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, 1998

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities 
    Exchange Act of 1934

	For the transition period from ____________ to ____________

                       Commission File Number  0-18250

                                  TMS, Inc.
(Exact name of small business issuer as specified in its charter)

	   OKLAHOMA                                       91-1098155
(State or other jurisdiction of        (I.R.S. Employer Identification Number)
incorporation or organization)



                            206 West Sixth Street
                            Post Office Box 1358
                        Stillwater, Oklahoma  74075
                  (Address of principal executive offices)
        Issuer's telephone number, including area code: (405) 377-0880


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 February 28, 1998
Common stock, par value $.05 per share                    13,303,966


Transitional Small Business Disclosure Format(check one):
Yes [ ]  No [X]


<PAGE>  1

                                PART I 
- FINANCIAL INFORMATION

Item 1. Financial Statements

TMS, Inc.
Condensed Balance Sheets
February 28, 1998 and August 31, 1997
<TABLE>
<CAPTION>

                                           February 28,       August 31,
                                              1998              1997
                                           ------------      ------------
<S>                                       <C>                 <C>
Cash                                      $    186,829           426,174
Trade accounts receivable, net               1,527,561         1,235,195
Contract service work in process               915,757           579,137
Other current assets                           260,086           322,291
                                           ------------      ------------
    Total current assets                     2,890,233         2,562,797
                                           ------------      ------------

Property and equipment                       3,101,018         2,714,181
Accumulated depreciation and 
 amortization                               (1,343,577)       (1,167,738)
                                           ------------      ------------
Net property and equipment                   1,757,441         1,546,443
                                           ------------      ------------

Capitalized software development 
 costs, net                                    527,187           499,444
Other assets                                   239,317           238,342
                                           ------------      ------------
Total assets                                 5,414,178         4,847,026
                                           ============      ============

Note payable                                         0            78,000
Accounts payable                               291,232           247,123
Other current liabilities                      583,445           442,765
                                           ------------      ------------
    Total current liabilities                  874,677           767,888

Obligation under capital lease, net of 
  current installments                         109,714                 0
Long-term debt, net of current 
  installments                                 321,906           333,618
                                           ------------      ------------
    Total liabilities                        1,306,297         1,101,506
                                           ------------      ------------

Common stock                                   672,555           671,552
Additional paid-in capital                  11,475,065        11,473,561
Unamortized deferred compensation              (26,292)          (30,048)
Accumulated deficit                         (7,934,562)       (8,290,660)
Treasury stock, at cost                        (78,885)          (78,885)
                                           ------------      ------------
   Total shareholders' equity                4,107,881         3,745,520
                                           ------------      ------------
Total liabilities and shareholders' 
  equity                                  $  5,414,178         4,847,026
                                           ============      ============

</TABLE>

See accompanying notes to condensed 
  financial statements.



<PAGE>  2

TMS, Inc.
Condensed Statements of Operations
Three and Six Months Ended February 28, 1998 and 1997
<TABLE>
<CAPTION>


                                  Three Months Ended    Six Months Ended
                                  1998        1997      1998        1997
                                --------------------- --------------------
<S>                            <C>         <C>        <C>         <C>
Revenue:
 Licensing and royalties       $1,268,702    917,162  2,423,872   1,567,683
 Software development services    288,493    416,928    739,257     846,266
 Document conversion services     439,966    133,960    888,176     258,998
                                ---------- ---------- ----------  ----------
                                 1,997,161 1,468,050  4,051,305   2,672,947
                                ---------- ---------- ----------  ----------
Operating costs and expenses:
 Cost of licensing and royalties   233,745   261,198    439,918     512,436
 Cost of software development
  services                         227,097   218,560    454,743     425,014
 Cost of document conversion
  services                         368,680    84,559    641,039     191,641
 Selling, general and
  administrative expenses          954,993   744,388  2,055,408   1,552,692
                                ---------- ---------- ----------  ----------
                                 1,784,515 1,308,705  3,591,108   2,681,783
                                ---------- ---------- ----------  ----------

Operating income (loss)            212,646   159,345    460,197      (8,836)

Other (expense) income, net         (9,486)   10,223    (20,517)     22,040
                                ---------- ---------- ----------  ----------
Income before income taxes         203,160   169,568    439,680      13,204
Income tax expense                  38,713         0     83,582         800
                                ---------- ---------- ----------  ----------
Net income                      $  164,447   169,568    356,098      12,404
                                ========== ========== ==========  ==========

Basic earnings per share             $0.01     $0.01      $0.03       $0.00
                                ========== ========== ==========  ==========
Weighted average common shares  13,297,826 13,302,721 13,290,461  13,292,908
                                ========== ========== ==========  ==========
Diluted earnings per share           $0.01     $0.01      $0.03       $0.00
                                ========== ========== ==========  ==========
Weighted average common and
 common equivalent shares       13,808,403 14,092,438 13,817,763  14,124,600
                                ========== ========== ==========  ==========

</TABLE>

See accompanying notes to condensed 
 financial statements.


