Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Tobasco who wrote (5977)	5/19/1999 9:38:00 PM
From: gary g	Read Replies (2) \| Respond to of 6931

well guys and girls how did thing go, I just got out of a long way to long meeting and looking forward to hearing.....

To: Tobasco who wrote (5977)	5/20/1999 7:15:00 PM
From: John S. Baker	Read Replies (1) \| Respond to of 6931

From my notes of the Conference Call — seven pages, roughly describing what was said but not including any direct quotes from Don unless so indicated. Duration of the call was considerably more than an hour. The format was JJ Jeffrey asking questions of Don ... questions which had been compiled from verbalized stockholder concerns over time plus specific questions forwarded recently to JJ. Don described the float as approximately 30 million, plus or minus a few hundred thousand. He prefers to use the strict definition of float as "freely tradeable", or "Shares authorized and issued" minus any which are subject to a trading restriction ("legended" or otherwise). The float wasn't always that high, but when they got upside down in the trading program last year, they couldn't pay the brokerage firm in real dollars so they paid in shares. This also explains why his holdings, as president and founder, represent such a small proportion of the total float, ie he used to have a decent proportion, but when they issued the additional shares, his percentage of the overall shrunk. About so-called "insiders", Don said that no one has more than 5% to his knowledge. Given what he's seen, he estimates "insider" holdings ... officers, directors, and holders of 10% or more ... totals about 1.2 million, 90% of which is his. Major shareholders? He doesn't know. He knows there are certain groups which have accumulated, often in street name (which makes it harder to determine), but he is not going to speculate on who has how much or whether they are telling the truth. There is no current corporate concentrated effort to go out and tell the TSIS story in order to find someone to support the stock (someone more than just a market maker), but he did mention two individuals, Al Starkel and Justus Solomon (spellings?), who had stepped in and have done some significant accumulation. Re getting a bank line of credit before they need it — Don implied that they are approached regularly by people who want to lend them money ... and that he doesn't accept the bit about having a bank line of credit as adding to a company's credibility. He noted that they recently had changed banks, now with City National Bank (which I know of as a major regional business- oriented bank). Having said all this, Don stated that he is looking at the line of credit "avenue, because it's being thrust upon us." But he very certainly hopes they will not need a line of credit, as they have positive cash flow and enough money in the bank "to do everything we want", noting that they do not purchase equipment; they lease it. Lots of discussion about the "puffer fish" syndrome ... triggered by concerns expressed by a number of investors. "We're trying to get away from the need for that (acting like a puffer fish)" but TSIS never will get away (completely?) "when your clients are so much bigger than you. These people still think we are a lot bigger than we are — I can tell from comments when they talk with us." (cont'd)

To: Tobasco who wrote (5977)	5/20/1999 7:16:00 PM
From: John S. Baker	Respond to of 6931

(cont'd) He then stressed that his application of the puffer fish mentality was from an operational basis ... and not from an investor relations basis. Furthermore, Don stated, he does not anticipate the puffer fish getting in the way of the SEC Form 10 filing this fall -- no delay (more about this schedule later). The hope is that TSIS will have established a credible customer base by that time. While some danger still exists, that danger will not be what it would have been a year ago. "It is very feasible that we will lose some contracts because of that" (meaning disclosure of just how small a company TSIS really is). When asked why he had so few shares, Don noted that this issue should be viewed relative to shares "issued and outstanding". Six years ago, the company was not properly financed. Some former law clients of his put up some money. But everything takes longer and costs three times as much as one expects. So Don financed the company "on credit cards and personal net worth" which over three years has completely evaporated, plus in some cases by the sale of shares in private placements. "That's how we got to where we are now." Don stated that one of the Directors is a headhunter in the telecom industry and a compensation expert and he (the Director) says that (possible garble here because my notes don't make sense) he would have expected Don to have a higher equity stake in the company than he does, based primarily upon the fact that if they were to set out to hire a new President/CEO at this stage of the game, they would have to offer that person 3-4% of the company just to get that person. The implication is that this Director feels that Don's stake should be higher and that the Board will be looking for ways to accomplish this, "based on performance", at its next Board meeting (June 18th). Don's stock options have not changed ... nor has there been any change in the overall plan since the last audit. Don noted turnover and increases in staff, and needs stock options for them. Hopefully this will be approved by the Board in June, stressing that the options would be for everybody in the corporation. Are the managers and directors buying TSIS stock? Don is not. He doesn't know about Rob Wilson. But he believes Mark Goyette is. Don does not feel that his not buying stock reflects poorly on the company because, from his perspective, he is committing $10,000 per month to the company because his salary now is a bit less than half what he was earning seven years ago. He has put his whole net worth into the company when it needed it, "and I don't have anything left." JJ then pressed him with a question about what Don would say to investors who would hope to see the CEO buy more. Don responded, a bit testily, "Give me a raise. We learned this through the buyback program. I personally haven't recovered. The only way I will is by making the company successful and then my 1 million shares will be worth something." Don was asked about his bonus of $5,000 in 1998 and how this was determined in a year when the company absorbed a 2.6 million dollar trading loss. He acknowledged that this was a fair question, said that it was approved by the Directors as a bit of a pat on the back, modest as it was, for the company's having its first full quarter of profitability. He noted that TSIS now has a more formal bonus policy as it applies to Don and to Dave Webb, both of whom will receive a cash bonus and a rise in salary when the company exceeds $1M in quarterly revenues. Don also suggested that it was appropriate to differentiate between trading losses and operational successes. (cont'd)

