-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PfCgeiY9Cjos6HxehmsLbHmNOS3K6dvwaUFFsJsfTXlQKCkDT/U1D1cJSIZICJWF e9a3pcX5qKShA1o7t8T+FA== 0000835412-96-000017.txt : 19960410 0000835412-96-000017.hdr.sgml : 19960410 ACCESSION NUMBER: 0000835412-96-000017 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960409 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TMS INC /OK/ CENTRAL INDEX KEY: 0000835412 STANDARD INDUSTRIAL CLASSIFICATION: RAILROAD EQUIPMENT [3743] IRS NUMBER: 911098155 STATE OF INCORPORATION: OK FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-22780-NY FILM NUMBER: 96545355 BUSINESS ADDRESS: STREET 1: 206 WEST SIXTH AVENUE STREET 2: P O BOX 1358 CITY: STILLWATER STATE: OK ZIP: 74076 BUSINESS PHONE: 4053770880 MAIL ADDRESS: STREET 1: 206 W. 6TH AVE. , P.O. BOX 1358 CITY: STILLWATER STATE: OK ZIP: 74076-1358 FORMER COMPANY: FORMER CONFORMED NAME: TMS INC DATE OF NAME CHANGE: 19920703 10QSB 1 1 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: February 29, 1996 [ ]Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 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 (I.R.S. EmployerIdentification Number) incorporation or organization) 206 West Sixth Street Post Office Box 1358 Stillwater, Oklahoma 74075 (Address of principal executive offices) Issuer's telephone number, including area code: (405) 377-0880 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 ot 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 February 29, 1996 Common stock, par value $.05 per share 8,518,351 Transitional Small Business Disclosure Format(check one): Yes [ ] No [X] 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements TMS, Inc. Condensed Balance Sheets February 29, 1996 and August 31, 1995
(Unaudited) February 29, August 31, 1996 1995 ---- ---- Cash $ 182,800 114,189 Trade accounts receivable, net 786,820 912,559 Contract service work in process 227,221 87,187 Deferred income taxes 225,000 180,000 Other current assets 91,435 32,050 --------- --------- Total current assets 1,513,276 1,325,985 --------- --------- Property and equipment 2,089,080 2,011,271 Accumulated depreciation and amortization (679,534) (564,497) ---------- ---------- Net property and equipment 1,409,546 1,446,774 ---------- ---------- Capitalized software development costs, net 301,047 204,984 Deferred income taxes 305,000 140,000 Other assets 12,339 13,994 ---------- ---------- Total assets 3,541,208 3,131,737 ========== ========== Current liabilities 483,078 499,044 Long-term debt, net of current installments 366,285 378,265 --------- --------- Total liabilities 849,363 877,309 --------- --------- Common stock 425,918 420,247 Additional paid-in capital 10,558,212 10,546,914 Unamortized deferred compensation (2,258) (3,810) Accumulated deficit (8,290,027) (8,708,923) ----------- ----------- Total shareholders' equity 2,691,845 2,254,428 ----------- ----------- Total liabilities and shareholders' equity $ 3,541,208 3,131,737 =========== ==========
See accompanying notes to condensed financial statements. 3 TMS, Inc. Condensed Statements of Operations Three and Six Months Ended February 29, 1996 and February 28, 1995
(Unaudited) (Unaudited) Three Months Ended Six Months Ended 1996 1995 1996 1995 ---- ---- ---- ---- Revenue: Software development and document conversion services $ 431,398 336,621 917,903 773,659 Licensing and royalties 746,952 667,024 1,560,757 1,239,547 --------- --------- --------- --------- 1,178,350 1,003,645 2,478,660 2,013,206 --------- --------- --------- --------- Operating costs and expenses: Software development and document conversion services 329,366 186,508 669,443 408,364 Cost of licensing and royalties 211,279 148,896 389,147 307,778 Selling, general and administrative 570,881 450,462 1,187,391 945,623 Research and development 17,434 32,100 47,607 63,078 --------- --------- --------- --------- 1,128,960 817,966 2,293,588 1,724,843 --------- --------- --------- --------- Operating income 49,390 185,679 185,072 288,363 Other income, net 5,515 5,830 23,824 13,867 --------- --------- --------- --------- Income before income taxes 54,905 191,509 208,896 302,230 Income tax benefit 210,000 318,700 210,000 317,950 --------- --------- --------- --------- Net income $ 264,905 510,209 418,896 620,180 ========= ========= ========= ========= Net income per common and common equivalent share $ 0.03 0.06 0.04 0.07 ========= ========= ========= ========= Weighted average common and common equivalent shares 9,611,008 8,975,933 9,497,654 8,999,571 ========= ========= ========= =========
See accompanying notes to condensed financial statements. 4 TMS, Inc. Condensed Statements of Cash Flows Six Months Ended February 29, 1996 and February 28, 1995
