Top Image Systems, LTD, (NASDAQ–TISA)-BUY

TISA
Valuation-$5.46
Price September 27, 2007-$3.28

We are recommending TISA for purchase. TISA is trading at 60% of our valuation, which is a bit higher than we like but, if they do what they say they are going to do, our valuation should go higher soon.

After a very weak first quarter, Q2 results (6/30/2007) showed sales up 24% to $6.1 million, gross margin was 62%, and the company made $109,000 or $.01 per share on a “Non-GAAP” basis (un-taxed). The stock has traded as high as $4.44 and as low as $2.91 over the last year.

We think our valuation (and the stock price) will go higher due to:

1) Recent acquisitions that made the CEO claim in their Q2 press release that “Q3 revenue run-rate will be over $7.5 million”

2) A recent partnership with J&B Software that has resulted in 3 new deals worth over $300,000 each (announced 9/24)

3) Purchased a 51% interest in “AsiaSoft” to get into the fast growing China and Asian markets.

With $.78 a share in “net” cash (24% of the market cap), and 60% margins, making money and several publicly announced catalysts that we believe not been reflected in the stock price, we think this is a good bet.

The daily trading volume is only 16,000 shares, but this stock can be accumulated.

We think anything under $3.35 is a good price.

About Top Image Systems
Top Image Systems is a leading innovator of enterprise solutions for managing and validating content entering organizations from various sources. Whether originating from mobile, electronic, paper or other sources, TIS solutions deliver the content to applications that drive the organization. TIS’s eFLOW Unified Content Platform is a common platform for the company’s solutions. TIS markets its platform in more than 30 countries through a multi-tier network of distributors, system integrators, value added resellers as well as strategic partners. Visit the company’s website http://www.topimagesystems.com for more information.

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