-----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, Q3JYb92grSx6SsNbt4bPWRnJUbiHm/MyNVYM5Zwmih4EpGy67wVNBZYemA4csa+R 7J+12aEHofK2gTnr8HHH3Q== 0000835412-97-000002.txt : 19970107 0000835412-97-000002.hdr.sgml : 19970107 ACCESSION NUMBER: 0000835412-97-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970106 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TMS INC /OK/ CENTRAL INDEX KEY: 0000835412 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] 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: 97501330 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 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, 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. Employer Identification 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 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 November 30, 1996 Common stock, par value $.05 per share 13,312,717 Transitional Small Business Disclosure Format(check one): Yes [ ] No [X] 1 PART I - FINANCIAL INFORMATION Item 1. Financial Statements TMS, Inc. Condensed Balance Sheets November 30, 1996 and August 31, 1996
November 30, August 31, 1996 1996 ------------- ------------- Cash $ 448,426 546,745 Trade accounts receivable, net 1,227,249 1,374,079 Contract service work in process 321,839 209,583 Other current assets 321,697 350,157 ------------- ------------- Total current assets 2,319,211 2,480,564 ------------- ------------- Property and equipment 2,410,675 2,384,267 Accumulated depreciation and amortization (964,130) (901,928) ------------- ------------- Net property and equipment 1,446,545 1,482,339 ------------- ------------- Capitalized software development costs, net 519,243 509,867 Other assets 233,632 235,615 ------------- ------------- Total assets 4,518,631 4,708,385 ============= ============= Current liabilities 578,742 642,383 Long-term debt, net of current installments 350,372 355,801 ------------- ------------- Total liabilities 929,114 998,184 ------------- ------------- Common stock 665,636 660,692 Additional paid-in capital 11,447,486 11,416,680 Unamortized deferred compensation (32,194) (32,970) Accumulated deficit (8,491,411) (8,334,201) ------------- ------------- Total shareholders' equity 3,589,517 3,710,201 ------------- ------------- Total liabilities and shareholders' equity $ 4,518,631 4,708,385 ============= =============
See accompanying notes to condensed financial statements. 2 TMS, Inc. Condensed Statements of Operations Three Months Ended November 30, 1996 and 1995
1996 1995 ------------- ------------- Revenue: Licensing and royalties $ 650,521 1,086,096 Software development services 429,338 230,167 Document conversion services 125,038 287,185 ------------- ------------- 1,204,897 1,603,448 ------------- ------------- Operating costs and expenses: Cost of licensing and royalties 242,114 200,489 Cost of software development services 206,454 149,046 Cost of document conversion services 107,081 206,518 Selling, general and administrative expenses 808,349 848,799 Research and development 9,125 30,173 ------------- ------------- 1,373,123 1,435,025 ------------- ------------- Operating (loss) income (168,226) 168,423 Other income, net 11,817 22,847 ------------- ------------- (Loss) income before income taxes (156,409) 191,270 Income tax expense 800 14,913 ------------- ------------- Net (loss) income $ (157,209) 176,357 ============= ============= Net (loss) income per common and common equivalent share (0.01) 0.01 ============= ============= Weighted average common and common equivalent shares 13,312,717 13,091,519 ============= =============
See accompanying notes to condensed financial statements. 3 TMS, Inc. Condensed Statements of Cash Flows Three Months Ended November 30, 1996 and 1995
1996 1995 ------------- ------------- Net cash flows (used in) provided by operating activities (21,696) 342,807 ------------- ------------- Cash flows from investing activities: Purchases of property and equipment (32,056) (28,019) Capitalized software development costs (78,336) (113,318) Patent costs (4,128) (17,814) Proceeds from sale of equipment 7,245 3,635 ------------- ------------- Net cash used in investing activities (107,275) (155,516) ------------- ------------- Cash flows from financing activities: Repayment of long-term debt (5,098) (6,289) Proceeds from short-term note payable - 318,000 Repayments of short-term note payable - (393,000) Issuance of common stock 35,750 11,696 ------------- ------------- Net cash provided by (used in) financing activities 30,652 (69,593) ------------- ------------- Net increase (decrease) in cash (98,319) 117,698 Cash at beginning of period 546,745 404,238 ------------- ------------- Cash at end of period 448,426 521,936 ============= =============