<PAGE>  3

TMS, Inc.
Condensed Statements of Cash Flows
Six Months Ended February 28, 1998 and 1997
<TABLE>
<CAPTION>

                                              1998              1997
                                           ------------      ------------
<S>                                       <C>                   <C>
Net cash flows provided by
 operating activities                     $    295,661           270,963
                                           ------------      ------------
Cash flows from investing activities:
 Purchases of property and equipment          (204,510)          (99,934)
 Capitalized software development costs       (221,711)         (152,550)
 Patent costs                                   (2,182)           (6,223)
 Proceeds from sale of equipment                     0             7,245
                                           ------------      ------------
Net cash used in investing activities         (428,403)         (251,462)
                                           ------------      ------------
Cash flows from financing activities:
 Repayment of long-term debt                   (12,756)          (10,341)
 Repayment of capital lease obligation         (18,354)                0
 Proceeds from short-term note payable         185,000                 0
 Repayments of short-term note payable        (263,000)                0
 Issuance of common stock                        2,507            66,743
                                           ------------      ------------
Net cash (used in) provided by
 financing activities                         (106,603)           56,402
                                           ------------      ------------
Net (decrease) increase in cash               (239,345)           75,903

Cash at beginning of period                    426,174           546,745
                                           ------------      ------------
Cash at end of period                     $    186,829           622,648
                                           ============      ============

</TABLE>

See accompanying notes to condensed 
 financial statements.




<PAGE>  4

TMS, Inc.
Notes to Condensed Financial Statements

Basis for Presentation
----------------------
The information included in the Condensed Financial Statements is unaudited,
but includes all adjustments which are, in the opinion of management,
necessary for a fair presentation of the interim periods presented. These
Condensed Financial Statements should be read in conjunction with the Company's
1997 Annual Report filed on Form 10-KSB.

Earnings Per Share
------------------
Statement of Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings
per Share",supersedes APB Opinion 15 (APB No. 15), "Earnings per Share", and
is effective for interim and annual periods ending after December 15, 1997.
SFAS No. 128 replaces primary EPS with basic EPS and fully diluted EPS with
diluted EPS. Basic EPS is computed by dividing net income by the weighted-
average number of shares of common stock outstanding during the period.
Diluted EPS recognizes the potential dilutive effects of the future exercise
of common stock options utilizing the same computations that the Company
currently uses to compute primary EPS under APB No. 15.  The Condensed
Statements of Operations reflect the adoption of SFAS No. 128 for all interim
periods presented.

Item 2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations
	
This Quarterly Report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. The Company's actual results could
differ materially from those set forth in the forward-looking statements
because of certain risks and uncertainties, such as those inherent generally
in the computer software industries and the impact of competition, pricing,
and changing market conditions. As a result, the reader is cautioned not to
place reliance on these forward-looking statements.

                              RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the attached
condensed financial statements and notes thereto and with the Company's
audited financial statements and notes thereto for the fiscal year ended
August 31, 1997.

QUARTER ENDED FEBRUARY 28, 1998 COMPARED TO FEBRUARY 28, 1997

REVENUE - Total revenue for the second quarter of fiscal 1998 was $1,997,161
compared to $1,468,050 for the same quarter of fiscal 1997, an increase of
$529,111 or 36%.

