-----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, Mk/0afoxzbhny3nW90tBiBLu3ZrYPv1y4RmkyntSNs76ifE+x4X47JSkAjiubAKE Oq6F2vRzQZ/d8j1kMSeRjg== 0000909334-04-000358.txt : 20041222 0000909334-04-000358.hdr.sgml : 20041222 20041222164830 ACCESSION NUMBER: 0000909334-04-000358 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20041217 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041222 DATE AS OF CHANGE: 20041222 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-22780-NY FILM NUMBER: 041221355 BUSINESS ADDRESS: STREET 1: 206 WEST SIXTH AVENUE STREET 2: PO BOX 1358 CITY: STILLWATER STATE: OK ZIP: 74076 BUSINESS PHONE: 4053770880 MAIL ADDRESS: STREET 1: 206 WEST 6TH AVE STREET 2: PO BOX 1358 CITY: STILLWATER STATE: OK ZIP: 74076-1358 8-K 1 tmsform8k-122204.txt SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 17, 2004 TMS, INC. (Exact name of registrant as specified in its charter) Oklahoma 0-18250 91-1098155 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of Incorporation Identification No.) 5811 Trenton Avenue P.O. Box 1358 Stillwater, Oklahoma 74074 (405) 707-9060 (Address, including zip code, and telephone numbers, including area code, of Principal executive offices) 206 West 6th Ave. Stillwater, Oklahoma 74076 (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2 below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01 Entry into a Material Definitive Agreement On December 17, 2004 the Company entered into and closed an agreement with Measurement Incorporated ("MI") pursuant to which, as a part of the Company's plan of liquidation, the Company sold its interest in VSC Technologies, LLC in exchange for a cash payment of $250,000 and MI agreed to indemnify and hold the Company harmless with respect to all claims, expenses and damages arising out of the patent infringement lawsuit involving NCS Pearson, described below. Sale of Interest; Termination of Agreements. The Company sold to MI all of its 50% membership interest in VSC Technologies, LLC. This resulted in MI owning all of VSC Technologies, LLC. The Company did not retain any rights therein. As part of this transaction, all of the existing agreements between the Company and VSC Technologies, LLC or MI were terminated and any obligation of the Company to repay $350,000 in development cost was also terminated. PIC Acquisition, Inc. ("Pegasus") in connection with acquiring the Company's Component Product Technology business described in Item 2.01 below entered into new licensing agreements and maintenance support agreements with MI and VSC Technologies, LLC to replace those terminated. Indemnification. The Company is a party to a lawsuit involving the Virtual Scoring Center technology we transferred to VSC Technologies, LLC when it was formed. We do not believe the Virtual Scoring Center technology infringes any patents or rights of NCS Pearson, Inc. and were designed to avoid any such infringement. Nonetheless, NCS has alleged that certain aspects of the Virtual Scoring Center technology infringes on certain patent rights of NCS Pearson, which we have and continue to deny. There is currently pending in the United States District Court for the Eastern District of North Carolina a lawsuit involving these allegations to which MI, VSC Technologies, LLC and the Company are parties. MI agreed to indemnify and hold the Company harmless for any costs, expenses or damages related to this suit. Cooperation and Coordination. The Company has agreed with MI that it will continue to have a coordinator to assist MI in the ongoing discovery and defense of the lawsuit with NCS Pearson. In this regard, Deborah D. Mosier, the President and Chief Financial Officer, will continue on a consulting basis to coordinate on behalf of the Company during its winding-up in assembling and organizing documents, responding to discovery request and identifying witnesses, among other things. Item 2.01 Completion of Acquisition or Disposition of Assets At a special meeting held on December 17, 2004, our shareholders approved the sale of the assets of our Component Product Technology division to PIC Acquisition, Inc. ("Pegasus"), a wholly owned subsidiary of Pegasus Imaging Corporation, and a plan of liquidation and dissolution of the Company. We also completed the final closing of the transaction with Pegasus and the sale of our membership interest in VSC Technologies, LLC to Measurement Incorporated on December 17, 2004. The final cash price paid at closing for the sale of the Component Products Technologies business to Pegasus approximated $2,246,000, of which $1,600,000 was paid in cash, $341,000 was issued as a note receivable from Pegasus, and $305,000 had been used to satisfy professional fees and other