-----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, FZMohycTeKpVNHaXWbx7Hymdl8Zz1PpnsIDdoZlvA2hb1BS4pTT0TJgsDkqg6tOC HNcLVZC5tYy0A1RtBG1Ufw== 0000909334-05-000105.txt : 20050414 0000909334-05-000105.hdr.sgml : 20050414 20050414121333 ACCESSION NUMBER: 0000909334-05-000105 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050228 FILED AS OF DATE: 20050414 DATE AS OF CHANGE: 20050414 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: 05749936 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 10QSB 1 tmsform10q-031405.txt 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: February 28, 2005 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ____________ to ____________ Commission File Number 0-18250 TMSS Liquidation, 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) 5811 Trenton Ave Post Office Box 1358 Stillwater, Oklahoma 74076 ---------------------------------------- (Address of principal executive offices) (405) 707-9060 ------------------------- (Issuer's telephone number) TMS, Inc. - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year if changed from last report) 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 April 14, 2005 Common stock, par value $.05 per share 13,121,659 Transitional Small Business Disclosure Format (check one): Yes [] No [X] PART I - FINANCIAL INFORMATION Item 1. Financial Statements TMSS Liquidation, Inc. Statement of Net Assets in Liquidation
February 28, 2005 ----------------- Assets Cash and cash equivalents $ 1,724,963 Amounts due from purchaser 344,554 Other receivables 1,432 ---------------- Total Assets $ 2,070,949 ================ Liabilities Accounts payable and accrued liabilities $ 7,692 Estimated costs of liquidation 149,927 ---------------- Total Liabilities 157,619 ---------------- Net Assets in Liquidation $ 1,913,330 ================
See accompanying notes to financial statements. TMSS Liquidation, Inc. Statement of Changes in Net Assets in Liquidation
Period from December 17, 2004 through February 28, 2005 ------------------------- Net Increase in Net Assets in Liquidation Interest income $ 8,273 -------------------------- Net Increase in Net Assets in Liquidation 8,273 Net Assets in Liquidation at December 17, 2004 $ 1,905,057 -------------------------- Net Assets in Liquidation at February 28, 2005 $ 1,913,330 ==========================
See accompanying notes to financial statements. TMSS Liquidation, Inc. Condensed Balance Sheets August 31, 2004
August 31, 2004* ----------- Cash $ 1,404,542 Trade accounts receivable, net 334,377 Due from related parties 42,835 Contract service work in process 201,981 Prepaid expenses and other current assets 29,028 Deferred income taxes 5,192 ----------- Total current assets 2,017,955 ----------- Property and equipment 566,304 Accumulated depreciation and amortization (470,130) ----------- Net property and equipment 96,174 ----------- Capitalized software development costs, net 391,496 Other assets 46,510 ----------- Total assets $ 2,552,135 =========== Accounts payable $ 139,980 Accrued payroll expenses 140,127 Deferred revenue 362,630 ----------- Total current liabilities 642,737 Investment in limited liability company 110,839 Deferred income taxes 5,192 ----------- Total liabilities 758,768 ----------- Common stock 656,083 Additional paid-in capital 11,349,558 Accumulated deficit (10,212,274) ----------- Total shareholders' equity 1,793,367 ----------- Total liabilities and shareholders' equity $ 2,552,135 =========== ________________ *Condensed from audited financial statements.
