U.S.SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: November 30, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission File Number 0-18250
TMS, Inc.
(Exact name of small business issuer as specified in its charter)
OKLAHOMA 91-1098155
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
206 West Sixth Street
Post Office Box 1358
Stillwater, Oklahoma 74076
(Address of principal executive offices)
(405) 377-0880
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Title of Each Class Outstanding at December 31, 2003
Common stock, par value $.05 per share 13,112,659
Transitional Small Business Disclosure Format (check one):
Yes [] No [X]
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TMS, Inc.
Condensed Balance Sheets
November 30, 2003 and August 31, 2003
Nov 30,
2003 August 31,
(unaudited) 2003*
----------- ----------
Cash $ 939,515 1,129,470
Trade accounts receivable, net 356,438 387,802
Due from related parties 62,297 29,779
Prepaid expenses and other current assets 60,520 33,295
Deferred income taxes 8,980 8,431
----------- ----------
Total current assets 1,427,750 1,588,777
----------- ----------
Property held for sale, net 426,400 -
Property and equipment 1,424,595 2,449,567
Accumulated depreciation and amortization (1,322,532) (1,639,414)
----------- ----------
Net property and equipment 102,063 810,153
----------- ----------
Capitalized software development costs, net 472,800 469,319
Other assets 42,231 42,863
----------- -----------
Total assets $ 2,471,244 $ 2,911,112
=========== ===========
Current portion of long-term debt 31,907 31,320
Accounts payable 144,651 109,204
Accrued payroll expenses 150,120 197,423
Deferred revenue 365,900 301,580
----------- -----------
Total current liabilities 692,578 639,527
Long-term debt, net of current installments 158,731 166,950
Investment in limited liability company 16,275 38,392
Deferred income taxes 8,980 8,431
----------- -----------
Total liabilities 876,564 853,300
----------- -----------
Common stock 655,633 655,633
Additional paid-in capital 11,348,883 11,348,883
Accumulated deficit (10,409,836) (9,946,704)
----------- -----------
Total shareholders' equity 1,594,680 2,057,812
----------- -----------
Total liabilities and shareholders' equity $ 2,471,244 2,911,112
============ ===========
*Condensed from audited financial statements.
See accompanying notes to condensed
financial statements.
TMS, Inc.
Condensed Statements of Operations (unaudited)
Three Months Ended November 30, 2003 and 2002
Three Months Ended
November 30
---------------------------
2003 2002
----- -----
Licensing and royalties revenue $ 343,544 668,860
Customer support and maintenance revenue 167,786 144,839
------------ ------------
Total revenue 511,330 813,699
Cost of revenue 106,260 134,128
Selling, general and administrative expenses 433,438 516,794
Research and development expenses 145,629 143,337
Loss in limited liability company (24,640) (25,436)
------------ ------------
Operating loss (198,637) (5,996)
Other (expense) income:
Write-down of property held for sale (266,537) -
Other, net 2,042 33,970
------------ ------------
(Loss) income before income taxes (463,132) 27,974
Deferred income tax expense - 10,562
------------ ------------
Net (loss) income $ (463,132) 17,412
============ ============
Basic (loss) income per share $ (0.04) 0.00
============ ============
Weighted average common shares 13,112,659 13,112,659
============ ============
Diluted (loss) income per share $ (0.04) 0.00
============ ============
Weighted average common shares and potentially
dilutive securities 13,112,659 13,114,790
============ ============
See accompanying notes to condensed
financial statements.
TMS, Inc.
Condensed Statements of Cash Flows (unaudited)
Three Months Ended November 30, 2003 and 2002
Three Months Ended
November 30
---------------------------
2003 2002
----- -----
Net cash flows (used in) provided by
operating activities $ (66,585) 160,499
----------- -----------
Cash flows from investing activities:
Capitalized software development costs (68,377) (85,380)
Proceeds from sale of technology - 250,000
Investment in limited liability company (46,757) (48,457)
Other, net (604) (533)
----------- -----------
Net cash (used in) provided by
investing activities (115,738) 115,630
----------- -----------
Cash flows from financing activities:
Repayments of long-term debt (7,632) (7,085)
----------- -----------
Net cash used in financing activities (7,632) (7,085)
----------- -----------
Net (decrease) increase in cash (189,955) 269,044
Cash at beginning of period 1,129,470 783,550
----------- -----------
Cash at end of period $ 939,515 1,052,594
=========== ===========
Non-cash investing and financing activities:
Investment in limited liability company
through contribution of technology $ - 94,939
----------- -----------
Deferred gain from sale of technology $ - 121,378
----------- -----------
See accompanying notes to condensed
financial statements.