Licensing and royalties revenue for the second quarter of fiscal 1998
increased $351,540,or 38%, over licensing and royalties revenue for the same
quarter of fiscal 1997. Second quarter revenue from imaging products increased
24% to $711,978 compared to the $574,515 reported for the second quarter last
year. The growth in imaging revenue primarily resulted from sales of the
Company's Prizm Plug-in product that was released early in the second quarter
of fiscal 1997 and targets corporate Intranet and Internet users.  Prizm
Plug-in revenue represented approximately 38% and 17% of the second quarter
imaging revenue in fiscal 1998 and 1997, respectively. Second quarter revenue
from image enhancement products (e.g. ScanFix, FormFix) increased $137,850, or
57%, over the same quarter last year.  Increased revenue for image enhancement
occurred across all major product lines and is primarily attributable to two
additional salespersons that the Company hired late in fiscal 1997 to focus on
image enhancement sales and a joint marketing program with Caere Corporation,
a leader in Optical Character Recognition (OCR)technology.  Revenue from the
Company's ScanFix product that may be used in conjunction with Caere's
OmniPage product, represented approximately 42% of the fiscal 1998 second
quarter growth in image enhancement revenue. 

Software development service revenue for the second quarter of fiscal 1998 was
$288,493 compared to $416,928 for the second quarter of fiscal 1997, a
decrease of $128,435 or 30%. The decrease in software development service
revenue resulted from fewer service contracts in the fiscal 1998 second
quarter as compared to the same period in 1997.  Revenue from one customer
represented $153,557, or 53%, of fiscal 1998, second quarter revenue from
software development services.  At February 28, 1998, the Company had a
software development service revenue backlog of approximately $350,000 through 
June 30, 1998. 

<PAGE>  5

Document conversion service revenue for the second quarter of fiscal 1998 was
$439,966 compared to $133,960 for the first quarter of fiscal 1997, an
increase of $306,006 or 228%. Approximately 54%, or $241,000, of the second
quarter document conversion service revenue came from one customer. This
customer contract is scheduled to be substantially complete mid-way into the
Company's third fiscal quarter. At February 28, 1998, document conversion
services had a revenue backlog of approximately $372,000 through the end of
the fiscal 1998 third quarter. 

OPERATING COSTS AND EXPENSES - Total operating costs and expenses for the
quarter ended February 28, 1998 were $1,784,515 compared to $1,308,705 for the
same quarter in fiscal 1997, an increase of $475,810 or 36%. 

The cost of licensing and royalties decreased $27,453, or 10%, for the second
quarter of fiscal 1998, compared to the same period a year ago. The gross
profit margin for licensing and royalties was 81% and 71% for the three months
ended February 28, 1998 and 1997, respectively. The increase in gross profit
margin is primarily attributable to the $161,331, or 36%, increase in royalty
revenue, which results in little or no cost to the Company.  Additionally, the
Company has expanded product offerings by using its toolkits to build complete
software applications to address an expanding marketplace of software users.
Second quarter revenue from complete software applications, such as the Prizm
Plug-in, was predominantly derived from companies purchasing licenses to
install multiple copies of the Company's software throughout their
organizations. Revenue from multiple licenses does not result in a
proportional increase in unit costs and thus had a significant impact on the
Company's second quarter gross margins.

The cost of software development services increased $8,537, or 4%, for the
second quarter of fiscal 1998, compared to the same period a year ago. The
gross profit margin for software development services was 21% and 48% for the
three months ended February 28, 1998 and 1997, respectively. The 30% decline
in revenue caused gross margins to drop significantly during the current
quarter because technical resources and related costs for performing contract
services did not significantly change from last year's second quarter.
The Company had some turnover in senior sales staff and management during the
second quarter and is currently in the process of hiring replacement sales
staff and rebuilding revenue backlog.  Retention and recruitment of qualified
technical staff is a significant issue for the Company and the software
industry as a whole.  Accordingly, the Company has made a decision to maintain
its current capacity of technical resources and utilize a portion of the
excess resources for further development and enhancements to the Company's
core product technologies. This may continue to negatively affect short-term
profitability. The Company is also in the process of evaluating sales
strategy and staffing to determine what the necessary requirements are to
support the current technical capacity for services. The Company is in the
process of negotiating additional software development opportunities and
believes that new contracts will be secured in the third and fourth quarters.
However, the Company can give no assurance when, or if, any of these contracts
will be finalized. The Company is prepared to make the necessary adjustments
by the end of the current fiscal year to improve profitability of software
development services.