corporate costs that had been incurred related to the sale of our assets and the plan of liquidation and dissolution of the Company. In addition, Pegasus assumed certain contractual obligations of the Company, including its office leases, customer contracts and severance arrangements with certain employees. Upon closing the sale of VSC Technologies, LLC to Measurement Incorporated, we received $250,000 in cash. We will use the proceeds from both transactions to make a final cash distribution to shareholders and cover the additional costs associated with the liquidation and dissolution of the Company. Item 8.01 Other Events The Company has changed it principal executive offices to: 5811 Trenton Avenue P.O. Box 1358 Stillwater, Oklahoma 74074 The Company has also changed its telephone number to: (405) 707-9060. Item 9.01 Financial Statements and Exhibits (a) Financial Statements - None. (b) Unaudited Pro Forma Financial Information. The following includes certain unaudited pro forma financial information related to the sale of our assets to PIC Acquisition, Inc. ("Pegasus"), a wholly owned subsidiary of Pegasus Imaging Corporation and the sale of our membership interest in VSC Technologies, (the "LLC") to Measurement Incorporated ("MI"). The unaudited pro forma balance sheet and the unaudited pro forma statement of operations has been prepared on the basis that the transactions with Pegasus and MI took place as of August 31, 2004 and the unaudited pro forma statement of operations has been prepared on the basis that the transactions with Pegasus and MI was consummated as of September 1, 2003, the beginning of the Company's fiscal year ended August 31, 2004. The unaudited pro forma financial statements should be read in conjunction with the notes thereto, our Form 10-KSB for the fiscal year ended August 31, 2004 and our Proxy Statement filed with the Securities and Exchange Commission on November 12, 2004. TMS, Inc. Unaudited Pro Forma Balance Sheet
Historical Pro Forma August 31, Pro Forma August 31, 2004 Adjustments 2004 ---- ----------- ---- ASSETS Current Assets: Cash and cash equivalents $ 1,404,542 618,492 (1) $ 2,023,034 Trade accounts receivable, net 334,377 (334,377) (7) - Note receivable from Pegasus - 340,974 (2) 340,974 Due from related parties 42,835 (42,835) (3) - Custom development work in process 201,981 (201,981) (7) - Prepaid expenses and other current assets 29,028 70,968 (4) 99,996 Deferred income taxes 5,192 (5,192) - ------------- ------------- -------------- Total current assets 2,017,955 446,049 2,464,004 ------------- ------------- -------------- Property and equipment: Computer equipment 287,057 (287,057) - Furniture and fixtures 279,247 (279,247) - ------------- ------------- -------------- 566,304 (566,304) - Less accumulated depreciation (470,130) 470,130 - ------------- ------------- -------------- Net property and equipment 96,174 (96,174) (7) - ------------- ------------- -------------- Capitalized software, net 391,496 (391,496) (7) - Other assets 46,510 (46,510) (7) - ------------- ------------- -------------- Total other assets 438,006 (438,006) - ------------- ------------- -------------- Total assets 2,552,135 (88,131) 2,464,004 ============= ============= ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable 139,980 69,584 (6),(7) 209,564 Accrued payroll expenses 140,127 (140,127) (7) - Income taxes payable - 20,000 (6) 20,000 Deferred revenue 362,630 (362,630) (7) - ------------- ------------- -------------- Total current liabilities 642,737 (413,173) 229,564 Investment in LLC 110,839 (110,839) (7) - Deferred income taxes 5,192 (5,192) - ------------- ------------- -------------- Total liabilities 758,768 (529,204) 229,564 ------------- ------------- -------------- Shareholders' equity: Common stock 656,083 - 656,083 Additional Paid-in capital 11,349,558 - 11,349,558 Accumulated (deficit) earnings (10,212,274) 441,073 (6),(7) (9,771,201) ------------- ------------- -------------- Total shareholders' equity 1,793,367 441,073 2,234,440 ------------- ------------- -------------- Total liabilities and shareholders' equity $ 2,552,135 (88,131) $ 2,464,004 ============= ============= ==============
TMS, Inc. Unaudited Pro Forma Statement of Operations