(Unaudited) 1996 1995 ---- ---- Net cash provided by operating activities $ 361,593 388,187 ----------- ---------- Cash flows from investing activities: Purchases of property and equipment (77,809) (487,781) Capitalized software development costs (145,988) (45,741) Proceeds from sale of equipment 0 1,500 ---------- ---------- Net cash used in investing activities (223,797) (532,022) ---------- ---------- Cash flows from financing activities: Proceeds from long-term debt 0 100,000 Repayment of long-term debt (11,154) 0 Proceeds from short-term note payable 468,000 0 Repayments of short-term note payable (543,000) 0 Issuance of common stock 16,969 11,320 ---------- ---------- Net cash (used in) provided by financing activities (69,185) 111,320 ---------- ---------- Net increase (decrease) in cash 68,611 (32,515) Cash at beginning of period 114,189 239,984 ---------- ---------- Cash at end of period $ 182,800 207,469 ========== ==========
See accompanying notes to condensed financial statements. 5 TMS, Inc. Notes to Condensed Financial Statements Unaudited Interim Condensed Financial Statements - ------------------------------------------------ The unaudited interim condensed financial statements and related notes were prepared by TMS, Inc.(the Company). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to rules and regulations established by the Securities and Exchange Commission (SEC). The accompanying unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and related notes included in the Company's Form 10-K Annual Report for the fiscal year ended August 31, 1995. The unaudited interim financial statements reflect all adjustments which 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. 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. Income Taxes - ------------ The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109), which requires an asset and liability method of accounting for income taxes. Income tax benefit of $210,000 for the six months ended February 29, 1996 consisted of deferred tax expense of $46,000 and a decrease in the beginning-of-the-year valuation allowance of $256,000. Income tax benefit of $317,950 for the six months ended February 28, 1995 consisted of deferred tax expense of $180,000, a decrease in the beginning-of-the-year valuation allowance of $500,000, and Federal alternative minimum tax of $2,050. The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at February 29, 1996 and August 31, 1995 are presented below.
(Unaudited) February 29, August 31, 1996 1995 ---- ---- Deferred tax assets: Net operating loss carryforwards $ 1,658,000 1,760,000 Tax credit carryforwards 417,000 417,000 Employee stock options 190,000 62,000 Other 29,000 50,000 ---------- ---------- Total gross deferred tax assets 2,294,000 2,289,000 Less valuation allowance 1,608,000 1,864,000 ---------- ---------- Net deferred tax assets 686,000 425,000 Deferred tax liabilities: Property and equipment (42,000) (69,000) Capitalized software costs (114,000) (36,000) ----------- ----------- Net deferred tax assets $ 530,000 320,000 =========== ===========
SFAS No. 109 provides for recognition of deferred tax assets when it is more likely than not that benefits from deferred tax assets will be realized. The Company increased it's deferred tax assets from $320,000 at August 31, 1995 to $530,000 at February 29, 1996. The ultimate realization of these deferred tax assets is dependent upon the Company's ability to generate future taxable income during the period in which temporary differences become deductible. Management considered the scheduled reversal of temporary differences, projected future taxable income, past earnings history, sales backlog, and net operating loss and tax credit carryforward expiration dates in determining the amount of deferred tax assets to recognize. In order to 6 fully realize the recorded deferred tax assets, the Company will need to generate approximately $1,400,000 in future taxable income prior to the expiration of the net operating loss and tax credit carryforwards. Taxable income for the six months ended February 29, 1996 approximated $192,000. Taxable income for the years ended August 31, 1995, 1994 and 1993 approximated $313,000, $425,000 and $559,000, respectively. The $1,608,000 valuation allowance provides for net operating loss and tax credit carryforwards that, as of February 29, 1996, are not expected to be realized prior to expiration. At February 29, 1996, the Company's net operating loss carryforwards and tax credit carryforwards approximated $4,875,000 and $417,000, respectively. These carryforwards expire during the years 1997 through 2004. Pro Forma Financial Information - ------------------------------- On November 9, 1995, the Company and Sequoia Data Corporation (Sequoia) signed a merger agreement whereby the Company will merge with Sequoia by issuing a maximum of 5.3 million shares of TMS common stock for all of the issued and outstanding shares of Sequoia common stock and common stock options. The merger was consummated on March 15, 1996 and will be accounted for using the pooling-of-interests method. Set forth below is certain unaudited pro forma financial information with respect to the merger, including an unaudited pro forma condensed balance sheet as of February 29, 1996 and unaudited pro forma condensed statements of operations for the three and six months ended February 29, 1996 and February 28, 1995. The pro forma condensed balance sheet has been prepared on the basis that the merger occurred on February 29, 1996. The pro forma condensed statements of operations have been prepared on the basis that the merger occurred at the beginning of the earliest interim period presented. The unaudited pro forma results are not necessarily indicative of the Company's future operations. Pro Forma Condensed Balance Sheet:
