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 March 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
Commission file number 0-2054
TSI, Inc.
(Exact name of small business issuer as specified in its charter)
Montana 81-0267738
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
128 Second Street South, Great Falls, Montana 59405
(Address of principal executive offices)
(406) 727-2600
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed
by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
Class Outstanding at March 31, 2004
$.05 Par Value Common Stock 10,439,687 Shares
Transitional Small Business Disclosure Format (Check One):
Yes ; No X
TSI, INC.
INDEX
MARCH 31, 2004
Page Number
PART I
Condensed Financial Statements:
Balance Sheet -March 31, 2004 2
Statements of Income and Comprehensive Income -
Three Months Ended March 31, 2004 and 2003 3
Statements of Cash Flows -
Three Months Ended March 31, 2004 and 2003 4
Notes to Financial Statements 5-6
Management's Discussion and Analysis of the
Statements of Income 7
Controls and Procedures 8
PART II
Other Information 9-10
Signatures 11
Certifications 14-18
1
TSI, INC.
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2004
ASSETS
Current Assets
Cash $ 20,091,883
Marketable Securities,
at Fair Value 4,626,306
Receivables, Net 77,334
Prepaid Expenses 41,599
Total Current Assets 24,837,122
Other Assets
Noncurrent Investments,
at Fair Value 706,060
Property, Plant and Equipment,
Net 769,597
Total Assets $ 26,312,779
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and
Accrued Liabilities $ 181,575
Income Taxes Payable 37,941
Current Deferred Income Taxes 115,319
Due to Parent Company 159,394
Related Party Payable 135,129
Total Current Liabilities 629,358
Provision for Estimated Title
and Escrow Losses 778,748
Minority Interests 371,557
Long Term Deferred Income Taxes 128,670
Stockholders' Equity
Common Stock, $.05 Par Value,
30,000,000 shares authorized,
10,439,687 shares issued &
outstanding 521,984
Additional Paid-In Capital 19,087,260
Retained Earnings 4,339,110
Accumulated Other
Comprehensive Income 456,092
Total Stockholders'
Equity 24,404,446
Total Liabilities and
Stockholders' Equity $ 26,312,779
See Notes to Consolidated Financial Statements.
2
TSI, INC.
CONSOLIDATED STATEMENTS
OF INCOME AND COMPREHENSIVE INCOME
For The Three Months
Ended
March 31,
2004 2003
Operating
Revenues $ 564,407 $ 657,026
Operating
Expenses
Salaries and
Payroll Costs2 81,011 231,006
Depreciation 20,665 17,790
Other Expenses 176,199 287,367
Total Expenses 477,875 536,163
Operating Income 86,532 120,863
Minority Portion
Of Income (4,160) (1,839)
82,372 119,024
Income Tax Expense (18,539) (13,130)
Net Income 63,833 105,894
Other Comprehensive Income
Increase (Decrease) in
Unrealized Holding Gains,
Net of Income Taxes 13,474 17,330
Comprehensive
Income $ 77,307 $ 123,224
Basic Earnings Per
Share $ 0.006 $ 0.01
Weighted Average
Shares 10,453,859 10,469,291
See Notes to Consolidated Financial Statements.
3
TSI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Three Months
Ended
March 31,
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash From Operations $ 73,074 $ 157,562
Net Cash Provided By
Operating Activities 73,074 157,562
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Purchases of Furniture and
Building Improvements (137,488) (14,206)
Cash Used For Purchases of
Marketable Securities
Available For Sale (3,442,291) (1,012,610)
Cash Received on Dispositions
of Marketable Securities
Available For Sale 13,392 117,782
Net Cash Provided (Used) By
Investing Activities (3,566,387) (909,034)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Purchases of Common Stock (45,936) (1,700)
Cash Provided (Due From)
Parent Company -- 105,857
Net Cash Provided (Used) By
Financing Activities (45,936) 104,157
NET DECREASE IN CASH (3,539,249) (647,315)
CASH - BEGINNING OF PERIOD 23,631,132 23,337,149
CASH - END OF PERIOD $ 20,091,883 $ 22,689,834
See Notes to Consolidated Financial Statements.
4
TSI, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
Note. 1 Basis of Presentation
In the opinion of management, all adjustments necessary
(consisting of only normal recurring accruals) have been
made to the unaudited financial statements to present fairly
the Company's financial position as of March 31, 2004 and the
results of the Company's operations and cash flows for the
three months ended March 31, 2004 and 2003. The results of
operations for the three months ended March 31, 2004 and 2003
are not indicative of the results to be expected for the full
year.
The consolidated financial statements include the accounts of
the company, its wholly owned subsidiaries and its majority
owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.
M Corp, Great Falls, Montana, owns approximately 92% of the
Company's issued and outstanding common stock.