Historical Pro Forma Year Ended Pro Forma Year Ended August 31, 2004 Adjustments August 31, 2004 --------------- ----------- --------------- Revenue: Licensing and royalties $ 1,757,093 (1,757,093) (7) $ - Customer support and maintenance 654,066 (654,066) (7) - Other services 515,913 (515,913) (7) - ---------------- ---------------- -------------- 2,927,072 (2,927,072) - ---------------- ---------------- -------------- Operating Costs and Expenses: Cost of revenue 677,400 (677,400) (7) - Selling & Marketing 703,207 (703,207) (7) - General & Administrative 929,343 (846,011) (4),(6) 83,332 Research and development 545,457 (545,457) (7) - Loss in equity investment 90,563 (90,563) (7) - ---------------- ---------------- -------------- 2,945,970 (2,862,638) (83,332) ---------------- ---------------- -------------- Operating loss (18,898) (64,434) (83,332) Other income (expense): Interest income 16,878 30,972 (2),(5),(7) 47,850 Interest expense (4,811) 4,811 (7) - Loss on sale of property (260,123) 260,123 (8) - Other, net 2,799 (2,799) (7) - ---------------- ---------------- -------------- Loss before income taxes (264,155) 228,673 (35,482) Income tax expense 1,415 (1,415) - ---------------- ---------------- -------------- Net loss $ (265,570) 441,073 $ (35,482) ================ ================ ============== Basic earnings per share $ (0.02) $ 0.03 $ (0.00) ================ ================ ============== Weighted average common shares 13,113,026 - 13,113,026 ================ ================ ============== Diluted earnings per share $ (0.02) $ 0.03 $ (0.00) ================ ================ ============== Weighted average common and common equivalent shares 13,113,026 - 13,113,026 ================ ================ ==============
Notes to Unaudited Pro Forma Financial Statements (1) Pro forma cash at August 31, 2004 is comprised of the following: Proceeds from sale of assets to Pegasus $ 1,905,195 Proceeds from sale of LLC interest to MI 250,000 --------------- 2,155,195 Cash paid for directors and officers discovery policy (99,996) Cash paid for key employee severance (75,000) Cash received from LLC for development costs 42,835 --------------- $ 2,023,034 =============== (2) The total cash price for the sale of assets to Pegasus was $2,246,149 of which $340,749 was issued as a note receivable bearing interest at an annual rate of 5.25%. The note must be payable within 15 days after the date of liquidation, with such liquidation date being set by the Company in its sole and absolute discretion after January 31, 2005, or by August 15, 2005, whichever is earlier. The pro forma statement of operations assumes a full year of interest income under the note from Pegasus and accordingly includes an adjustment to interest income of $17,850. (3) As a condition to closing the sale of our interest in the LLC to MI, all software development costs were required to be paid. Accordingly, such payment is included in the pro forma cash balance at August 31, 2004. (4) The pro forma prepaid expense balance at August 31, 2004 represents a three year directors and officers discovery insurance policy. The pro forma statement of operations includes an adjustment for 12 months of amortization, or $33,332, related to the insurance policy. (5) Interest income includes a pro forma adjustment of $30,000 to reflect earnings on an expected average cash balance of $2,000,000 during the 12 months following the sales transactions at an estimated yield of 1.5%. (6) We estimate that professional fees, income taxes and other corporate costs related to the sale of our assets, implementation of the plan of liquidation and limited administrative activities for winding up the affairs of the Company will approximate $415,000, of which $32,975 was accrued at August 31, 2004. As discussed in Note 1, the pro forma financial statements include a cash adjustment of $174,996 for directors and officers insurance and key employee severance. An additional pro forma adjustment was made to current liabilities and accumulated deficit to reflect $176,589 and $20,000 of the remaining professional fees or corporate costs and alternative minimum taxes ultimately expected to be incurred and paid, respectively. In the pro forma statement of operations, which has been prepared as if the transactions with Pegasus and MI occurred at the beginning of the year, $210,000 of the $415,000 in estimated total costs has been excluded from the pro forma results because those costs are for employee severance, completion of purchase and sale agreements, proxy preparation and solicitation and other costs that are non-recurring in nature. The remaining $205,000 of the total costs represents an estimate for recurring items such as officers and directors compensation, insurance and professional fees related to SEC compliance and other administrative matters. Accordingly, a pro forma adjustment of $83,332 was made to general and administrative expense to give effect to the portion of the remaining $205,000 of estimated recurring costs that are expected to be incurred during the first 12 months following completion of the sales transactions. (7) Except for the pro forma adjustments discussed in Notes 1 - 6 above, all remaining