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To: Joseph Waligore who wrote (15)	1/17/1999 8:35:00 AM
From: Greg Burton	Read Replies (1) \| Respond to of 612

Joseph: Yes it does seem that the financials are not encouraging if it is to be hoped that the market will sustain a share price of $16 after the IPO. I did some back of the envelope scratchings: First, let's assume that the market will want at least an EPS of 30 to be safe. But it seems that footnote (1) indicates that there is about 40% more dilution than the 10M/Shs that first meet the eye in the S 1. So, $16/30 = $0,53/Sh x 14M/shs = $7.4M earnings. 9 mos. losses show $9.8M or a straight line projection of $13 for 12 mos. So where does management find $20M ? Well growth has been pretty good, about 200% so let's project that out to 12 months and then double it: $13.4M x 12/9 $18M x 200% = $40M. $7.4M/$40 = 18.5%. But Costs have been running about 120% of sales - not 81%. So my question is, when they stop trying to buy market share at this rate what are the reasonable margin expectations? When will they grow sales at a self sustaining rate? Greg