Note 2. Significant Accounting Policies
For purposes of the statements of cash flows, cash equivalents
include time deposits, certificates of deposit and money market
accounts, all with original maturities of three months or less.
The Company's investment security portfolios, current and
noncurrent, are carried at fair value in the Company's balance
sheet at March 31, 2004. The unrealized holding gain at
March 31, 2004, net of the estimated income tax effects and
minority interests in the unrealized holding gains, is included
in Accumulated Other Comprehensive Income at March 31, 2004.
Basic earnings per share (EPS) is calculated by dividing net
income by the weighted number of common shares outstanding for
the period.
Note 3. Contingencies
The Board of Directors has approved the Company's participation
in an attempt to purchase a savings and loan institution. The
Company will participate in the purchase with its parent, M Corp.
Should the purchase take place, the liquidity of the Company
will be significantly affected.
5
TSI, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
Note 4. Segment Information
Sales to outside concerns, interest revenues and segment
operating profit for the Company's reportable segments were
as follows for the period ended March 31, 2004:
Sales To Segment
Outside Interest Operating
Concerns Revenues Profit
Financial
Holding Company $ 52,355 $24,191 $(25,986)
Title Insurance
Operations 369,383 10,477 76,297
Rental Properties 108,001 - 36,221
Consolidated $529,739 $34,668 $ 86,532
6
TSI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE STATEMENTS OF INCOME
MARCH 31, 2004
A summary of the period to period changes in items included
in the statements of income is shown below.
COMPARISON OF
Three Months Ended
March 31,
2004 and 2003
Increases
(Decreases)
Revenues $ (92,619) ( 14.1%)
Operating Expenses $ (58,287) ( 10.9%)
Net Income $ (42,061) ( 39.7%)
Revenues decreased $92,619 in the first quarter of 2004
as compared with the first quarter of 2003 due primarily to an
decrease in title revenue of $196,090 (35.4%). Other factors
include: a slight increase in rent of $14,271 (15.2%), a decrease
in interest and dividends of $4,770 (9.5%), an increase in other
revenue of $16,738 (92.8%), and a $10,000 gain on sale of
securities during the first quarter of 2004 compared to $61,752
loss on sale of securities during first quarter 2003.
Operating expenses decreased $58,287 (10.9%) in the first quarter
of 2004 as compared with the first quarter of 2003 due primarily to
a decrease of $100,168 (39.4%) in other expenses. Salaries and
payroll costs increased $50,005 (21.6%), intercompany charges
decreased by $11,000 (33.3%),and depreciation increased by
$2,875 (16.2%) in the first quarter of 2004 compared with the first
quarter of 2003.
7
TSI, INC.
CONTROLS AND PROCEDURES
MARCH 31, 2004
Evaluation of disclosure controls and procedures. Based on an
evaluation carried out under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer during the 90-day period
prior to the filing of this report, our Chief Executive Officer
and Chief Financial Officer believe that our disclosure controls
and procedures, as defined in Securities Exchange Act Rules
13a-14 and 15d-14, are, to the best of their knowledge,
effective.
Changes in internal controls, subsequent to the date of this
evaluation. Our Chief Executive Officer and Chief Financial
Officer are not aware of any significant changes in our internal
controls over financial reporting, including any corrective
actions with regard to significant deficiencies and material
weakness, or in other factors that could significantly affect
these controls to ensure that information required to be
disclosed by us, in reports that we file or submit under the
Securities Act, is recorded, processed, summarized, and
reported within the time period specified in Securities and
Exchange Commission rules or regulations.
8
TSI, INC.
PART II
OTHER INFORMATION
MARCH 31, 2004
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
None
9
TSI, INC.
PART II
OTHER INFORMATION - CONTINUED
MARCH 31, 2004
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number Description Page #
3.1 Articles of Incorporation 12
3.2 By-Laws 12
10 Material Contracts 12
16 Letter on change in certifying accountant 13
31.1 Certification required under Section 302 14-15
31.2 Certification required under Section 302 16-17
32.1 Certification required under Section 906 18
32.2 Certification required under Section 906 18
(b) Reports on Form 8-K
On October 20, 2003, Dwyer & Company, CPA, PC, our independent
accountant, resigned, when the review for the period ending September
30, 2003 was completed. February 23, 2004, we engaged Anderson
ZurMuehlen & Co., P.C. as our principal accountant to audit our
financial statements. The decision to change was approved by the
Board of Directors. Dwyer & Company, CPA, PC's report on the
financial statements for either of the past two years did not contain
an adverse opinion and was not modified as to uncertainty, audit scope
or accounting principles. A current report on Form 8-K was filed
with the SEC on February 24, 2004 regarding the change in auditors.
On April 30, 2004, Form 8-K/A was filed including additional
disclosures required by the Securities Exchange Commission.
10
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.