assets, liabilities and associated revenue and expenses were included in the asset sales to Pegasus or MI and had those sales taken place as of and for the year ended August 31, 2004, the Company would have recognized a gain of $712,662. The effect of such gain is included in the pro forma adjustment to accumulated deficit, but excluded from the pro forma statement of operations because it is nonrecurring in nature. We expect to use a portion of our $2.7 million in tax operating loss carryforwards to offset any gains associated with the sales. (8) The loss on the sale of property relates to the sale of the Company's headquarters building to a third party other than Pegasus or MI. The pro forma statement of operations assumes that such transaction occurred as of the beginning of the year and such amount is not included in the pro forma financial results as the loss is nonrecurring in nature. (c) Exhibits. Exhibit No. Description - ----------- ----------- 99.1 Press Release of December 20, 2004 titled "TMS Shareholders Approve Sale of Company Assets and Plan of Liquidation" SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TMS, INC. Date December 22, 2004 By DEBORAH D. MOSIER Deborah D. Mosier, President INDEX TO EXHIBITS Exhibit No. Description Method of Filing --- ----------- ---------------- 99.1 Press Release of December 20, 2004 Filed herewith electronically titled "TMS Shareholders Approve Sale of Company Assets and Plan of Liquidation" EX-99 2 tmsex99form8k-122204.txt PRESS RELEASE Contact: Debbie Mosier, President Phone: 405/707-9060 Email: debbie.mosier@tmsinc.com TMS Shareholders Approve Sale of Company Assets and Plan of Liquidation STILLWATER, OK - December 20, 2004 - TMS, Inc. (OTC Bulletin Board : TMSS), announced that at a special meeting held on December 17, 2004, its shareholders approved the sale of the Company's Component Products Technologies Division to Pegasus Imaging Corporation and a plan of liquidation and dissolution of the Company. The Company also announced the final closing of the transaction with Pegasus and the sale of its membership interest in VSC Technologies, LLC to Measurement Incorporated. "The Board of Directors and Management of the Company are pleased with the overwhelming support by its shareholders in favor of the sale to Pegasus and plan of liquidation for the Company" said Debbie Mosier, TMS President. "Our plan moving forward is to work as quickly as possible to wind up the affairs of the Company and make a final cash distribution to our shareholders." The final cash price for the sale of the Components's Technology Business to Pegasus approximated $2,246,000 of which $1,600,000 was paid in cash, $341,000 was issued as a note receivable and $305,000 was used to satisfy professional fees and other corporate costs that have been incurred related to the sale of the Company's assets and plan of liquidation and dissolution of the Company. Upon closing the sale of its interest in VSC Technologies, LLC, the Company received $250,000 in cash from Measurement Incorporated. The proceeds from both transactions will be used to make a final cash distribution to shareholders and cover the addtional costs associated with winding up up the affairs of the Company. About Measurement Incorporated - ------------------------------ Measurement Incorporated is an employee-owned corporation that contracts with state departments of education, other educational agencies, and private businesses to develop and score educational tests. Founded in Durham, North Carolina in 1980 by Henry Scherich, Ph.D., Measurement Incorporated is a full service educational testing company. For more information about Measurement Incorporated or its products, visit the website at http://www.measinc.com or call 1- 919-683-2413. About Pegasus Imaging Corporation - --------------------------------- Founded in 1991 and headquartered in Tampa, Florida, Pegasus Imaging Corporation delivers digital imaging software development components, image compression and image editing technologies. Technology is delivered as Microsoft .NET controls, COM controls, VCL's and DLL's. The company provides solutions for medical imaging, document imaging, color/photo imaging, video applications and more. Multiple platforms are supported, including Windows, Linux, Solaris, IBM AIX and Mac. For more information about Pegasus Imaging Corporation or its products, visit the website at http://www.jpg.com or call 1-813-875-7575. About TMS, Inc. - --------------- TMS, Inc. is a publicly held company located in Stillwater, Oklahoma which is in the process of implementing a plan of liquidation and dissolution of the Company. For more information call 1-405-707-9060. ### -----END PRIVACY-ENHANCED MESSAGE-----