February 29, 1996 (Unaudited) TMS Sequoia Pro Forma TMS/Sequoia Adjustments Combined Cash and equivalents $ 182,800 297,760 0 480,568 Trade accounts receivable, net 786,820 339,685 (11,920)(1) 1,114,585 Contract service work in process 227,221 0 (11,445)(1) 215,776 Deferred income taxes 225,000 0 (28,343)(2) 196,657 Other current assets 91,435 9,317 0 100,752 ---------- --------- --------- --------- Total current assets 1,513,276 646,770 (51,708) 2,108,338 ---------- --------- --------- --------- Property and equipment, net 1,409,546 38,943 0 1,448,489 Capitalized software development costs, net 301,047 117,370 0 418,425 Deferred income taxes 305,000 0 (46,951)(2) 258,049 Other assets 12,339 20,408 0 32,747 --------- -------- -------- --------- Total assets 3,541,208 823,499 (98,659) 4,266,048 ========= ======== ======== ========= Current liabilities 483,078 96,180 (51,708) 527,550 Long term debt, net of current installments 366,285 0 0 366,285 Other liabilities 0 46,951 (46,951) 0 --------- -------- --------- -------- Total liabilities 849,363 143,131 (98,659) 893,835 --------- -------- --------- -------- Common stock 425,918 632,086 (449,924) 608,080 Additional paid-in capital 10,558,212 0 449,294 11,008,136 Unamortized deferred compensation (2,258) 0 0 (2,258) Accumulated (deficit) earnings (8,290,027) 48,282 0 (8,241,745) ------------ -------- --------- ----------- Total shareholders' equity 2,691,845 680,368 0 3,372,213 ------------ -------- --------- ----------- Total liabilities and shareholders' equity $ 3,541,208 823,499 (98,659) 4,266,048 ============ ======= ======== =========
7 Pro Forma Condensed Statements of Operations:
(Unaudited) Three Months Ended February 1996 1995 ---- ---- Net revenue: TMS $ 1,178,350 1,003,645 Sequoia 287,837 211,689 Pro forma adjustments (23,365)(1) 0 ---------- --------- 1,442,822 1,215,334 ---------- --------- Operating costs and expenses: TMS 1,128,960 817,966 Sequoia 234,983 134,013 Pro forma adjustments (23,365) 0 ---------- --------- 1,340,578 951,979 ---------- --------- Operating income: TMS 49,390 185,679 Sequoia 52,854 77,676 --------- --------- 102,244 263,355 --------- --------- Other, net: TMS 5,515 5,830 Sequoia 4,148 (407) --------- --------- 9,663 5,423 --------- --------- Income before income tax: TMS 54,905 191,509 Sequoia 57,002 77,269 --------- -------- 111,907 268,778 --------- -------- Income tax benefit (expense): TMS 210,000 318,700 Sequoia (22,658) (31,378) --------- -------- 187,342 287,322 --------- -------- Net income: TMS 264,905 510,209 Sequoia 34,344 45,891 --------- -------- Pro forma net income $ 299,249 556,100 ========= ======== Pro forma net income per common and common equivalent share $ .02 .04 ========= ======== Pro forma weighted average common and common equivalent shares 14,333,286 12,648,869 ========== ========== (Unaudited) Six Months Ended February 1996 1995 Net revenue: TMS $ 2,478,660 2,013,206 06 Sequoia 590,976 417,928 Pro forma adjustments (23,365)(1) 0 ----------- --------- 3,046,271 2,431,134 ----------- --------- Operating costs and expenses: TMS 2,293,588 1,724,843 Sequoia 505,382 255,592 Pro forma adjustments (23,365) 0 ----------- --------- 2,775,605 1,980,435 ----------- --------- Operating income: TMS 185,072 288,363 Sequoia 85,594 162,336 ---------- --------- 270,666 450,699 ---------- --------- Other, net: TMS 23,824 13,867 Sequoia 8,687 2,220 ---------- -------- 32,511 16,087 ---------- -------- 7 Income before income tax: TMS 208,896 302,230 Sequoia 94,281 164,556 ---------- -------- 303,177 466,786 ---------- -------- Income tax benefit (expense): TMS 210,000 317,950 Sequoia (37,569) (66,823) ---------- -------- 187,342 251,127 ---------- -------- Net income: TMS 418,896 620,180 Sequoia 56,712 97,733 ---------- -------- Pro forma net income $ 475,608 717,913 ========== ======== Pro forma net income per common and common equivalent share $ .03 .06 ========== ======== Pro forma weighted average common and common equivalent shares 14,003,507 12,674,745 ========== ==========
