-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MLw9ZL1PeD+jOxm7mUnxaLoYWC3X9d7gnPF1LxzQNkAEsAEDKMkUpAVNE1xEJI5S tBQJf1zQFXTUPnP7Ft2xgA== 0000724910-96-000017.txt : 19961016 0000724910-96-000017.hdr.sgml : 19961016 ACCESSION NUMBER: 0000724910-96-000017 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961001 ITEM INFORMATION: Changes in control of registrant FILED AS OF DATE: 19961015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PREMIS CORP CENTRAL INDEX KEY: 0000724910 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 411424202 STATE OF INCORPORATION: MN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12196 FILM NUMBER: 96643530 BUSINESS ADDRESS: STREET 1: 15301 HIGHWAY 55 WEST CITY: PLYMOUTH STATE: MN ZIP: 55447 BUSINESS PHONE: 6125501999 MAIL ADDRESS: STREET 1: 15301 HIGHWAY 55 WEST CITY: PLYMOUTH STATE: MN ZIP: 55447 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934 Date of Report (Date of earliest event reported): October 1, 1996 PREMIS Corporation (Name of small business issuer in its charter) Minnesota 0-12196 41-1424202 (State of other jurisdiction (Commission File No.) (IRS Employer of incorporation) Identification Number) 15301 Highway 55 West, Plymouth, MN 55447 (Address of principal executive offices) (Zip Code) Issuer's telephone number: 612/550-1999 (Former name, former address and former fiscal year, if changed since last report): N/A TABLE OF CONTENTS Item 2. Acquisition or Disposition of Assets 3 Item 7. Financial Statements and Exhibits 3 INDEX TO EXHIBITS 4 SIGNATURE 5 -2- ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On October 1, 1996, PREMIS Corporation (the "Company") completed the acquisition of all of the issued and outstanding equity securities of REF Retail Systems Corporation ("REF"), a closely-held corporation organized under the laws of Ontario, Canada, from the several shareholders of REF. The purchase price for the acquisition was paid in cash in the amount of $6,500,000 on the date of closing. The purchase price was determined by negotiation based upon various factors, including, principally, management's assessment that the REF products, which are complementary to the Company's products, offer significant growth opportunities. The payment of the purchase price was not financed by any third party but was paid from funds of the Company obtained through a public offering of its Common Stock. The Company and REF both engage in businesses involving the development and marketing of computer software which, in overview, provide multi-store retailers and food brokers with an integrated system for: point of sale data collection and management review of transactions "real time" sales analysis reporting by store, product, customer, salesperson individual store stock positions and enterprise inventory tracking purchasing, order tracking and warehouse control accounts receivable management and commission receivable accounting sales promotion fund management and advertising budget accounting electronic data interface for on-line ordering from vendors and customers intranet communications connections between stores and main corporate office ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS The following financial statements are filed herewith: Audited consolidated balance sheets of REF as of March 31, 1995 and 1996 and related consolidated statements of operations, shareholders equity and cash flows for the years then ended; -3- Unaudited interim consolidated balance sheet of REF as of June 30, 1996 and related consolidated statements of operations, shareholders' equity and cash flows for the three months ended June 30, 1996 and 1995; Pro forma combined balance sheet as of June 30, 1996 and pro forma combined statements of operation for the year ended March 31, 1996 and for the three months ended June 30, 1996. The following exhibits are filed herewith. Exhibit No. Description of Exhibit Stock Purchase Agreement by and between PREMIS Corporation dated July 9, 1996(1) (1)Incorporated by reference to exhibit filed as part of registration statement of Form S-2, Commission file no. 333-10917. -4- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: October 15, 1996. PREMIS CORPORATION By /s/ F. T. Biermeier F.T. Biermeier Financial Officer (Principal accounting and financial officer) -5- INDEX TO FINANCIAL STATEMENTS
PAGE ---- REF RETAIL SYSTEMS CORPORATION Report of Independent Accountants......................................... F-12 Consolidated Balance Sheet as of March 31, 1995 and 1996 (audited) and June 30, 1996 (unaudited)................................................ F-13 Consolidated Statement of Operations for the Years ended March 31, 1995 and 1996 (audited) and the three months ended June 30, 1995 and 1996 (unaudited).............................................................. F-14 Consolidated Statement of Shareholders' Equity for the years ended March 31, 1995 and 1996 (audited) and the three months ended June 30, 1996 (unaudited).............................................................. F-15 Consolidated Statement of Cash Flows for the years ended March 31, 1995 and 1996 (audited) and the three months ended June 30, 1995 and 1996 (unaudited).............................................................. F-16 Notes to the Consolidated Financial Statements............................ F-17 PREMIS CORPORATION PRO FORMA COMBINED Introduction to Pro Forma Financial Information........................... F-22 Pro Forma Combined Balance Sheet as of June 30, 1996 (unaudited).......... F-23 Pro Forma Combined Statement of Operations for the year ended March 31, 1996 (unaudited)......................................................... F-24 Pro Forma Combined Statement of Operations for the three months ended June 30, 1996 (unaudited)..................................................... F-25 Notes to Pro Forma Financial Statements................................... F-26
REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of REF Retail Systems Corporation In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of REF Retail Systems Corporation and its subsidiary at March 31, 1995 and 1996, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Minneapolis, Minnesota August 7, 1996 F-12 REF RETAIL SYSTEMS CORPORATION CONSOLIDATED BALANCE SHEET ASSETS
MARCH 31, ------------------------ JUNE 30, 1995 1996 1996 ----------- ----------- ----------- (UNAUDITED) Current assets: Cash and cash equivalents..................................... $ 523,399 $ 197,327 $ 107,101 Trade accounts receivable, less allowance for doubtful accounts of $63,306 and $16,420, respectively................ 301,444 596,279 587,123 Inventory..................................................... 96,852 78,118 Prepaid expenses.............................................. 52,721 22,499 23,589 Cost and estimated earnings in excess of billings............. 747,140 423,915 529,703 Other current assets.......................................... 3,392 58,695 56,890 ----------- ----------- ----------- Total current assets........................................ 1,628,096 1,395,567 1,382,524 ----------- ----------- ----------- Property and equipment: Furniture and equipment....................................... 467,622 787,424 817,359 Leasehold improvements........................................ 5,521 Less accumulated depreciation and amortization................ (270,309) (416,264) (445,742) ----------- ----------- ----------- 202,834 371,160 371,617 ----------- ----------- ----------- Capitalized software development................................ 473,038 602,393 ----------- ----------- ----------- Total assets................................................ $ 1,830,930 $ 2,239,765 $ 2,356,534 ----------- ----------- ----------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable........................................ $ 20,422 $ 37,129 $ 54,002 Other accrued liabilities..................................... 107,442 128,507 82,050 Accrued income taxes.......................................... 137,507 67,083 159,473 Unearned income............................................... 90,745 77,800 104,066 Customer deposits............................................. 65,680 82,008 12,016 Notes payable -- banks........................................ 25,718 Notes payable................................................. 41,064 Note payable -- shareholder................................... 28,305 63 62 Deferred rent................................................. 24,976 49,791 ----------- ----------- ----------- Total current liabilities................................... 450,101 484,348 461,460 ----------- ----------- ----------- Long-term liabilities: Deferred income taxes......................................... 19,295 120,650 59,927 Notes payable -- banks........................................ 98,823 137,274 Notes payable................................................. 112,783 143,533 ----------- ----------- ----------- Total long-term liabilities................................. 19,295 332,256 340,734 ----------- ----------- ----------- Shareholders' equity: Preferred Class A stock: no par value; unlimited shares authorized; 20,000 shares outstanding at March 31, 1995...... 162,417 Class B Special stock: no par value; unlimited shares authorized; 925,000 shares outstanding at both dates......... 36,379 35,700 35,700 Common stock: no par value; unlimited shares authorized; 2,000 shares outstanding at both dates............................. 1 1 1 Retained earnings............................................. 1,168,884 1,335,524 1,471,516 Cumulative translation adjustment............................. (6,147) 51,936 47,123 ----------- ----------- ----------- Total shareholders' equity.................................. 1,361,534 1,423,161 1,554,340 ----------- ----------- ----------- Total liabilities and shareholders' equity.................. $ 1,830,930 $ 2,239,765 $ 2,356,534 ----------- ----------- ----------- ----------- ----------- -----------