TMS, Inc.
Notes to Condensed Financial Statements (unaudited)
Unaudited Interim Condensed Financial Statements
- ------------------------------------------------
The unaudited interim condensed financial statements and related notes were
prepared by TMS, Inc. Certain information and disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to rules and regulations established by the Securities and Exchange Commission.
The accompanying unaudited interim condensed financial statements should be read
in conjunction with the audited financial statements and related notes included
in our Form 10-KSB Annual Report for the fiscal year ended August 31, 2003.
The unaudited interim financial statements reflect all adjustments that are, in
the opinion of management, necessary for a fair presentation of financial
position, results of operations and cash flows for the interim periods
presented. All adjustments are normal and recurring, except for the impairment
write-down discussed in "Property Held for Sale" footnote below.
Interim results are subject to year-end adjustments and audit by independent
auditors. The financial data for the interim periods may not necessarily be
indicative of the results expected for the year.
Property Held for Sale
- -----------------------
On October 24, 2003, the Company entered into a contract for the sale of its
corporate headquarters' building located in Stillwater, Oklahoma. The sale of
the building closed on December 31, 2003. The new owner of the building is an
individual, Jevon Nasalroad, who purchased the property for investment purposes.
The Company is now a tenant in the building and has leased approximately 5,500
square feet of space for a minimum of two years at an annual cost of
approximately $56,000. The contracted purchase price of the building was
$460,000. The net proceeds from the sale, after closing costs, were $431,266
and were used to pay off a $191,800 mortgage.
For the first quarter ended November 30, 2003, the Company's net loss included a
$266,537 write-down to reflect an impairment of the value of the property held
for sale. The amount of the impairment was based on the amount that the net
book value of the property exceeded the contracted purchase price plus estimated
costs incurred for the final sale. Property held for sale, net, at November 30,
2003 included the following:
Land $ 111,000
Building 476,365
Accumulated depreciation (160,965)
----------
Property held for sale, net $ 426,400
==========
Net (Loss) Income Per Share
- ----------------------------
Options to purchase 413,974 shares of common stock at prices ranging from $.125
to $.40 per share and 579,974 shares of common stock at prices ranging from
$.27 to $.40 per share were outstanding at November 30, 2003 and 2002,
respectively, but were not included in the computation of diluted net (loss)
income per share because the options' exercise prices were greater than the
average market price of common shares. The Company had total options
outstanding to purchase 413,974 and 588,974 shares of common stock at
November 30, 2003 and 2002, respectively. All options expire during periods
through the year 2008.
Legal Proceedings
- -----------------
We are a party to a lawsuit involving the Virtual Scoring Center technology we
transferred to VSC Technologies, LLC. On October 23, 2002, we, along with VSC
Technologies, LLC and Measurement Incorporated, filed an action in the United
States District Court for the Eastern District of North Carolina against NCS
Pearson, Inc. In the complaint, we and the other plaintiffs seek a declaratory
judgment that the Virtual Scoring Center technology owned by VSC Technologies,
LLC and marketed by Measurement Incorporated and us does not infringe twenty
patents belonging to NCS Pearson. On June 3, 2003, NCS filed their answer to
our complaint, along with a set of counterclaims that assert infringement of
thirteen of their patents.
We believe that the Virtual Scoring Center technology does not infringe the NCS
Pearson patents and we designed that technology to carefully avoid infringement,
but we cannot assure you that we will be successful in our claims or our defense
against NCS Pearson's counterclaims.
If the court rules that the Virtual Scoring Center infringes the NCS Pearson
patents and NCS Pearson prevails in their counterclaims, this could result in a
monetary judgment against us. Because this action is at an early stage, we
cannot estimate the extent of any potential damages if there is a judgment
against us.