______________________________ 1. Adjustment reflects elimination of intercompany software development services and related receivables and payables. 2. Adjustment reflects the reduction of TMS' current and non-current deferred tax assets by Sequoia's current and non- current deferred tax liabilities. 3. Adjustment reflects the exchange of Sequoia common shares at February 29, 1996, (1,284,180), for 2.837 shares of TMS common shares, and the resulting increase in additional paid-in-capital. At February 29, 1996, after giving effect to the merger, TMS would have had outstanding 12,161,570 common shares. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS The Company realized growth in total revenue for the three and six month periods ended February 29, 1996, as compared to the same periods a year ago. Revenue growth was more than offset by increased operating costs and expenses, which contributed to the decline in net income for the three and six month periods ended February 29, 1996. Operating costs and expenses for the first six months of 1996 increased over the same period in 1995 primarily because of increases in the number of personnel, selling and marketing activities, and significant non-recurring professional costs related to the merger with Sequoia Data Corporation (Sequoia). The merger with Sequoia was consummated on March 15, 1996. Net income for the period ended February 29, 1996, was also impacted by the recognition of $210,000 in deferred tax benefits during the second quarter. The Company recognized $320,000 in deferred tax benefits during the second quarter of fiscal 1995. The deferred tax benefits in both years are a positive indication that the Company will, more likely than not, utilize a portion of the net operating loss carryforwards to offset future taxable income, and accordingly, will not pay significant amounts of income taxes for the forseeable future. Revenue - ------- Total revenue for the second quarter of fiscal 1996 was $1,178,350 compared to $1,003,645 for the same quarter of fiscal 1995, an increase of $174,705 or 17%. Total revenue for the first six months of fiscal 1996 increased 23% to $2,478,660 as compared to the $2,013,206 reported for the same period in fiscal 1995. Licensing and royalties revenue, when compared to fiscal 1995, increased $79,928, or 12%, for the second quarter of fiscal 1996 and $321,210, or 26%, for the first six months of fiscal 1996. The growth in licensing and royalties is 8 attributable to increased revenue from the Company's imaging products. Revenue from the Company's imaging products increased 30% to $680,377 for the second quarter of fiscal 1996, and increased 36% to $1,321,377 for the first six months of fiscal 1996, when compared to the same periods in fiscal 1995. Increased unit sales resulting from recent releases of new or enhanced imaging products, and existing customers who expanded their use of the Company's products or completed a product for resale resulting in royalty revenue for the Company, are the primary factors which contributed to increased revenue from imaging products. Revenue from the Company's text products decreased 53% to $66,576 for the second quarter of fiscal 1996, and decreased 7% to $247,879 for the first six months of fiscal 1996, when compared to the same periods in fiscal 1995. Increased competition and the Company's emphasis on imaging technology are the primary factors which have contributed to the decline in text revenue. Software development and document conversion service revenue for the second quarter of fiscal 1996 was $431,398 compared to $336,621 for the second quarter of fiscal 1995, an increase of $94,777 or 28%. For the first six months of fiscal 1996 service revenue was $917,903 compared to $773,658 for the first six months of fiscal 1995, an increase of $144,244 or 18%. Software development service revenue declined 40% for the second quarter of fiscal 1996 and 42% for the first six months of fiscal 1996, when compared to the same periods in fiscal 1995. Document conversion service revenue increased 246% for both the second quarter and first six months of fiscal 1996, when compared to the same periods in fiscal 1995. The decrease in software development service revenue was due to the successful delivery of product to POWERCOM 2000 near the end of fiscal year 1995. Negotiations are currently underway with potential customers to help replace software development service revenues previously generated for POWERCOM 2000. Management expects certain of these contracts to be secured early in the third quarter of the current fiscal year, although there can be no assurance as to when or if any of these software development service contracts will be finalized. If the aforementioned negotiations are not successful or other new contracts can not be secured, revenue from software development services is expected to continue to decline. Management is prepared to take the appropriate cost cutting measures in the event that software development service revenues do not increase. The increase in document conversion service revenue is attributable to continued service under the Toro contract that began in the fourth quarter of fiscal 1995 and continued through the second quarter of the current fiscal year. Revenue from the Toro contract amounted to approximately $121,000 or 44%, of the second quarter document