I've been reading over the past few quarterly reports and captured the following interesting pieces of information that I want to share:
- Over the past ten years, assessment revenues have increased from $2.1 million to $11.7 million, representing a compounded annual growth rate of approximately 15%.
- The Company has recently completed three acquisitions which have greatly expanded the types of services that the Company can offer to its clients and prospective clients in the assessment marketplace. In January 2005, the Company acquired all of the outstanding stock of Assessment and Evaluation Concepts Inc. ("AEC"), a firm with experience and relationships in the educational assessment field which complement the Company's experience and relationships. On July 1, 2005, the Company completed the acquisition of all of the outstanding stock of Achievement Data, Inc. ("ADI"). ADI provides on-line testing capabilities to state testing programs and also offers an electronic testing engine. Effective as of June 1, 2006, the Company acquired all of the outstanding stock of Questar Educational Systems, Inc. ("Questar"). Questar provides test delivery, scoring and score analysis capabilities to state testing programs.
- Since the first quarter of 2005, the Company has added three seasoned sales executives and a marketing director. The net result is that the Company has shifted, with little incremental expense, from an outside independent sales organization to an in-house staff. We believe this shift bodes well for the future.
- The Company as a whole is bidding on larger administration contracts that traditionally have lower margins, and as we undertake such large contracts, we have encountered higher start-up costs than we have traditionally seen. We anticipate costs of goods sold should decrease as a percent of sales as the number of contracts we administer increases and as our operations gain in efficiency.
- In July 2003, the Company sold its headquarters building to 26 Palmer LLC for $2,875,000. The building and related improvements had a net book value of $1,458,481. The Company reported a gain on the sale totaling $1,254,383, net of closing costs totaling $162,136. The building was then leased by the Company under a ten year lease agreement. As a result of the sale-leaseback of the building, the gain has been deferred and is being recognized as other income over the ten-year term of the lease at $125,439 per year.
- The process of writing and calibrating a test passage takes approximately two years, and all costs associated with the process are capitalized during this period. Amortization of these costs begins once the development period has elapsed, which in most cases, represents the point in time at which the new test passage is placed into the test passage bank and becomes available to be utilized within the Company's existing tests, or the point in time at which a newly developed test becomes available for sale. Costs capitalized in connection with the development of passages used in the Company's DRP Test have been estimated to have a useful life of eleven years and, accordingly, are being amortized over an eleven-year period. Such amortization costs are included in the costs of goods sold in that period. Costs capitalized in connection with the development of passages used in all other of the Company's tests have been estimated to have a useful life of seven years and, accordingly, are being amortized over a seven-year period. If these estimates of the useful lives of test passages prove to be shorter periods, the Company would be required to accelerate the amortization of these passages, resulting in a reduction in income.
- The results for the first six months of Fiscal 2006 show that the Company is beginning to earn revenues from non- traditional sources of business. For example, the Company's assessment products unit is now providing operational support for the Idaho ESL and Indiana Core 40 programs being run by the Company's proprietary assessment unit. The increased revenues in the custom assessment and services unit are due to the increased activity resulting from the combined strength and breadth of services provided by BETA and AEC together, as well as revenues attributed to ADI which the Company acquired in July 2005.
Mike
AI