The cost of document conversion services increased $284,121, or 336%, for the
second quarter of fiscal 1998, compared to the same period a year ago. The
gross profit margin for document conversion services was 16% and 36% for the
three months ended February 28,1998 and 1997, respectively.  The increase in
cost represents the hiring of additional personnel to meet service contract
requirements.  The decrease in gross profit margins resulted from a
combination of several factors.  In the prior year second quarter, and
historically for document conversion, services have focused on electronic
publishing of documents for several large corporations.  Within the last six
months, the majority of document conversion services have come from contracts
associated with backfile conversion of documents for imaging and database
management.   The technical complexity associated with backfile conversion is
much lower than that of electronic publishing; accordingly, the Company faces
more competition in securing backfile conversion contracts which affects
pricing downward. During the second quarter, one of the Company's primary value
added reseller (VAR) channels created a document conversion company in Oklahoma
City and hired the Company's senior document conversion sales person.  In 
addition to external competition and pricing pressures, the document conversion
group has faced a number of internal challenges that have negatively impacted 
gross margins for the second quarter.  Rapid growth has hindered productivity
because of the number of new employees and contract workers that were hired to
meet service requirements.  The contract that accounted for 54% of document 
conversion revenue in the second quarter (see the discussion of revenue above)
is being performed at a customer site, which has increased costs, and has 
required many more labor resources than was originally expected.  This contract
will not be substantially complete until mid-April so margins will continue to
be negatively impacted in the fiscal 1998 third quarter.  The Company is
currently evaluating the document conversion bidding practices in an effort to
better match labor and cost requirements with service fees.  Upon completion
of the significant contract in mid-April, the Company is prepared to take 
significant cost cutting measures if the backlog at that time does not match the
available resources.

<PAGE>  6

Selling, general and administrative expenses for the second quarter of fiscal
1998 increased $210,605, or 28%, when compared to the second quarter of fiscal
1997. The increase in costs is almost entirely due to personnel related
expenses.  As mentioned in the Company's 10-KSB for the fiscal year ending
August 31, 1997, the Company made several market adjustments to salaries in
addition to regular merit and cost of living increases. The Company also
improved employee benefit offerings by implementing a 401(k)-retirement plan
matching program and absorbing 25% more of the cost of employee medical
insurance premiums. The majority of these changes occurred at the beginning of
the fiscal 1997 third quarter.  During the first quarter of fiscal 1998, the
Company implemented an incentive compensation plan that provides cash rewards
to all employees if certain revenue and profit goals are achieved.  The
Company recognized approximately $34,000 related to the incentive plan during
the fiscal 1998 second quarter. All of the increases in personnel related
costs were deemed necessary to retain and attract competent technical,
sales/marketing and management staff.  Management expects the employment
environment will continue to remain competitive, which may adversely impact
future earnings through increased costs. 


INCOME TAXES - Deferred tax expense of $77,201 for the quarter ended February
28, 1998, was offset by deferred tax benefit of approximately $38,500
attributable to the decrease in the valuation allowance for deferred tax
assets.  The Company assesses the realizability of net deferred tax assets at
least quarterly, and adjusts the valuation allowance to reflect the future
benefits that will more likely than not be realized from those net deferred
tax assets.

NET INCOME/LOSS - Net income for the second quarter of fiscal 1998 was
$164,447 or $.01 per share, compared to 169,568, or $.01 per share, for the
second quarter of fiscal 1997. Increased revenue for the current year second
quarter was offset by higher costs associated with excess technical resource
capacity in software development services, low gross margins in document
conversion, and generally higher salary and benefit costs. Additionally the
Company recorded $38,713 of tax expense during the quarter to give effect to
utilization of the Company's net operating loss carryforwards against taxable
income.  At the end of the second quarter last year, the Company had not
recognized tax expense because taxable income was at a break-even level. 


SIX-MONTHS ENDED FEBRUARY 28, 1998 COMPARED TO FEBRUARY 28, 1997

REVENUE - Total revenue for the first six-months of fiscal 1998 was $4,051,305
compared to $2,672,947 for the same period in fiscal 1997, an increase of
$1,378,358 or 52%.

Licensing and royalties revenue for the first six-months of fiscal 1998
increased $856,189, or 54%, over licensing and royalties revenue for the same
period in fiscal 1997. Six-month revenue from imaging products increased 60%
to $1,433,547 compared to the $895,406 reported for the same six-month period
last year. Approximately 85% of the imaging revenue growth came from sales of
the Company's Prizm Plug-in product. Prizm Plug-in revenue represented
approximately 43% and 18% of imaging revenue for the first six months of
fiscal 1998 and 1997, respectively. Revenue from image enhancement products
increased $209,630, or 41%, for the first six months of the current year as
compared to the same period last year.  Approximately 64% of the increase in
image enhancement revenue came from the Company's ScanFix product that may be
used in conjunction with Caere's OmniPage product.  The Company secured a
co-marketing agreement with Caere, a leader in OCR technology, early in the
current fiscal year.  Additional sales focus from two additional
sales staff for image enhancement products also contributed to growth for the
first six months of the current year. 