See accompanying notes to financial statements. TMSS Liquidation, Inc. Condensed Statements of Operations (unaudited)
Period from September 1, 2004 through Three Months Ended Six Months Ended December 16, 2004 February 29, 2004 February 29, 2004 ----------------- ----------------- ----------------- Revenue: Licensing and royalties $ 322,653 441,452 775,902 Customer support and maintenance 154,093 159,120 328,156 Other services 89,520 92,950 100,794 ------------ ------------ ------------ 566,266 693,522 1,204,852 ------------ ------------ ------------ Operating costs and expenses: Cost of revenue 224,818 174,907 281,167 Selling, general and administrative 483,060 425,031 858,468 Research and development 147,338 189,653 335,283 Loss in limited liability company 18,772 23,763 48,403 ------------ ------------ ------------ 873,988 813,354 1,523,321 ------------ ------------ ------------ Operating loss (307,722) (119,832) (318,469) Other (expense) income: Loss on disposal of property - 6,414 (260,123) Interest income 14,620 4,730 8,841 Interest expense - (1,161) (4,811) Other, net (4,420) 2,323 3,904 ------------ ------------ ------------ Loss before income taxes (297,522) (107,526) (570,658) Income tax expense - - - ------------ ------------ ------------ Net loss $ (297,522) (107,526) (570,658) ============ ============ ============ Basic loss per share $ (0.02) (0.01) (0.04) ============ ============ ============ Weighted average common shares 13,121,659 13,121,659 13,112,659 ============ ============ ============ Diluted loss per share $ (0.02) (0.01) (0.04) ============ ============ ============ Weighted average common shares and potentially dilutive securities 13,121,659 13,121,659 13,112,659 ============ ============ ============
See accompanying notes to financial statements. TMSS Liquidation, Inc. Condensed Statements of Cash Flows (unaudited)
Period from September 1, 2004 through Six Months Ended December 16, 2004 February 29, 2004 ------------------ ----------------- Net cash flows used in operating activities $ (18,669) (63,102) ----------- ---------- Cash flows from investing activities: Proceeds from sale of substantially all assets 517,396 - Proceeds from sale of building - 431,226 Capitalized software development costs (7,654) (156,251) Investment in limited liability company (45,615) (78,178) Distribution from limited liability company - 154,922 Other, net - (24,423) ----------- ---------- Net cash provided by investing activities 464,127 327,296 ----------- ---------- Cash flows from financing activities: Repayments of long-term debt - (198,270) ----------- ---------- Net cash used in financing activities - (198,270) ----------- ---------- Net increase in cash 445,458 65,924 Cash at beginning of period 1,404,542 1,129,470 ----------- ---------- Cash at end of period $ 1,850,000 1,195,394 =========== ========== Noncash investing activities: Issuance of notes receivable for sale of assets $ 340,974 - =========== ==========
See accompanying notes to condensed financial statements. TMSS, Liquidation Inc. Notes to Financial Statements (unaudited) Unaudited Interim Financial Statements - -------------------------------------- The unaudited interim financial statements and related notes were prepared by TMSS Liquidation, 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 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, 2004. The unaudited 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. Sale of Substantially All Assets and Accounting Basis - ----------------------------------------------------- At a special meeting held on December 17, 2004, the Company's shareholders approved the sale of the assets of our Component Product Technology ("CPT") division to PIC Acquisition, Inc. ("Pegasus"), a wholly owned subsidiary of Pegasus Imaging Corporation, and approved a plan of liquidation and dissolution of the Company. The Company also completed the final closing of the transaction with Pegasus and the sale of our membership interest in VSC Technologies, LLC ("VSC") to Measurement Incorporated ("MI"). In connection with the adoption of the plan of liquidation and dissolution of the Company, we adopted the liquidation basis of accounting effective December 17, 2004. The accompanying condensed balance sheet as of August 31, 2004, and the condensed statements of operations and cash flows for the period from September 1, 2004 to December 16, 2004 and the three and six months ended February 29, 2004 have been presented on a going concern basis comparable to prior periods, which assumes the realization of assets and the liquidation of liabilities in the normal course of business. Under the liquidation basis of accounting, assets are stated at their estimated net realizable cash value and liabilities are stated at their anticipated settlement amounts. Upon changing to the liquidation basis of accounting, the Company recorded a $409,212 increase to net assets, which included an increase of $734,349 for the gain on sale of assets to Pegasus and MI, and decreases of $99,966 for directors and officers insurance, and $225,171 of accrued costs of liquidation representing the estimate of the costs to be incurred during dissolution; however actual costs could vary from those estimates. Uncertainties as to the ultimate amount of our liabilities make it impracticable to predict the aggregate net value that may ultimately be distributable to stockholders. Claims, liabilities