See accompanying notes to the consolidated financial statements. F-13 REF RETAIL SYSTEMS CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS YEAR ENDED MARCH 31, ENDED JUNE 30, ---------------------------- --------------------------- 1995 1996 1995 1996 ------------- ------------- ------------ ------------- (UNAUDITED) Revenue: System sales......................................... $ 2,676,945 $ 2,725,256 $ 384,604 $ 967,473 Maintenance fees and other service revenue........... 410,155 471,260 107,648 80,528 ------------- ------------- ------------ ------------- Total revenue...................................... 3,087,100 3,196,516 492,252 1,048,001 ------------- ------------- ------------ ------------- Cost of sales.......................................... 1,140,348 1,434,018 313,613 482,397 ------------- ------------- ------------ ------------- Gross profit........................................... 1,946,752 1,762,498 178,639 565,604 Selling, general, and administrative expenses.......... 1,199,555 1,726,537 312,514 440,093 ------------- ------------- ------------ ------------- Income (loss) from operations.......................... 747,197 35,961 (133,875) 125,511 Interest expense....................................... (3,026) (5,475) (175) (4,209) Other income........................................... 45,500 148,000 -- -- ------------- ------------- ------------ ------------- Income (loss) before income taxes...................... 789,671 178,486 (134,050) 121,302 Income tax expense (benefit)........................... 246,470 (7,975) (46,903) (14,690) ------------- ------------- ------------ ------------- Net income (loss)...................................... $ 543,201 $ 186,461 $ (87,147) $ 135,992 ------------- ------------- ------------ ------------- ------------- ------------- ------------ -------------
See accompanying notes to the consolidated financial statements. F-14 REF RETAIL SYSTEMS CORPORATION CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
CLASS A PREFERRED CLASS B SPECIAL COMMON CUMULATIVE -------------------- -------------------- -------------------------- TRANSLATION RETAINED SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ADJUSTMENT EARNINGS --------- --------- --------- --------- ----------- ------------- ----------- ---------- Balance at March 31, 1994....... 40,000 $ 324,834 925,000 $ 36,379 2,000 $ 1 $ (12,029) $ 645,936 Net income.................... 543,201 Preferred dividends........... (20,253) Effect of currency translation adjustment................... (10,282) Redeem preferred shares....... (20,000) (162,417) 16,164 -- --------- --------- --------- --------- ----- ----------- ---------- Balance at March 31, 1995....... 20,000 162,417 925,000 36,379 2,000 1 (6,147) 1,168,884 Net income.................... 186,461 Dividends on preferred stock........................ (10,324) Redeem Class B special shares....................... (18,500) (679) (9,497) Redeem Class A preferred shares....................... (20,000) (162,417) 15,746 Currency translation adjustment................... 42,337 -- --------- --------- --------- --------- ----- ----------- ---------- Balance at March 31, 1996....... 0 0 906,500 35,700 2,000 1 51,936 1,335,524 Net income (unaudited)........ 135,992 Currency translation adjustment (unaudited)....... (4,813) -- --------- --------- --------- --------- ----- ----------- ---------- Balance at June 30, 1996 (unaudited).................... 0 $ 0 906,500 $ 35,700 2,000 $ 1 $ 47,123 $1,471,516 -- -- --------- --------- --------- --------- ----- ----------- ---------- --------- --------- --------- --------- ----- ----------- ---------- TOTAL ---------- Balance at March 31, 1994....... $ 995,121 Net income.................... 543,201 Preferred dividends........... (20,253) Effect of currency translation adjustment................... (10,282) Redeem preferred shares....... (146,253) ---------- Balance at March 31, 1995....... 1,361,534 Net income.................... 186,461 Dividends on preferred stock........................ (10,324) Redeem Class B special shares....................... (10,176) Redeem Class A preferred shares....................... (146,671) Currency translation adjustment................... 42,337 ---------- Balance at March 31, 1996....... 1,423,161 Net income (unaudited)........ 135,992 Currency translation adjustment (unaudited)....... (4,813) ---------- Balance at June 30, 1996 (unaudited).................... $1,554,340 ---------- ----------
See accompanying notes to the consolidated financial statements. F-15 REF RETAIL SYSTEMS CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED YEAR ENDED MARCH 31, JUNE 30, -------------------------- -------------------------- 1995 1996 1995 1996 ------------ ------------ ------------ ------------ (UNAUDITED) Cash flows from operating activities: Net income (loss)............................................. $ 543,201 $ 186,461 $ (87,147) $ 135,992 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization............................... 62,757 141,697 22,083 57,822 Changes in assets and liabilities: Trade accounts receivable................................. 14,771 (245,371) (9,553) 7,244 Inventory................................................. (95,448) (2,788) 18,452 Prepaid expenses.......................................... 