TASA Research Note

Touchstone Applied Sciences (TASA)
By: Robert Davis

Touchstone Applied Sciences (OTCBB:TASA) held their annual shareholders meeting on March 20th, and as usual, Andrew Simon, its CEO, provided investors with a significant amount of new information about the Company.

Probably the most important announcement was the Company's decision to 'attempt to extricate ourselves' from the post-secondary proprietary school business ' the Mildred Elley schools.

Back in 1998, the Company saw the proprietary school business as a potential profitable growth area that was also countercyclical to the seasonality inherent in its Assessment and Instructional Products businesses. While realizing at the time that this business was highly regulated, management felt that it could successfully deal with the resulting business constraints.

However, due to a combination of economic conditions in its market area that were less than ideal for the post-secondary school business, and regularitory issues that for a time affected its access to the guaranteed student loan program, for the last several years Mildred Elley has made a 'negative contribution' to the Company's profits, while tying up a considerable amount of its capital.

Although management did not provide a timetable for this action, Simon clearly stated 'it is our long-term strategy to focus our resources on our core businesses, namely K-12 assessment and instruction.'

Regarding the Company's Assessment Division, Simon reviewed the successful introduction of its new MAC II test, designed to support 'English as a Second Language' programs, and projected that 'I believe that we will do more than $1 million in volume in 2002 on this new product.'

He also quantified the sales gains made by the DRP->Booklink product, citing a 51% sales increase in 2001. He also announced ' We produced a private label version of this product for McGraw-Hill/Glencoe to be used as part of their submission in California.' This version of the software package includes only about half of the titles covered by the original product, and is distributed by McGraw-Hill as a sales promotion tool. TASA then can follow up to sell either or both the full DRP->Booklink product or the full line of DRP assessment products. Simon also announced that a similar program would be initiated in Florida during 2002.

J.M.Dutton & Associates, LLC. John M. Dutton, President and Supervisory Analyst, 1129 Manning Drive, Suite 310, El Dorado Hills, CA 95762 Phone (916) 941-4985, Fax (978) 418-6422 Email: [email protected] Web site: www.JMDutton.com

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