TSI, INC.
Registrant
Date: June 30, 2004 By: s/John Ross
John Ross,
President
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in
the capacities indicated on June 30, 2004.
Director s/Tyler Arneson
Tyler Arneson
Director s/A.M. McCann
A. M. McCann
Chief Executive Officer s/Paul J. McCann.
Paul J. McCann
Chief Financial Officer s/D. Mellinger
D. Mellinger
11
TSI, INC.
EXHIBIT 3.1
ARTICLES OF INCORPORATION
There have been no amendments to the Articles of
Incorporation for TSI, Inc.during the first fiscal
quarter of 2004.
EXHIBIT 3.2
BY-LAWS
During the first quarter ending March 31, 2004,
there were no changes toTSI, Inc.'s By-laws.
EXHIBIT 10
MATERIAL CONTRACTS
No material contracts were executed or became
effective during the first quarter of 2004.
12
TSI, INC.
EXHIBIT 16
LETTER ON CHANGE IN CERTIFYING ACCOUNTANT
[DWYER & COMPANY, CPA, PC LETTERHEAD]
DWYER & COMPANY, CPA, PC [LOGO]
18 6th Street North, Suite 200, Great Falls, MT 59401
Phone (406) 453-2463 Fax (406) 727-3225
We have read the Form 8-K, item 4, for TSI, Inc.,
(SEC File No. 0-2054) dated February 23, 2004, and Form
8-K/A dated April 27, 2004, and we agree with the
statements made therein concerning our resignation.
Sincerely,
/s/Dwyer & Company, CPA, PC
Dwyer & Company, CPA, PC
13
TSI, INC.
EXHIBIT 31.1
CERTIFICATION
I, Paul J. McCann, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
TSI, 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 the annual report,
fairly present in all material respects the financial
condition, results of operations and cash flows of TSI,
Inc., as of, and for, the periods presented in this report.
4. TSI, Inc.'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) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for
TSI, Inc. 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 TSI, Inc., 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 TSI, Inc.'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 TSI, Inc.'s internal
control over financial reporting that occurred during TSI,
Inc.'s first fiscal quarter that has materially affected, or
is reasonably likely to materially affect TSI, Inc.'s internal
control over financial reporting;
14
TSI, INC.
EXHIBIT 31.1 - CONTINUED
CERTIFICATION
5. TSI Inc.'s other certifying officers and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to TSI, Inc.'s auditors and the audit
committee of TSI, Inc.'s Board of Directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect
TSI, Inc.'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 TSI, Inc.'s
internal control over financial reporting.
Date: June 30, 2004 s/Paul J. McCann
Paul J. McCann,
Chief Executive Officer
15
TSI, INC.
EXHIBIT 31.2
CERTIFICATION
I, D. Mellinger, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
TSI, 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 the annual report, fairly
present in all material respects the financial condition,
results of operations and cash flows of TSI, Inc., as of,
and for, the periods presented in this report.
4. TSI, Inc.'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) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for
TSI, Inc. 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 TSI, Inc., 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 TSI, Inc.'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 TSI, Inc.'s internal
control over financial reporting that occurred during TSI,
Inc.'s first fiscal quarter that has materially affected, or
is reasonably likely to materially affect TSI, Inc.'s internal
control over financial reporting;
16
TSI, INC.
EXHIBIT 31.2 - CONTINUED
CERTIFICATION
5. TSI Inc.'s other certifying officers and I have disclosed,
based on our most recent evaluation of internal control
over financial reporting, to TSI, Inc.'s auditors and the
audit committee of TSI, Inc.'s Board of Directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in
the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect
TSI, Inc.'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 TSI,
Inc.'s internal control over financial reporting.
Date: June 30, 2004 s/D. Mellinger
D. Mellinger,
Chief Financial Officer
17
TSI, INC.
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED UPRSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of TSI, Inc. on Form
10-QSB for the period ending March 31, 2004 as filed with the
Securities and Exchange Commission on the date hereof
(the "Report"), I, Paul J. McCann, Chief Executive Officer of
TSI, Inc., certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
to the best of my knowledge and belief, that;
The report fully compiles with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in
all material respects, the financial condition and result of
perations of TSI, Inc.
Date: June 30, 2004 s/Paul J. McCann
Paul J. McCann,
Chief Executive Officer
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED UPRSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of TSI, Inc. on
Form 10-QSB for the period ending March 31, 2004 as filed with
the Securities and Exchange Commission on the date hereof
(the "Report"), I, D. Mellinger, Chief Financial Officer of
TSI, Inc., certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, to the best of my knowledge and belief, that;
The report fully compiles with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in
all material respects, the financial condition and result of
operations of TSI, Inc.
Date: June 30, 2004 s/D. Mellinger
D. Mellinger,
Chief Financial Officer
18