An injunction against us and VSC Technologies, LLC would be severely damaging to
our business growth opportunities and our plans to exploit the Virtual Scoring
Center technology. Measurement Incorporated has agreed to indemnify us against
our costs and any liability arising in connection with the action against NCS
Pearson. But that indemnification responsibility has certain dollar limitations
and other conditions. Consequently, we may have financial exposure if we do not
prevail in this action and the conditions for indemnification are not met or our
costs and liability exceed the indemnification coverage.
Item 2. Management's Discussion and Analysis or Plan of Operation
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Our actual results could differ materially from those set forth in the
forward-looking statements because of certain risks and uncertainties, such as
those inherent generally in the computer software industry and the impact of
competition, pricing and changing market conditions. As a result, you should not
rely on these forward-looking statements.
CRITICAL ACCOUNTING ESTIMATES
- -----------------------------
Our discussion and analysis of financial condition and operations are based on
our financial statements, prepared in accordance with accounting principles
generally accepted in the United States of America and included in this report
on Form 10-QSB. Certain amounts included in or affecting our financial
statements and related disclosure must be estimated, requiring us to make
certain assumptions with respect to values or conditions which cannot be known
with certainty at the time the financial statements are prepared. Therefore,
the reported amounts of our assets and liabilities, revenues and expenses and
associated disclosures with respect to contingent assets and obligations are
necessarily affected by these estimates. We evaluate these estimates on an
ongoing basis, utilizing historical experience, consultation with experts and
other methods we consider reasonable in the particular circumstances.
Nevertheless, actual results may differ significantly from our estimates. We
believe that certain accounting policies are of more significance in our
financial statement preparation process than others, as discussed below.
Computer Software Costs
- -----------------------
We capitalize our software development product costs after we have established
technological feasibility and prior to the release of our products for sale.
Such costs are primarily based on the salaries of our employees and contractors
that contribute to the development of our products, including a factor for
related overhead. Once a product is released for sale, we begin amortizing the
capitalized costs on a straight-line basis over the product's estimated economic
life. On a periodic basis, we compare the unamortized costs of our products to
their estimated net realizable values. If our estimates of net realizable value
fall below the unamortized product costs, the excess is charged directly to
operations to reflect impairment. At November 30, 2003 and 2002, we did not
incur any charges for impairment related to our capitalized software development
costs.
Revenue
- -------
Our revenue is primarily derived from the license of software toolkits and
applications, royalties from customers based on those licenses, and fees for
technical support and product maintenance. We recognize license and royalty
revenue only after we have delivered the software, fulfilled all of our
significant obligations, and resolved any significant uncertainties regarding
customer acceptance. Technical support and product maintenance fees are deferred
and recognized as revenue on a straight-line basis over the applicable contract
period. Occasionally, technical support and product maintenance is bundled with
a software license fee. In such cases, we estimate the fair value of our
technical support and product maintenance obligations using the established fees
that we charge to other customers. Such revenue is deferred as a separate
element of the contract and recognized ratably over the applicable contract
period. Any remaining revenue is then recorded as the software license fee.
Income Taxes
- ------------
We account for income taxes using the asset and liability method. Under the
asset and liability method, deferred tax assets and liabilities are recognized
at the enacted tax rates for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date. Following is a summary of the significant items that comprise our
estimated deferred tax assets and liabilities:
November 30, 2003 August 31, 2003
- ---------------------------------------------------------------------------
Deferred tax assets:
Tax operating loss carryforwards $ 1,087,404 911,691
Other 41,977 34,731
- ---------------------------------------------------------------------------
Total gross deferred tax assets 1,129,381 946,422
Less valuation allowance 887,775 716,668
- ---------------------------------------------------------------------------
Net deferred tax assets 241,606 229,754
Deferred tax liabilities:
Property and equipment (15,794) (15,628)
Loss in limited liability company (46,337) (35,973)
Capitalized software costs (179,475) (178,153)
- ---------------------------------------------------------------------------
Net deferred tax $ - -
- ---------------------------------------------------------------------------
Deferred tax assets are recognized when it is more likely than not that benefits
from deferred tax assets will be realized. The ultimate realization of deferred
tax assets is dependent upon our ability to generate future taxable income
during the periods in which the temporary differences that create deferred tax
assets become deductible. We consider the scheduled reversal of deferred tax
liabilities, projected future taxable income, past earnings history, sales
backlog and tax operating loss carryforward expiration dates when determining
the amount of deferred tax assets to recognize.