See accompanying notes to condensed financial statements. 4 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-KSB Annual Report for the fiscal year ended August 31, 1996. 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. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS This analysis of the Company's results of operations and financial condition contains certain forward-looking statements regarding the Company's business and prospects that are based upon numerous assumptions about future conditions which may ultimately prove to be inaccurate and actual events and results may materially differ from anticipated results described in such statements. The Company's ability to achieve such results is subject to certain risks and uncertainties, such as those inherent generally in the retail and computer software industries and the impact of competition, pricing and changing market conditions. The Company disclaims, however, any intent or obligation to update these forward-looking statements. As a result, the reader is cautioned not to place reliance on these forward-looking statements. Revenue - ------- Total revenue for the first quarter of fiscal 1997 was $1,204,897 compared to $1,603,448 for the same quarter of fiscal 1996, a decrease of $398,551 or 25%. Licensing and royalties revenue for the first quarter of fiscal 1997 decreased $435,575, or 40% over licensing and royalties revenue for the same quarter of fiscal 1996. First quarter revenue from text products decreased $121,881, or 68%, from the same quarter last year. As mentioned in the Company's 10-KSB for the year ended August 31, 1996, revenue from text products is expected to continue to decline because future development of this technology will occur on a customer contract basis and be reported as software development service revenue. Revenue from imaging products (e.g. ViewDirector) decreased $300,106, or 48%, over last year, while revenue from image enhancement products (e.g. FormFix, ScanFix) remained flat at approximately $265,000 for both quarters. The decreases in imaging and image enhancement product revenues may be attributed to competition and price erosion for the Company's imaging technology, and late releases of the Company's ViewDirector Plug-in and FormFix products which hindered revenue growth in both product groups. The ViewDirector Plug-in and FormFix final products were released early in the second quarter. Software development service revenue for the first quarter of fiscal 1997 was $429,338 compared to $230,167 for the first quarter of fiscal 1996, an increase of $199,171 or 87%. During the first quarter of fiscal 1997, the 5 software development services group was operating at full capacity and at November 30, 1996 had a service revenue backlog of approximately $500,000. During the first quarter of fiscal 1996, the Company was in the process of rebuilding it's software development service business. Document conversion service revenue for the first quarter of fiscal 1997 was $125,038 compared to $287,185 for the first quarter of fiscal 1996, a decrease of $162,147, or 56%. During the first quarter of fiscal 1996, service under the Toro contract, which was substantially completed during March of 1996, accounted for approximately $188,000, or 66% of the document conversion revenue. The Company has secured new document conversion service contracts, but not at the level of revenue provided under the Toro contract. The Company has a sales and marketing plan underway to obtain additional document conversion service opportunities, but 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 reduced the number of document conversion employees during the first quarter of the current fiscal year to help offset the decline in revenues and is prepared to make additional cost cutting measures where necessary. Operating Costs and Expenses - ---------------------------- Total operating costs and expenses for the quarter ended November 30, 1996, were $1,373,123 compared to $1,435,025 for the same quarter in fiscal 1996, a decrease of $61,902 or 4%. The cost of licensing and royalties increased $41,625, or 21%, for the first quarter of fiscal 1997, compared to the same period a year ago. The gross profit margin for licensing and royalties was 63% and 82% for the three months ended November 30, 1996 and 1995, respectively. The decrease in gross profit margin is primarily attributable to the 40% decrease in licensing and royalty revenue and more engineering time devoted to product maintenance. The cost of software development services increased $57,408, or 39%, for the first quarter of fiscal 1997, compared to the same period a year ago. The gross profit margin for software development services was 52% and 35% for the three months ended November 30, 1996 and 1995, respectively. The increased cost of software development services is primarily attributable to the additional personnel needed to satisfy contract requirements. Improved gross margins are a direct result of the engineering service group operating at full capacity during the fiscal 1997 first quarter. The cost of document conversion services decreased $99,437, or 48%, for the first quarter of fiscal 1997, compared to the same period a year ago. The gross profit margin for document conversions services was 14% and 28% for the three months ended November 30, 1996 and 