Software development service revenue for the first six months of fiscal 1998
was $739,257 compared to $846,266 for the same period in fiscal 1997, a
decrease of $107,009 or 12%. The decrease in software development service
revenue resulted from fewer service contracts in the fiscal 1998 second
quarter as compared to the same period in 1997.  Revenue from one customer
represented $443,624, or 60%, of software development services revenue for
the first six months of fiscal 1998.  At February 28, 1998, the Company had a
software development service revenue backlog of approximately $350,000 through
June 30, 1998. 

<PAGE>  7

Document conversion service revenue for the first six months of fiscal 1998
was $888,176 compared to $258,998 for the same period in fiscal 1997, an
increase of $629,178 or 242%. The Company secured two large back-file
conversion contracts during the first six months of the current fiscal year.
Revenue from those two contracts represented approximately 54%, or $484,000,
of document conversion service revenue for the first six months of the
current fiscal year. One of the significant contracts was substantially
complete early in the second fiscal quarter, but may require some follow-up
work through the remainder of the fiscal year.  The second significant
contract is scheduled to be substantially complete in mid-April. At February 28,
1998, document conversion services had a revenue backlog of approximately
$372,000 through the end of the fiscal 1998 third quarter.


OPERATING COSTS AND EXPENSES - Total operating costs and expenses for the six
months ended February 28, 1998 were $3,591,108 compared to $2,681,783 for the
same period in fiscal 1997, an increase of $909,325 or 33%.

The cost of licensing and royalties decreased $72,518, or 14%, for the first
six months of fiscal 1998, compared to the same period a year ago. Lower costs
are primarily attributed to an approximate $70,000 increase in capitalized
development costs for new and significantly enhanced products.  The gross
profit margin for licensing and royalties was 81% and 67% for the six months
ended February 28, 1998 and 1997, respectively. The increase in gross profit
margin is primarily attributable to the $289,181, or 37%, increase in royalty
revenue, which results in little or no cost to the Company. Additionally, the
sale of multiple licenses of the Company's complete software applications has
had a significant impact on improved gross margins, because revenue from
multiple licenses does not result in a proportional increase in unit costs.
For the first six months of the current year, revenue from the Company's
complete software applications has increased $542,505, or 143%, compared to
the same period last year.  The Prizm Plug-in product accounts for 84% of the
growth in complete software applications.

The cost of software development services increased $29,729, or 6%, for the
first six months of fiscal 1998, compared to the same period a year ago. The
gross profit margin for software development services was 38% and 49% for the
six months ended February 28, 1998 and 1997, respectively. The 12% decline in
revenue and excess technical resource capacity caused gross margins to drop
for the first six months of the current fiscal year, as compared to the same
period last year. As mentioned in the discussion of the second quarter above,
the Company is in the process of evaluating sales strategy and staffing to
help determine what the necessary requirements are to support the current
technical capacity for services. As the software development services group
continues to re-build its revenue backlog, the Company has decided to retain
its current capacity of technical resources. A portion of these resources will
be used internally for product development and enhancement. The Company is
prepared to make the necessary adjustments by the end of the current fiscal
year to improve profitability of software development services.

The cost of document conversion services increased $449,398, or 234%, for the
first six months of fiscal 1998, compared to the same period a year ago. The
gross profit margins for document conversion services were 27% and 26% for the
six months ended February 28, 1998 and 1997, respectively.  The increase in
cost represents the hiring of additional personnel to meet service contract
requirements and an increase in the number of jobs performed at customer sites.
The low gross profit margins for the first six months in the prior year
reflect a certain level of labor and overhead cost that were required to be
maintained to support growth during a rebuilding period.  The low margins for
the first six months of the current year primarily result from a significant
increase in the amount of backfile conversion jobs, lower productivity
resulting from a significant number of new employees, and a miss-match in the
amount of revenue and labor resources for a significant contract.
For a more detail explanation of operational issues within document conversion,
refer to the "OPERATING COSTS AND EXPENSES" section in the discussion of the
fiscal 1998 second quarter above. 

