U.S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB/A
This form has been amended to include the required
certifications, additional disclosure regarding
the resignation of our former accountant and the
engagement of our new accountant, the subsequently
filed Forms 8-K and 8-K/A, and our former
accountant's letter covering the additional
disclosures.
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2003
[ ] 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 September 30, 2003
$.05 Par Value Common Stock
10,464,905 Shares
Transitional Small Business
Disclosure Format (Check One): Yes; NoX
TSI, INC.
INDEX
SEPTEMBER 30, 2003
Page Number
PART I
Condensed Consolidated Financial Statements:
Balance Sheet
September 30, 2003 2
Statements of Income and
Comprehensive Income -
Three Months and Nine
Months Ended
September 30, 2003 and 2002 3
Statements of Cash Flows -
Nine Months Ended
September 30, 2003 and 2002 4
Notes to Consolidated
Financial Statements 5
Management's Discussion
and Analysis of the
Statements of Income 6
PART II
Other Information 7
Signatures 8
Certifications 9-13
Letter from former accountant
regarding additonal disclosures 14
1
TSI, INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2003
ASSETS
Current Assets
Cash $ 23,046,619
Marketable Securities, at Fair Value 1,860,600
Receivables, Net 1,500
Deferred Taxes, Current 148,012
Prepaid Expenses 6,737
Total Current Assets 25,063,468
Other Assets
Noncurrent Investments, at Fair Value 861,243
Other Assets 2,755
Property, Plant and Equipment, Net 665,788
Total Assets $ 26,593,254
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 213,816
Income Taxes Payable 121,935
Due To Parent Company 470,838
Deferred Income Taxes 3,803
Total Current Liabilities 810,392
Provision for Estimated Title and Escrow Losses 792,727
Minority Interests 394,325
Deferred Income Taxes 240,344
Excess of Fair Value of Net
Assets Acquired Over Cost 9,590
Total Liabilities 2,247,378
Stockholders' Equity
Common Stock, $.05 Par Value,
30,000,000 shares authorized,
10,483,142 shares issued 524,157
Additional Paid-In Capital 22,165,957
Retained Earnings 1,248,445
Accumulated Other Comprehensive Income 437,951
Treasury Stock, at cost (30,634)
Total Stockholders' Equity 24,345,876
Total Liabilities and Stockholders' Equity $ 26,593,254
See Notes to Consolidated Financial Statements.
2
TSI, INC.
CONSOLIDATED STATEMENTS OF INCOME and COMPREHENSIVE INCOME
For The Three Months For The Nine Months
Ended Ended
September 30, September 30,
2003 2002 2003 2002
Operating Revenues $742,451 $601,918 $2,188,093 $1,712,953
Operating Expenses
Salaries and
Payroll Costs 324,714 358,184 947,806 712,647
Depreciation 19,024 19,746 55,837 53,747
Administration 33,000 33,000 99,000 99,000
Other Expenses 212,344 187,231 635,422 501,423
Total Expenses 589,082 598,161 1,738,065 1,366,817
153,369 3,757 450,028 346,136
Amortization of
Deferred Credit 2,055 2,055 6,165 6,165
Minority Portion
Of (Income) Loss (431) 901 (2,569) (2,874)
154,993 6,713 453,624 349,427
Income Tax Expense (27,116) 15,700 (74,171) (87,900)
Net Income 127,877 22,413 379,453 261,527
Other Comprehensive Income (Loss)
Increase (Decrease) in
Unrealized Holding Gains,
Net of Income Taxes 111,072 (149,207) 271,628 (112,147)
Comprehensive
Income (Loss) $ 238,949 $ (126,794) $ 651,081 $ 149,380
See Notes to Consolidated Financial Statements.
3
TSI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Nine Months
Ended
September 30,
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash From Operations $ 429,415 $ 719,397
Income Taxes Paid (3,650) (147,150)
Net Cash From Operating Activities $ 425,765 $ 572,247
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Received on Sales and Redemptions
of Property, Plant and Equipment 10,250 -
Capital Expenditures Paid in Cash (46,025) (42,733)
Cash Used For Purchases of Marketable
Securities Available For Sale (1,053,645) (361,962)
Cash Received on Dispositions of Marketable
Securities Available For Sale 118,893 1,050,336
Net Cash Provided By
Investing Activities (970,527) 645,641
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Advances From (To) Parent Company 264,074 (195,859)
Cash Purchases of Treasury Stock (9,842) (6,198)
Net Cash Provided By
Financing Activities 254,232 (202,057)
NET INCREASE IN CASH (290,530) 1,015,831
CASH - BEGINNING OF PERIOD 23,337,149 22,140,919
CASH - END OF PERIOD $ 23,046,619 $ 23,156,750
See Notes to Consolidated Financial Statements.
4
TSI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003
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 financial position as of September 30, 2003
and the results of the Company's operations for the
three months and nine months ended September 30, 2003
and 2002 and cash flows for the nine months ended
September 30, 2003 and 2002.
The results of operations for the three months and nine
months ended September 30, 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 owns approximately 92% of the Company's
issued and outstanding common stock.
The Company adopted the provisions of Statement of
Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity
Securities (SFAS No. 115) effective January 1, 1994.