1995, respectively. The decrease in costs is the direct result of management reducing the number of document conversion employees to help offset the decline in revenues. Despite the decrease in costs, gross margins declined over fiscal 1996 first quarter levels because of the number of employees and level of overhead that is required to be maintained in order to be responsive to new projects. Management is prepared to make additional cost reductions if revenue growth from the document conversion service division is not achieved. Selling, general and administrative expenses for the first quarter of fiscal 1997 decreased $40,450, or 5%, when compared to the first quarter of fiscal 1996. The decrease can be attributed to approximately $115,000 in non- recurring legal, accounting and other professional fees incurred during the prior year first quarter for the merger with Sequoia Data Corporation. The 100% decrease in merger costs over the prior year was partially offset by an additional $75,000, or 70%, investment in tradeshow and advertising. Management expects second quarter marketing costs to decrease approximately 50% over fiscal 1997 first quarter levels. Research and development costs for the first quarter of fiscal 1996 decreased $21,048, or 70% from the same period a year ago. The decrease is primarily 6 attributable to the Company focusing it's resources on product maintenance releases and new products and enhancements to existing products that are capitalized for financial accounting and reporting purposes. The Company capitalized software development costs of $78,336 and $113,318, during the first quarter of fiscal 1997 and 1996, respectively. Income Taxes - ------------ Deferred tax benefits of approximately $60,000 for the quarter ended November 30, 1996, was offset by deferred tax expense of approximately $60,000 attributable to the increase in the valuation allowance for deferred tax assets. The Company assesses the realizability of deferred tax assets at least quarterly, and adjusts the valuation allowance to reflect the future benefits that will more likely than not be realized from those deferred tax assets. The current tax expense of $800 recognized for the fiscal 1997 first quarter represents state taxes paid. Net Loss/Income - --------------- Net loss for the first quarter of fiscal 1997 was $157,209, or $.01 per share, compared to net income of $176,357, or $.01 per share, for the first quarter of fiscal 1996. The 25% decrease in revenue and lower gross margins for licensing and royalties and document conversion services, were the primary factors that caused the fiscal 1997 first quarter loss. FINANCIAL CONDITION Working capital, at November 30, 1996 was $1,740,469 with a current ratio of 4.0:1 compared to $1,838,181, with a current ratio of 3.9:1, at August 31, 1996. Net cash used in operations for the three months ended November 30, 1996 was $21,696 compared to net cash provided by operations of $342,807 for the three months ended November 30, 1995. The current quarter net loss and slower customer billing cycles associated with custom software services were the primary factors that affected operating cash flows. Net cash used in investing activities for the first three months of fiscal 1997 was $107,275 compared to $155,516 for the same period in fiscal 1996. During the quarter ended November 30, 1996, the Company did not borrow against it's $800,000 line of credit. At November 30, 1996, the Company's long-term debt was $350,372. Current obligations under the long-term debt total $21,156. The Company believes that operating cash flow and the $800,000 operating line of credit will be adequate to meet its current obligations and current operating and capital requirements. The funding of long-term needs is dependent upon increased revenue and profitability and obtaining funds through outside debt and equity sources. The funding for long-term needs includes funding for increased product development, expanded sales staff and adequate promotion of the Company and its products. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Reports on Form 8-K - ------------------- None Exhibits Exhibit No. Name of Exhibit 27 Financial Data Schedule as of and for the three month period ending November 30, 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. /s/ Maxwell Steinhardt Date: January 6, 1997 _______________________ Maxwell Steinhardt Chief Executive Officer /s/ Deborah D. Mosier Date: January 6, 1997 _______________________ Deborah D. Mosier Chief Financial Officer EX-27 2
5 This schedule contains summary financial information extracted from the first quarter 10-QSB for the fiscal year ending August 31, 1997 and is qualified in its entirety by reference to such financial statements. 3-MOS AUG-31-1997 NOV-30-1996 448,426 0 1,332,363 105,114 0 2,319,211 2,410,675 964,130 4,518,631 578,742 0 0 0 665,636 2,923,881 4,518,631 1,204,897 1,204,897 555,649 555,649 817,474 18,200 5,923 (156,409) 800 (157,209) 0 0 0 (157,209) (.01) (.01)
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