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