In accordance with SFAS No. 115 the Company's
portfolios, current and noncurrent, are carried at
fair value in the Company's balance sheet at September
30, 2003. The net unrealized holding gain at September
30, 2003, net of the estimated income tax effects and
minority interests in the unrealized holding gains,
is included in Accumulated Other Comprehensive Income
at September 30, 2003 in accordance with the
provisions of Financial Accounting Standards No. 130.
Sales to outside concerns, interest revenues and
segment operating profit for the Company's reportable
segments were as follows for the period ended
September 30, 2003:
COMPARISON OF
Sales To Segment
Outside Interest Operating
Concerns Revenues Profit
Financial Holding Company $ 2,235 $ 15,483 $ (44,388)
Title Insurance Operations 604,959 11,550 227,979
Rental Properties 107,612 612 (30,222)
Consolidated $714,806 $ 27,645 $ 153,369
5
TSI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
SEPTEMBER 30, 2003
A summary of the period to period changes in items included in the
statements of income is shown below.
COMPARISON OF
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 AND 2002 2003 AND 2002
INCREASES (DECREASES)
Revenues $ 140,534 23.3% $ 475,141 27.7%
Expenses (9,078) (1.5%) 371,249 27.2%
Net Income 105,464 470.8% 117,926 45.1%
Revenues increased $475,141 for the first nine months of 2003
($140,534 in the third quarter of 2003) as compared to this time
frame in 2002. This increase is primarily due to an increase in
title income of $561,477 (46.9%). Other factors for the change
in revenues include: an increase in rent of $18,932 (6.7%), a
decrease in interest and dividend revenue of $84,927 (37%), and
a decrease of 536.5% on security sales gains. Operating expenses
increased $103,892 (30%) in the first nine months of 2003 compared
to this time frame in 2002. This is due to the decrease in
depreciation of $2,090 (3.9%), and an increase in other expenses of
$133,999 (26.7%), and an increase in payroll costs of $235,159 (33%).
The provision for income tax expense decreased by $13,729 (15.6%) in
the first nine months of 2003 (an increase of $42,816 in the third
quarter of 2003) as compared to this time frame in 2002.
6
TSI, INC.
PART II
OTHER INFORMATION
SEPTEMBER 30, 2003
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
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Dwyer and Company, CPA, PC, the Company's
independent auditor, resigned on October 20, 2003.
TSI, Inc., (the "Company"), accepted the resignation
of Dwyer & Company, CPA, PC as the Company's
independent accountant, on October 20, 2003, when
the review for the quarter ended September 30,
2003 was completed.
During the years ended December 31, 2002 and
December 31, 2001 and through the resignation
date, October 21, 2003, there have been no
disagreements with Dwyer & Company, CPA, PC on
any matter of accounting principles or practices,
financial statement disclosure or auditing scope
or procedure. A letter from Dwyer & Company, CPA,
PC is on page 14 of this 10-QSB/A.
On February 23, 2004, the Company engaged the
accounting firm of Anderson ZurMuehlen & Co.,
C.P.A., P.C. as its new independent accountant.
Form 8-K was filed February 25, 2004 disclosing
the resignation of Dwyer and Company, CPA, PC,
and the engagement of Anderson ZurMuehlen & Co.,
P.C. as its new independent accountant on
February 23, 2004.
Form 8-K/A was filed April 30, 2004 to include
amended disclosures to the Form 8-K, as required
by the Securities Exchange Commission.
7
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: May 8, 2004 s/Paul McCann, Jr.,
President, CEO
Date: May 8, 2004 s/M. A. Arneson
Director, CFO
8
CERTIFICATION
I, Paul McCann, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
TSI, Inc.
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in the quarterly 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 quarterly 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 13(a)-15(f) and 15(d)-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 quarterly report is being
prepared;
b. Evaluated the effectiveness of TSI'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 quarterly report any change in TSI,
Inc.'s internal control over financial reporting that
occurred during TSI's third fiscal quarter that has
materially affected, or is reasonably likely to materially
affect TSI, Inc's internal control over financial
reporting;
Page 10
CERTIFICATION - continued
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's ability to record, process,
summarize and report financial information; and I have
identified for TSI, Inc.'s auditors any material
weaknesses in internal controls; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant role
in TSI's internal control over financial reporting.
Date: May 8, 2004 s/Paul McCann, Jr.
President, CEO
Page 11
CERTIFICATION
I, M.A. Arneson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
TSI, Inc.
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in the quarterly 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 quarterly 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 13(a)-15(f) and 15(d)-15(f) for
TSI 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 quarterly report is being
prepared;
b. Evaluated the effectiveness of TSI'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 quarterly report any change in TSI,
Inc.'s internal control over financial reporting that
occurred during TSI's third fiscal quarter that has
materially affected, or is reasonably likely to materially
affect TSI, Inc's internal control over financial
reporting;
Page 12
CERTIFICATION - continued
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's ability to record, process,
summarize and report financial information; and I have
identified for TSI, Inc.'s auditors any material
weaknesses in internal controls; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant role
in TSI's internal control over financial reporting.
Date: May 8, 2004 s/M. A. Arneson
Director, CFO
Page 13
[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
May 9, 2004
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We have read the amended disclosures concerning
our resignation included in this 10-QSB/A, for
TSI, Inc. (SEC File No. 0-2054) dated May 8, 2004,
and we agree with the statements made therein
concerning our resignation.
Sincerely,
/s/Dwyer & Company, CPA, PC
Dwyer & Company, CPA, PC
Page 14