During the first quarter ended November 30, 2003, the Company increased its
valuation allowance for deferred tax assets and increased the deferred tax
asset, net of valuation allowance, from $229,754 at August 31, 2003 to $241,606
at November 30, 2003. In order to fully realize the net deferred tax assets
prior to the expiration of tax operating loss carryforwards, the Company will
have to generate approximately $638,000 in taxable income through increased
income from operations, the reversal of deferred tax liabilities, or both. At
November 30, 2003, we had approximately $2.9 million of tax operating loss
carryforwards, of which approximately 79% do not begin to expire until our
fiscal year 2019.
RESULTS OF OPERATIONS
- ---------------------
Following is selected financial information for each of our reportable segments
for the three months ended November 30, 2003 and 2002.
Component Product Technologies Segment
- --------------------------------------
Three Months Ended
----------------------------------------------------
Dollar Percent
November 30, November 30, Increase Increase
2003 2002 (Decrease) (Decrease)
----------------------------------------------------
Revenue from external customers $ 489,247 788,510 (299,263) (37.95%)
----------- ----------- ---------- ---------
Operating (loss) income $ (42,140) 288,647 (330,787) (114.60%)
----------- ----------- ---------- ---------
Operating (loss) income as % of revenue (8.61%) 36.61%
----------- -----------
Revenue from the component product technologies segment is primarily derived
from licensing, royalties, and the customer support and maintenance of our
Prizm(R) web-based Viewer, ScanFix(R), Prizm(R) Image Processing, Prizm(R) Gray,
ViewDirector(TM) and FormFix(R) products.
The profitability of this segment has historically depended on our ability to
secure significant sales of multiple licenses and/or royalties to individual
customers. For the first quarter ended November 30, 2002 two customers
collectively accounted for 39% of the total revenue for the segment. No one
customer accounted for greater than 10% of total segment revenue for the first
quarter ended November 30, 2003. The lack of significant multiple license and/or
royalty sales to individual customers contributed to the decline in revenue
during the current year first quarter compared to the same period last year.
We believe that the lack of widespread adoption of color and gray image
processing technologies in the document management marketplace has impacted our
ability to not only improve revenue for this segment, but also replace revenue
from our more mature viewing and black and white image processing products.
Additionally, we believe that revenue from our viewing technology may continue
to be impacted by increased competition from low or no cost web-based viewing
technologies and the expected increase in demand for document images to be
created or converted to Adobe's PDF file format. The document management
marketplace is also expected to continue to migrate to more specialized
technology solutions applicable to niche markets or industries. Our products
have typically been applicable across many types of document imaging technology
solutions, and although we have development plans that include certain
specialized applications, there can be no assurance that we will be successful
in penetrating our targeted niche markets.
Because of the specific factors described above, our ability to predict the
timing and extent of revenue for this segment is difficult. Our inability to
secure additional significant revenue transactions with individual customers
and/or increase the volume through the release of new or enhanced products that
meet current market needs could have a material adverse affect on our business,
operating results and financial position.
Assessment Scoring Technologies Segment
- ---------------------------------------
Three Months Ended
November 30, November 30,
2003 2002
Revenue $ 22,083 25,189
----------- -----------
Operating loss $ (41,518) (207,463)
----------- -----------
The financial results for this segment reflect operating activities associated
with the license and support of our Digital Mark Recognition(TM) ("DMR(R)")
software product and our 50% equity interest in VSC Technologies, LLC, an entity
that we formed with Measurement Incorporated in October 2002. First quarter
revenue for both 2003 and 2002 was primarily derived from the license of DMR to
Measurement Incorporated.