conversion service revenue, and $309,000 or 55% of document conversion service revenue for the first six months. Services under the Toro contract were substantially completed during March of the current fiscal year. Management increased document conversion marketing activities during the second quarter in an effort to obtain new service opportunities. Although certain document conversion contracts have been secured, they will not replace the level of revenue that was recognized for Toro and there can be no assurance as to when additional document conversion service contracts will be secured, or if revenues from any new contracts will replace the level of revenue recognized for Toro. Management is prepared to take the appropriate cost cutting measures to offset a significant decline in document conversion service revenue. Operating Costs and Expenses - ---------------------------- Total operating costs and expenses for the quarter ended February 29, 1996, were $1,128,960 compared to $817,966 for the same quarter in fiscal 1995, an increase of $310,994 or 38%. For the first six months of fiscal 1996, total operating costs and expenses increased 33% to $2,293,588 from $1,724,843 reported for the first six months of fiscal 1995. Personnel costs accounted for approximately 56% of the total increase for the second quarter and 58% of the increase for the first six months. At February 29, 1996 the Company employed 60 full-time permanent employees and 52 temporary and part-time employees compared to 53 full-time and 18 temporary and part-time employees at February 28, 1995. The increase in temporary and part-time employees is directly related to the increase in document conversion service revenue generated during the first six months of the current fiscal year. 10 The cost of software development and document conversion services increased primarily because of the additional resources necessary to satisfy requirements under document conversion contracts. The gross profit margin for services for the fiscal 1996 second quarter was 24% compared to 45% for the same quarter of fiscal 1995. The gross profit margin for services for the first six months of fiscal 1996 was 27% compared to 47% for the first six months of 1995. This drop in gross profit margin reflects the change in the mix of software development versus document conversion service activities. Document conversion service activities have historically generated profit margins of 20% to 25%, whereas software development service margins generally range from 35% to 40%. Accordingly, the decrease in software development service revenue has had the greatest impact on the total gross profit margin for services. The cost of licensing and royalties increased for both the second quarter and first six months of fiscal 1996, compared to the same periods a year ago, due to increased licensing and royalties revenue. The gross profit margins for licensing and royalties were 72% and 78% for the three months ended February 29, 1996 and February 28, 1995, respectively. For the first six months of both fiscal 1996 and fiscal 1995, the gross profit margins for licensing and royalties were 75%. Fluctuations in gross profit margins primarily result from the mix of product versus royalty revenue reported, as royalties essentially result in little or no cost to the Company. Selling, general and administrative expenses for the second quarter of fiscal 1996 increased $120,419 or 27% when compared to the second quarter of fiscal 1995. For the first six months of fiscal 1996, selling, general and administrative expenses increased $241,768, or 26% over the same period in fiscal 1995. Non-recurring professional fees related to the recent merger with Sequoia, accounted for approximately 34% of the increase for the second quarter and 44% of the increase for the first six months. The merger with Sequoia was finalized on March 15, 1996, thus non- recurring professional fees should significantly decline during the third quarter. The balance of the increases for both the second quarter and first six months of fiscal 1996 was attributable to increased costs of facilities, advertising, investor relations and the increased operating expenses related to the higher number of employees and increased sales activity. Research and development costs for the second quarter and first six months of fiscal 1996 were minimal as the Company continued to focus it's resources on new products and significant enhancements to existing products that were capitalized for financial accounting and reporting purposes. During the first six months of fiscal 1996 and 1995, the Company capitalized software development costs of $145,988 and $45,741, respectively. Income Taxes - ------------ The Company recognized deferred tax benefits of $210,000 and $320,000, during the second quarters of both fiscal 1996 and fiscal 1995, respectively. These deferred tax benefits, and related deferred tax assets, are a positive indication that the Company will, more likely than not, be able to utilize a portion of the previously generated net operating losses to offset future taxable income. For further discussion of deferred income taxes, see "Income Taxes" in the notes to the condensed financial statements. Net Income - ---------- Net income for the second quarter of fiscal 1996 was $264,905 compared to $510,209 for the second quarter of fiscal 1995, a decrease of $245,304 or 48%. For the first six months of fiscal 1996, net income decreased 32% to $418,896 compared to $620,180 for the same period in 1995. The non-recurring merger costs and the lower deferred tax benefit recognized in fiscal 1996 were the primary factors that caused a decline in net income compared to fiscal 1995. 