Selling, general and administrative expenses for the first six months of
fiscal 1998 increased $502,716 or 32%, when compared to the same period in
fiscal 1997. The increase in costs is almost entirely due to personnel related
expenses. Refer to the "OPERATING COSTS AND EXPENSES" section in the above
discussion of the second quarter for a more detailed explanation. The first
six months of the fiscal year is generally the highest for general and
administrative expenses because of professional fees associated with the
annual financial statement audit, legal fees for SEC compliance, annual report 
reproduction and the annual shareholder's meeting. The Company anticipates
that selling, general and administrative expenses will remain at a similar
level during the second six months of the fiscal year because of planned
increases in marketing related to tradeshows, advertising and public
relations.

<PAGE>  8

INCOME TAXES. - Deferred tax expense of $167,078 for the six months ended
February 28, 1998, was offset by a deferred tax benefit of approximately
$83,496 attributable to the decrease in the valuation allowance for deferred
tax assets.  The Company assesses the realizability of net deferred tax assets
at least quarterly, and adjusts the valuation allowance to reflect the future
benefits that will more likely than not be realized from those deferred tax
assets.

NET INCOME. - Net income for the first six months of fiscal 1998 was $356,098
or $.03 per share,compared to 12,404, or $.00 per share, for the first six
months of fiscal 1997. Revenue growth and increased gross profit margins for
licensing and royalties were the primary factors that contributed to improved
net income over the prior year.



                             FINANCIAL CONDITION

Working capital, at February 28, 1998 was $2,015,556 with a current ratio of
3.3:1 compared to $1,794,909 with a current ratio of 3.3:1, at August 31, 1997.
Net cash provided by operations for the six months ended February 28, 1998
and 1997 was $295,661 and 270,963, respectively. Despite increased profits for
the first six months of the current fiscal year, the Company experienced only
a slight increase in operating cash flow as compared to the same six-month
period last year.  More working capital is tied up in accounts receivable and
work in process in the current year because many of the larger licensing and
royalty revenue transactions occurred late in the second quarter and the
billing and collection cycle time is longer for service work.  Net cash used
in investing activities for the first six months of fiscal 1998 was $428,403
compared to $251,462 for the same period in fiscal 1997. The increase in
investing activities primarily relates to additional equipment needed to meet
requirements under document conversion service contracts and increased product
software development.

During the first quarter of the current year, the Company borrowed $185,000
against its $800,000 line of credit for general operating purposes. The
Company repaid $263,000 against the line of credit using cash from operations
during the second quarter of the current fiscal year.  At February 28, 1998,
there was no balance outstanding against the line of credit. During the first
six months of the current fiscal year the Company entered into approximately
$187,000 of capital lease obligations to obtain the necessary scanners
to meet requirements under document conversion contracts. 

The Company believes that operating cash flow and the $800,000 operating line
of credit will be adequate to meet its current obligations and current
operating and capital requirements. The funding of long-term needs is
dependent upon increased revenue and profitability and obtaining funds through
outside debt and equity sources. The funding for long-term needs includes
funding for increased product development, expanded sales and technical staff
and adequate promotion of the Company and its products.


                      PART II - OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

a)  The Company held its annual meeting of shareholders on January 23, 1998.

b)  The following matters were voted upon at the annual meeting:
        1)  Following are the directors elected at the annual meeting and the
            tabulation of votes related to each nominee.

                                        Affirmative          Votes Withheld 
Dana R. Allen				11,013,315		 303,475
Doyle E. Cherry                         10,278,365             1,038,425
Arthur D. Crotzer                       11,224,015                92,775
James R. Rau, M.D.			10,862,492		 454,298		
Marshall C. Wicker			10,862,492		 454,298

        2)	The shareholders ratified the appointment of KPMG Peat Marwick LLP 
           as independent public accountants for 1998.  Affirmative votes were
           11,181,992; negative votes were 46,385; and abstentions were 88,413.

<PAGE>  9

Item 6.  Exhibits and Reports on Form 8-K

Reports on Form 8-K
-------------------

None

Exhibits
--------

Exhibit No.     Name of Exhibit

        27	     Financial Data Schedule as of and for the six month period
                ending February 28, 1998.  




SIGNATURES
	

In accordance with the requirements of the Exchange Act, the registrant caused
the report to be signed on its behalf by the undersigned, thereunto duly
authorized.


TMS, Inc.

      March 27, 1998         /s/ Arthur D. Crotzer
Date: ____________________       _______________________
                                 Chief Executive Officer
                                 

      March 27, 1998         /s/ Deborah D. Mosier
Date: ____________________       _______________________
                                 Chief Financial Officer