We have an agreement with the LLC whereby we provide software development
services, at a fixed rate per hour. During the first quarters ended November
2003 and 2002, the segment's operating expenses were reduced by approximately
$87,000 and $69,000, respectively, for such development services of which 50%
was billed to the LLC and 50% was recorded as an increase to our investment in
the LLC. Additionally, during the prior year first quarter and prior to the
formation of the LLC we received approximately $23,000 from Measurement
Incorporated for partial funding of the Virtual Scoring Center software product.
Of that amount, $21,000 was recorded as reduction to capitalized software
development costs and the remaining $2,000 reduced our research and development
expense.
The decrease in operating loss for the three months ended November 30, 2003
compared to the same period last year primarily resulted from a reduction in
sales and marketing activities, lower DMR development costs, and lower
professional fees that were applicable in the prior year first quarter for
closing the LLC transaction. The operating loss for both the current and prior
first quarter included approximately $25,000 for our 50% share of the LLC net
loss.
Measurement Incorporated is currently using the Virtual Scoring Center software
product on a limited basis for its own scoring operation. Based on their use of
the software, we believe that additional investment in the design and
development of the product will be required to make it more viable for general
commercial use. Accordingly, we are not yet actively marketing the product for
license to third parties.
Our agreement with the LLC includes a provision that allows us to receive cash
distributions at the end of each calendar year for five years beginning December
31, 2002. Eligibility for such distributions, which are subject to certain
maximum amounts that graduate downward over the five-year period, are based on
whether our financial return from the LLC is at least equal to the amount of
software development cost that we have invested in the LLC. When and if the LLC
becomes profitable, we would be required to pay back such distributions by
foregoing a portion of future cash profits from the LLC. The funds received
from the LLC pursuant to this cash distribution arrangement and our software
development services to the LLC, described above, help mitigate the financial
risk associated with the additional development and delay in marketing the
Virtual Scoring Center product to third parties. However, given the increased
unpredictability of financial results from our Component Product Technology
business segment, we can provide no assurance that it will be feasible for us to
continue to participate in the LLC at our current investment level.
Accordingly, we may be required to pursue other alternatives related to our
investment, including selling all or a portion of our ownership interest.
Total Company Operating Results
- -------------------------------
Following is a report of total company revenue and a reconciliation of
reportable segments' operating (loss) income to our total net (loss) income for
the three-month periods ending November 30, 2003 and 2002.
Three Months Ended
November 30
2003 2002
------------- -------------
Total company revenue $ 511,330 813,699
------------- -------------
Operating (loss) income for
reportable segments (83,658) 81,184
Unallocated corporate expenses (114,979) (87,180)
Interest income 4,111 5,273
Interest expense (3,650) (4,195)
Write-down of property held for sale (266,537) -
Gain on sale of technology - 33,683
Other, net 1,581 (791)
Income tax expense - 10,562
------------- -------------
Net (loss) income $ (463,132) 17,412
============= =============
(Loss) income per share:
Basic $ (0.04) 0.00
Diluted $ (0.04) 0.00
============= =============
A decrease in revenue from our Component Product Technologies segment accounted
for the decline in total company revenue and negatively impacted our segment
operating and total company net results at November 30, 2003 compared to the
same three month period last year.
The net loss for the three month period ended November 30, 2003, was also
impacted by our write-down to reflect impairment in the value of our property
held for sale. During the current year first quarter, we entered into a real
estate purchase contract for the sale of our headquarters' building located in
Stillwater, Oklahoma. The final sale closed on December 31, 2003. The impairment
was based on the amount that the net book value of the property exceeded the
contracted purchase price plus estimated costs incurred for final sale.
Net income for the three month period ended November 30, 2002, included
recognition of a portion of the $155,000 gain realized upon our transfer of the
Virtual Scoring Center technology to the LLC. The unrecognized portion of the
gain was deferred and recognized in income during the prior year as we continued
to fulfill our ongoing commitment to fund its 50% share software development
costs.
FINANCIAL CONDITION
- -------------------
Working capital at November 30, 2003 was $735,172 with a current ratio of 2.1:1,
compared to $949,250 with a current ratio of 2.5:1 at August 31, 2003.