11 FINANCIAL CONDITION Working capital at February 29, 1996 was $1,030,198 with a current ratio of 3.1:1 compared to $826,941, with a current ratio of 2.7:1, at August 31, 1995. Net cash provided by operations for the six months ended February 29, 1996 was $361,593 compared to $388,187 for the six months ended February 28, 1995. Despite lower profitability for the first six months of 1996, cash flows from operations remained comparable with the first six months of 1995 as a result of higher turnover of receivables. Net cash used in investing activities for the first six months of fiscal 1996 was $223,797 compared to $532,022 for the same period in fiscal 1995. During the first six months of fiscal 1995 construction was underway on the renovation of the Company's headquarters facilities which was the primary reason for the higher costs last year. During the six months ended February 29, 1996 the Company borrowed $468,000 on its line of credit for short-term working capital needs. The amount borrowed plus the $75,000 outstanding balance at the beginning of the fiscal year were repaid prior to the end of the quarter. At February 29, 1996, the Company's long-term debt was $384,957. Current obligations under the long-term debt total $18,672. The Company believes net cash provided by operating activities and the operating line of credit of $600,000 will be adequate to meet its current obligations and current operating and capital requirements. The Company expects the $600,000 line of credit to be extended when it matures on October 23, 1996. The funding of long-term needs is dependent upon increased revenue and profitability and obtaining funds through outside debt and equity sources. The Company's long-term needs include funding for increased product development, expanded sales staff and adequate promotion of the Company and its products. The combined net operating cash flow for the Company and Sequoia, and the Company's existing line of credit, are expected to be adequate to provide sufficient resources for operations after the merger. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders a) The Company held its annual meeting of shareholders on January 19, 1996. b) The following matters were voted upon at the annual meeting: 1) Following are the directors elected at the annual meeting and the tabulation of votes related to each nominee. Affirmative Votes Withheld Dana R. Allen 7,574,246 12,177 Doyle E. Cherry 7,122,023 16,700 J. Richard Phillips 7,579,523 6,900 James R. Rau, M.D. 7,122,023 16,700 Maxwell Steinhardt 7,579,723 6,700 Marshall C. Wicker 7,121,398 17,325 2) The shareholders ratified the appointment of KPMG Peat Marwick LLP as independent public accountants for 1996. Affirmative votes were 7,549,155; negative votes were 16,132; and abstentions were 21,236. 12 Item 6. Exhibits and Reports on Form 8-K Reports on Form 8-K - ------------------- The Company filed a report on Form 8-K on April 1, 1996 regarding the merger of Sequoia Computer Corporation with and into SCC Acquisition Corp., a wholly-owned subsidiary of the Company. Exhibits Exhibit No. Name of Exhibit 27 Financial Data Schedule as of and for the three and six month periods ending February 29, 1996. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused the report to be signed on its behalf by the undersigned, thereunto duly authorized. TMS, Inc. Date: April 8, 1996 /s/ Maxwell Steinhardt Chief Executive Officer Date: April 8, 1996 /s/ Dale E. May Chief Financial Officer EX-27 2
5 This schedule contains summary financial information extracted from the second quarter 10-QSB for the fiscal year ending August 31, 1996 and is qualified in its entirety by reference to such financial statements. 3-MOS 6-MOS AUG-31-1996 AUG-31-1996 FEB-29-1996 FEB-29-1996 182,800 182,800 0 0 863,770 863,770 76,950 76,950 0 0 1,513,276 1,513,275 2,089,080 2,089,080 679,534 679,534 3,541,208 3,541,208 483,078 483,078 0 0 0 0 0 0 425,918 425,918 2,265,927 2,265,927 3,541,208 3,541,208 1,178,350 2,478,660 1,178,350 2,478,660 540,645 1,058,590 540,645 1,058,590 588,315 1,234,998 19,800 44,680 8,765 18,653 54,905 208,896 (210,000) (210,000) 264,905 418,896 0 0 0 0 0 0 264,905 418,896 .03 .04 .03 .04
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