and future expenses for operations will continue to be incurred with execution of the plan. These costs will reduce the amount of net assets available for ultimate distribution to stockholders. Although we do not believe that a precise estimate of those expenses can currently be made, we believe that available net assets will be adequate to provide for our obligations, liabilities, operating costs and claims, and to make cash distributions to stockholders. If available cash are not adequate to provide for our obligations, liabilities, operating costs and claims, estimated future distributions of cash to our stockholders will be reduced. At February 28, 2005, the Company had accrued $149,927 of costs of liquidation which includes the following: Estimated Costs of Liquidation: Professional fees for preparation of tax returns, SEC filings and other related services associated with implementation of plan of liquidation $ 58,357 Costs of cash distribution to shareholders at time of liquidation 30,000 Compensation to officers and directors for services related to the oversight and implementation of the plan of liquidation 26,570 Alternative minimum taxes 10,000 Record storage fees, telephone services, supplies, and other administrative costs 25,000 ----------- $ 149,927 ===========
Legal Proceedings - ----------------- The Company is a party to a lawsuit involving the Virtual Scoring Center technology transferred to VSC Technologies, LLC. On October 23, 2002, the Company, along with VSC Technologies, LLC and MI, filed an action in the United States District Court for the Eastern District of North Carolina against NCS Pearson, Inc. In the complaint, the Company and the other plaintiffs seek a declaratory judgment that the Virtual Scoring Center technology owned by VSC Technologies, LLC and marketed by MI and the Company does not infringe twenty patents belonging to NCS Pearson. On June 3, 2003, NCS filed their answer to the complaint, along with a set of counterclaims that assert infringement of thirteen of their patents. The Company carefully designed and developed the technology to avoid infringement and the Company has and continues to deny any infringement of the NCS Pearson patents. In March 2005, a tentative agreement was reached between the Company, MI and NCS Pearson, to resolve the patent infringement lawsuit. The tentative settlement provides for dismissal of the Company from the lawsuit and a complete release of the Company and any of its affected customers from any claims of infringement related to the lawsuit. The Company will not be required to pay any amounts to NCS Pearson as part of the settlement. The parties anticipate a final settlement by April 20, 2005. Net Loss Per Share - ------------------ Options to purchase 364,500 shares of common stock at prices ranging from $.27 to $.40 per share and 413,974 shares of common stock at prices ranging from $.125 to $.40 per share were outstanding at December 17, 2004 and February 29, 2004, respectively, but were not included in the computation of diluted net loss per share because the options' exercise prices were greater than the average market price of common shares. Options to purchase 202,000 shares of common stock at prices ranging from $.27 to $.3125 expired on March 17, 2005. The remaining 162,500 of the options outstanding at December 17, 2005 will expire if not exercised prior to the earlier of liquidation and dissolution of the Company or June 6, 2006. 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. Factors that could cause actual results to differ materially from those described herein include, without limitation, delays in the final settlement with NCS Pearson and unexpected or greater than expected expenses associated with winding up the affairs and liquidation the Company, as well as any unexpected and unknown obligations or liabilities that are determined". As a result, you should not rely on these forward-looking statements. Upon sale of substantially all of the assets of the Company on December 17, 2004, we ceased normal operations and began the process of winding up the affairs of the Company. As a result, we changed our basis of accounting to the liquidation basis as of December 17, 2004. Under the liquidation basis of accounting, assets and liabilities are reflected at the estimated amounts to be paid or received, however actual costs could differ from those estimates. The proceeds from the sale of our assets will be used to make a final cash distribution to shareholders and cover the additional costs associated with the liquidation and dissolution of the Company. At February 28, 2005 such additional costs are estimated at approximately $150,000. See the "Notes to the Financial Statements" for a detailed description of such costs. Distributions ultimately made to stockholders upon liquidation will differ from the "net assets in liquidation" recorded in the accompanying Statement of Net Assets in Liquidation as a result of future changes in estimated investment income, settlement of liabilities and obligations, and final costs of liquidation. The accompanying historical Balance Sheet as of August 31, 2004 and Statements of Operations and Cash Flows for the periods from September 1, 2004 - December 16, 2004 and for the three and six month periods ended February 29, 2004 have been presented on a going concern basis comparable to prior periods, which assumes the realization of assets and the liquidation of liabilities in the normal course of business. It is our intention to settle our outstanding obligations and convert our remaining assets to cash as expeditiously as possible. Final dissolution of the Company and distribution to stockholders will occur upon obtaining final resolution on all liquidation issues and final settlement of the lawsuit with NCS Pearson. See "Legal Proceedings" in the accompanying "Notes to the Financial Statements". 