Net cash used in operations for the three months ended November 30, 2003 was
approximately $67,000. Our negative operating cash position primarily reflects
the impact of reduced revenue on our operating results during the current
quarter.
Net cash used in investing activities for the three months ended November 30,
2003 approximated $115,000 related to our investments in new and enhanced
software products and VSC Technologies, LLC. Net cash flows used in financing
activities during the three month period ended November 30, 2003 was
approximately $8,000 and represents repayments of long-term debt.
In January 2004 we renewed our line of credit with a bank that provides for
borrowing based on a percentage of certain eligible trade accounts receivable.
The maximum borrowing under the line of credit is $500,000, of which
approximately $271,000 was available to us at November 30, 2003. The maximum
borrowing amount was reduced to $500,000 from the $1,000,000 provided in the
prior year based on our history of eligible accounts receivable. There was no
balance outstanding against our line of credit at November 30, 2003.
We anticipate that our existing working capital, the $239,426 we received upon
final sale and pay off of our mortgage on our headquarters building on December
31, 2003, the annual cash distribution that we expect to receive in January 2004
pursuant to our agreement with the LLC (see the "Assessment Scoring
Technologies" segment above), and our line of credit will be adequate to meet
our current obligations and current operating and capital requirements.
The funding of long-term needs (including funding for increased product
development and expanded marketing and promotion of our products) is dependent
upon increased revenue and profitability and may require obtaining funds through
outside sources. Although our management is currently exploring various options
for improving the overall financial position of the Company, we can give no
assurance that we will be successful in such endeavors or that we will be able
to become profitable and thus maintain the necessary level of working capital to
adequately fund the continued development and promotion of our products.
Continued losses or lack of revenue growth may require that we consider
strategic alternatives in order to maximize value to our shareholders.
Options available to us could be a "going private" transaction, sale of the
Company and other possibilities. We have made no plans at this time to make any
proposals to our shareholders to address this situation, but we may find it
necessary in the future to do so.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
- ----------------------------------------------
In December 2003, the Financial Accounting Standards Board ("FASB") issued a
revised version of FASB Interpretation No. 46 ("FIN 46"), "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51". FIN 46 sets forth
guidance to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties.
We have a 50% equity interest in VSC Technologies, LLC. The LLC qualifies as a
variable interest entity. An equity investor is required to consolidate a
variable interest entity if it is deemed the "primary beneficiary". The primary
beneficiary is defined as the investor that is expected to either absorb the
majority of the entity's expected losses, receive a majority of the entity's
expected residual returns, or both. We are in the process of evaluating whether
we qualify as the primary beneficiary of the LLC. If we are required to
consolidate the LLC in accordance with this Interpretation, the financial
effects will be implemented in our second quarter of fiscal 2005. We have also
evaluated our exposure to economic loss as a result of our involvement with the
LLC, and estimate that from the inception of the LLC in October 2002 through
December 31, 2005, that our maximum exposure to economic loss approximates
$250,000.
Item 3. Controls and Procedures
As of the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's President and Chief Financial Officer, of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures (as defined in Rule 13a-14 under the Securities Exchange
Act of 1934). Based upon that evaluation, the President and Chief Financial
Officer concluded that the Company's disclosure controls and procedures were
effective. There were no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation.
PART II - Other Information
Item 5. Other Information
On December 31, 2003, we finalized the sale of our headquarters' building
located in Stillwater, Oklahoma. See "Property Held for Sale" in the Notes to
Interim Condensed Financial Statements in this report on Form 10-QSB.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
31 Certification of Principal Executive and Financial Officer Pursuant to SEC
Rule 13a-14
32 Certification of Principal Executive and Financial Officers Pursuant to 18
U.S.C. Section 1350
(b) Reports on Form 8-K
On October 31, 2003, we filed a report on Form 8-K pursuant to Item 5. "Other
Events and Regulation FD Disclosure", to disclose that we entered into a real
estate purchase contract for the sale of our headquarters' building located in
Stillwater, Oklahoma.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Registrant: TMS, Inc.
Date: January 14, 2004 /s/ Deborah D. Mosier
---------------- -----------------------
Deborah D. Mosier
President and Chief Financial Officer,
Principal Executive and Financial Officer