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Microcap & Penny Stocks : TSIS: WHAT IS GOING ON? -- Ignore unavailable to you. Want to Upgrade?

To: Breeze1 who wrote (2430)	5/31/1998 11:16:00 AM
From: John S. Baker	Read Replies (1) \| Respond to of 6931

I agree with your analyses and your concerns. As I stated in my "review" of the Annual Meeting last January, this company strikes me as a penny stock company which is growing up and cleaning up its act. And I listed some of the improvements which had occurred by that point. If TSIS were already a listed company, I reckon the stock would reflect a higher multiple than it currently does. The benefit to current stockholders is that the company's continued progress toward "growing up" will leverage our investment -- perhaps even mightily. It is interesting to have watched the tenor of the comments on this board change over the last year or so. From the "It's going to the moon ... I heard from my brother-in-law ... latest hot tip" type of posting to numerous serious dialogues attempting to establish, for instance, what the correct multiple for the TSIS stock should be (and multiple of what: sales, earnings, growth rate, etc.). In other words, I think the maturation of TSIS has brought about a maturation of this thread as well. So your comments and concerns are very appropriate. If you have not done so, I would recommend that you call TSIS and ask to speak either with one of the Directors, Don or Scott. Express your questions/concerns and ask them to explain. They both are very easy to talk with on the phone, although both travel a good bit (Don more so than Scott). Be sure to post your thoughts here afterwards so we all can share them. A few specific comments: 1. Since January, they have hired additional marketing staff ... in major centers, including Washington, DC. Not sure of the numbers, but the impression that it was 3 or 4 sticks in my mind. 2. Not sure I agree that I want them to be lining up additional investors to finance expansion. My view of the company is that it is scaleable ... using that term to mean that the infrastructure can be increased in small increments to meet growth demands. This is in contrast, say, with a steel mill which already is operating at maximum capacity, three shifts a day. The steel mill cannot easily increase its output by 10%; rather it must either build a new plant, just to cover that additional 10%, which then instantaneously means that both plants have excess capacity. Given that scaleability, they can grow as their customers demand grows. More business; add a computer or two plus some modems. And they soon will be profitable ... perhaps even throwing off excess cash ... so they should be able to fund the necessary incremental growth from operating cash. It might be interesting to try to list the "shortages" which TSIS might encounter -- barriers to growth. Given decent growth, every once in a while they will need to add another T-1 line -- probably no significant likelihood of a shortage there. Programming for *current applications" is modular. It's already been written, so they can bring a new client on board quite easily just by adding the client-specific information. I liken this to a macro or template in a word processing program. Most totally new application programming to date has been done by consultants. This is both good and bad. Good because it means you do not have long-term payroll and benefits considerations; potentially a weak point as the source of good programmers becomes more and more scarce. Office space. They are located in leased space a small business park in Encinitas, a bedroom suburb some 15-18 miles north of San Diego. I suppose it is possible to envision growth so severe that they might outstrip the electrical capacity of the office park, but I reckon that's still pretty far off. More likely is that the office/support staff will grow and they will be forced to put the office staff in a separate space. Perhaps that might be in the same office park; perhaps it would be a ways away. Neither is a crippling endeavour. Enough from me for now. Perhaps others might be able to suggest (and analyze!) other potential barriers to growth. For now, I remain long in TSIS -- though I recognize that it is still a non-reporting, though audited penny stock, with all the risks that that encompasses. (It is the only penny stock I own -- violating my personal rule of buying only listed stocks within the $2-20 range.)