To: Tobasco who wrote (5977)	5/20/1999 7:17:00 PM
From: John S. Baker	Respond to of 6931

(cont'd) Don was asked about a possible stock buyback. He cautions us to differentiate between short term peaks upward and long term increases in stock price and questions whether decreasing the float by 3% would increase the stock price by 3% over time. In addition, there are fiduciary issues. "Do we have the cash to make sure we can run the company day to day (we do!)." What is the best use of excess cash? "Right now we are leasing a lot of equipment, costing 17-18% per annum." He would love to pay cash and save the cost. And contemplating what might come up in the future which might result in a requirement for a very substantial cash outlay, only to discover that he had already spent all the cash on a buyback program. TSIS's style has been to install equipment at its own expense and then to earn the cost through usage fees. Also, the NASDAQ listing requires $4 million in assets, including $2 million in liquid assets (essentially cash), so if liquid assets are used to buy back stock, one ends up on the bulletin board forever, or at least it delays the NASDAQ listing process. Don stated that NASDAQ listing is a critical step forward which needs to get accomplished ASAP because that's where the legitimate support from market makers will come .. once the small cap listing is accomplished. Question: the last news release was April 9th ... have we signed any new companies? Don responded that yes we have signed companies, but noted that TSIS's difficulty is that major clients ... "every single one" ... prohibit disclosure without written consent. "We tripped over ourselves" with Frontier and "came within a whisker" of losing them as a customer. We now are hypersensitive. We'll ask for rights to news releases (I think this means in future contracts). Don agreed that he needs to pay more attention to getting the news out ... understands the market's need to have the info ... has a couple of drafts on his desk but has been unwilling to ask the clients for permission to release them ... pledges to work hard to focus on these releases ... charged JJ with being more forceful about bugging him to get the news out. Don said they have hired a consultant to get some media coverage of the company and its business in general and feels that this will get around the non-disclosure issues. Don sees no delays in becoming fully reporting. The new US auditor is putting last year's audited financials into US GAAP, a process Don described as "a couple of technical adjustments". The FY ends on July 31st. He sees them drafting the Form 10 in August or early September, with the audit ready for publication in October. He expects to file the Form 10 by the end of October or early November, as soon as the audits are ready. Don stated his opinion that filing will not change the stock's price a penny, but it is the first step in getting to the NASDAQ. Don stated that Scott has had nothing to do with TSIS since December 15th. Scott is in Vancouver, and Don is not aware of what he's doing. Don is "letting some grass grow between us before we come back as brothers." Prior to Scott's separation, he had options but no shares. He was given the 100,000 restricted shares as a golden parachute. Don noted that Scott did put in five years of his life, working for modest and often intermittent pay ... says that the 100,000 shares is "a paltry sum", compared with "what he forwent" and very much reflects that the company took a real loss on the buyback program. (cont'd)

To: Tobasco who wrote (5977)	5/20/1999 7:18:00 PM
From: John S. Baker	Read Replies (3) \| Respond to of 6931

(cont'd) Greg Cruppee (spelling?) observed that the trading losses appeared to be a misuse of leverage and asked where the leverage came from. Don agreed and said that the brokerage firm extended the credit. In closing Don said he wanted to make these conference calls a more formal process and to do it quarterly, probably right after the earnings release. He also noted that many of the questions for this call reflected the concerns of the investors, and that resulted in a negative tone. In the future he wants to be able to share the hopes and aspirations and the things TSIS actually is fulfilling, so that shareholders will know what's going on, which is particularly important in view of being muzzled by the clients. JSb.