stock will be a big winner. However, I think there is a risk of bankruptcy. If you take the intangible asset off the balance sheet, they have assets of $414.474 million and liabilities of $549.069 million (426.085 long term debt). Total equity is only $98.592 million and they have negative retained earnings of $202.972 million. To strengthen the balance sheet, they need to convert a lot of debt to equity but that would significantly dilute the existing equity with the stock at $1.50 a share. For example, to raise even $200 million (half the debt), they would have to sell 130 million shares and they only have 27.7 million shares outstanding right now. This assumes that they could even sell that much stock at $1.50 a share. This is a risky situation from a financial perspective but I don't know anything about their competitive position in the marketplace. Their sales seem to be doing well but the debt is really hurting them. About 65% of their debt is tied to the prime and they will be in even worse shape if interest rates increase. Dan PS: Are you holding any DWRX?