TSS LTD. STOCK OFFERING PROCEEDS WILL GO TOWARD ADDITIONAL COUPON TERMINALS

TSS LTD. STOCK OFFERING PROCEEDS WILL GO TOWARD ADDITIONAL COUPON TERMINALS and working capital, the marketing technology firm said in a recent prospectus filed with the Securities and Exchange Commission. Providence, R.I.-based TSS estimated that the offering will yield $ 3.27 mil. in proceeds of which $ 850,000 will help cover the costs of putting approximately 550 additional promotional terminals in retail outlets. The remainder of the proceeds will go toward working capital and general corporate purposes. TSS operates a program called "The Savings Spot" ("The Tan Sheet" March 15, p. 14) in which an electronic terminal "depicts up to 32 available promotional offers on a brightly lit, full- color poster overlaying a pressure sensitive selection panel." After shoppers press the pictures of the desired promotional offers, the items are printed out by the terminal. The offers usually are cents-off coupons, TSS explained, but can also include "rebates, recipes, contests, sweepstakes, product usage and other product information." Advertisers participate in "The Savings Spot" program for four-week periods on terminals operated by TSS in the retailer's stores. TSS "manufactures, installs and maintains the terminals, produces and installs the posters for the terminals, solicits advertisers for the program, and provides data collection, program performance analysis and reporting and coupon-clearing and settlement services." The firm owns 370 "Savings Spot" terminals of which 274 are currently in stores. However, TSS said in the prospectus that its "current business strategy has achieved limited acceptance to date from retailers and advertisers," and that, at present, the firm "has no contracts with any retailer or any ongoing commitments from advertisers to participate in the program." As of the end of February, for example, TSS terminals were operating in 116 Kmart stores in Michigan and Ohio and 158 Ralph's supermarkets in California, "although the company's contracts with these retailers expired in June and September 1992, respectively." Under the agreement with Kmart, the retail chain sells participation in the program to advertisers and pays TSS a monthly fee that has been reduced since the contract expired. Kmart is currently reviewing bids from TSS and other manufacturers to build terminals similar to those provided by TSS in an effort to expand the discount chain's in-store coupon program, called "Blue Light Coupons," TSS reported in the prospectus. TSS added that if Kmart purchases new terminals, the chain will likely ask TSS to remove its terminals. Under the program with Ralph's, which began a chain-wide roll- out in September 1991 that was aborted six months later, TSS charged Ralph's a fee and the retailer was responsible for selling slots to advertisers. TSS said it believes that this approach "proved to be unprofitable for all parties due to the relatively high cost charged to advertisers." TSS noted that it has since discontinued its business strategy of charging retailers for the terminals and depending on them to sell to advertisers. Since September 1992, TSS has been sharing revenues from advertisers with Ralph's and had primary responsibility for selling slots in the "The Savings Spot" to advertisers. TSS believes that its revised business strategy "is more likely to succeed than its former business strategies" in part because it provides the "primary incentive to the retailer to participate in the program" and because TSS "will provide additional informational services to participating product manufacturers, such as reporting coupon issuance and redemption, incremental volume and source of volume data" where scanners are available. TSS said it is "seeking to obtain contracts for 'The Savings Spot' program with additional retailers and has signed letters of intent to conduct six-month demonstration programs in a total of 70 stores." TSS also "seeks to receive fees from the retailer for program exclusivity in the retailer's geographic market." Demonstration programs have been initiated with stores including Sentry Markets, Caldor, Kroger, Long's Drug Stores and Payless Drug Stores. The program with Long's Drug Stores is scheduled to begin in May. Among future applications of TSS' terminals are "frequent shopper programs" -- in which customers would earn points for purchases which they would redeem for discounts or gift merchandise -- and "database marketing" -- which would combine scanner technology, electronic programs and direct marketing techniques to "create customer marketing profiles" allowing "promotional offers to individual customers based on their historical purchasing patterns." The initial development and testing of TSS' in-store couponing program and terminals were conducted by The Savings Spot Ltd., which was formed in 1984 as a majority-owned subsidiary of on-line lottery equipment and services firm GTECH Corp. TSS was formed in May 1988, and the technology and assets of The Savings Spot Ltd. were transferred to TSS in May 1989, when the company commenced commercial operations. Since last April, TSS has been headed by President, CEO and Director Michael Clark, formerly a managing director for Citicorp POS Information Services. TSS is registering 1.35 mil. units at $ 3 each consisting of three shares of common stock and two common stock purchase warrants, which entitle the holder to purchase one share of common at an initial exercise price per share equal to $ 1, subject to adjustment. Paulson Investment Company, Barclay Investments and Greenway Capital are underwriting. TSS incurred a net loss of $ 1.35 mil. for the first six months of fiscal 1993 (ended Nov. 30, 1992) on total revenues of $ 990,000, including $ 879,400 from coupon distribution, up 53% from the previous year. In FY 1992 ended May 31, TSS reported revenues of $ 1.41 mil., including $ 1.37 mil. from coupon distribution, and a net loss of $ 3.38 mil.