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 to allow timely decisions regarding required disclosure, however, since the sale of substantially all of our assets on December 17, 2004, we have been in the process of winding down our operations and we no longer have any employees. The accounting and administrative functions are being performed by Deborah D. Mosier, President and Chief Financial Officer on a part-time contract basis along with our outside legal and accounting professional service providers. As a result, the Company has limitations on its ability to provide common internal control practices, including adequate segregation of duties. While the activities of the Company are being monitored by the Board of Directors, our inability to provide adequate segregation of duties and other mitigating controls may be considered a material weakness in internal controls over financial reporting. PART II - Other Information Item 1. Legal Proceedings The Company is a party to a lawsuit involving the Virtual Scoring Center technology transferred to VSC Technologies, LLC. On October 23, 2002, the Company, along with VSC Technologies, LLC and MI, filed an action in the United States District Court for the Eastern District of North Carolina against NCS Pearson, Inc. In the complaint, the Company and the other plaintiffs seek a declaratory judgment that the Virtual Scoring Center technology owned by VSC Technologies, LLC and marketed by MI and the Company does not infringe twenty patents belonging to NCS Pearson. On June 3, 2003, NCS filed their answer to the complaint, along with a set of counterclaims that assert infringement of thirteen of their patents. The Company carefully designed and developed the technology to avoid infringement and the Company has and continues to deny any infringement of the NCS Pearson patents. In March 2005, a tentative agreement was reached between the Company, MI and NCS Pearson, to resolve the patent infringement lawsuit. The tentative settlement provides for dismissal of the Company from the lawsuit and a complete release of the Company and any of its affected customers from any claims of infringement related to the lawsuit. The Company will not be required to pay any amounts to NCS Pearson as part of the settlement. The parties anticipate a final settlement by April 20, 2005. Item 4. Submission of Matters to a Vote of the Security Holders On December 17, 2004 we held a special meeting in which our shareholders approved the sale of our Component Product Technologies business to Pegasus and a plan of liquidation and dissolution of the Company. Following are the final results of the shareholder voting from the special meeting: 1. Approve the sale of the Company's Component Products Technologies business to Pegasus Imaging Corporation and the Asset Purchase Agreement entered into by the Company, Pegasus, and PIC Acquisition, Inc., a subsidiary of Pegasus. FOR AGAINST ABSTAIN 9,850,486 359,450 16,863 2. Approve the Plan of Liquidation and Dissolution. FOR AGAINST ABSTAIN 9,797,092 406,950 22,757 Item 6. Exhibits 31 Certification of Principal Executive and Financial Officer Pursuant to SEC Rule 13a-14 32 Certification of Principal Executive and Financial Officer Pursuant to 18 U.S.C. Section 1350 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: TMSS Liquidation, Inc. Date: April 14, 2005 /s/ Deborah D. Mosier Deborah D. Mosier, President and Chief Financial Officer Principal Executive and Financial Officer INDEX TO EXHIBITS Exhibit No. Description Method of Filing --- ----------- ---------------- 31 Certification of Principal Executive Filed herewith electronically and Financial Officer Pursuant to SEC Rule 13a-17 32 Certification of Principal Executive Filed herewith electronically and Financial Officer Pursuant to U.S.C. Section 1350 EX-31 2 tmsex31form10q-031405.txt EXHIBIT 31 CERTIFICATION PURSUANT TO SEC RULE 13a-14 I, Deborah D. Mosier, certify that: 1. I have reviewed this report on Form 10-QSB of TMSS Liquidation, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: April 14, 2005 /s/ Deborah D. Mosier Deborah D. Mosier President and Chief Financial Officer, Principal Executive and Financial Officer EX-32 3 tmsex32form10q-031405.txt EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 The undersigned hereby certifies that to her knowledge the quarterly report of TMSS Liquidation, Inc. (the "Company") filed with the Securities and Exchange Commission on the date hereof fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly represents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 of The Sarbanes-Oxley Act of 2002 has been provided to TMSS Liquidation, Inc. and will be retained by TMSS Liquidation, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. Date: April 14, 2005 /s/ Deborah D. Mosier Deborah D. Mosier President and Chief Financial Officer, Principal Executive and Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----