21,620 8,554 (187,430) 451 Costs and earnings in excess of billings.................. (751,247) 340,205 754,391 (107,329) Income tax receivable..................................... 144,091 50,262 Deferred taxes............................................ (13,078) 89,176 (60,432) Trade accounts payable.................................... 4,847 15,873 (881) 17,021 Accrued liabilities....................................... 121,165 (102,095) (42,250) 46,637 Unearned income........................................... 31,792 (15,389) 10,666 26,560 Customer deposits......................................... 57,490 14,186 (43,923) (69,840) Deferred rent............................................. 24,614 24,936 ------------ ------------ ------------ ------------ Net cash provided by operating activities............... 237,409 412,725 413,168 97,514 ------------ ------------ ------------ ------------ Cash flows from investing activities: Purchase of property and equipment............................ (118,094) (272,860) (41,740) (38,300) Capitalized software development.............................. (351,636) (152,270) Investment in subsidiary...................................... (205,176) ------------ ------------ ------------ ------------ Net cash (used) by investing activities................. (118,094) (829,672) (41,740) (190,570) ------------ ------------ ------------ ------------ Cash flows from financing activities: Payment of dividend........................................... (20,253) (10,324) (10,102) Repayment of note payable to shareholder...................... (22,865) (28,715) (28,580) Repayment of notes payable.................................... 274,351 3,323 Redemption of Common Shares................................... (10,178) Redemption of preference shares............................... (146,253) (146,671) (144,316) ------------ ------------ ------------ ------------ Net cash provided (used) by financing activities........ (189,371) 78,463 (182,998) 3,323 ------------ ------------ ------------ ------------ Effect of exchange rate changes on cash......................... (3,487) 12,412 12,105 (493) ------------ ------------ ------------ ------------ Net increase in cash and cash equivalents....................... (73,543) (326,072) 200,535 (90,226) Cash and cash equivalents at beginning of period................ 596,942 523,399 523,399 197,327 ------------ ------------ ------------ ------------ Cash and cash equivalents at end of period...................... $ 523,399 $ 197,327 $ 723,934 $ 107,101 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
See accompanying notes to the consolidated financial statements. F-16 REF RETAIL SYSTEMS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- ORGANIZATION REF Retail Systems Corporation (the "Company") is a Canadian business that develops and markets point-of-sale application software to the retail distribution marketplace. In August, 1995, the Company acquired 100% of the outstanding common shares of Softworks Group, Inc. ("Softworks"). The operations of Softworks have been incorporated into the Company on the date of acquisition. NOTE 2 -- ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash and investments in Canadian treasuries with an original maturity of three months or less. Investments are valued at cost, which approximates market. BASIS OF PRESENTATION The consolidated financial statements are presented in U.S. dollars and are presented in accordance with accounting principles generally accepted in the United States. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts are eliminated in consolidation. INVENTORY Inventory is stated at the lower of cost (first-in, first-out) or market. Inventory consists primarily of software licenses held for resale. No reserves have been provided, since historical writedowns have been insignificant. PROPERTY AND EQUIPMENT Property and equipment are stated at cost and depreciated for financial statement purposes on a declining-balance basis over the estimated useful lives of the assets, which is three to five years for furniture and equipment. RESEARCH AND DEVELOPMENT COSTS Costs incurred to establish the technological feasibility of computer software to be marketed are expensed as research and development costs in the period incurred. Costs incurred subsequent to the establishment of technological feasibility and before the software is released to the general public are capitalized as software development costs. Such costs are amortized to cost of revenues at the greater of straight-line amortization over three years or the proportion of the current period's product revenues to total expected product revenues. Recording of amortization of software development cost began in May, 1996 when certain modules of the software were released to the general public. REVENUE RECOGNITION Revenues derived from system installation contracts are recognized over the period the Company satisfies its obligations using the percentage-of-completion method. Progress on the contracts is measured by the percentage of cost incurred to date to the total estimated cost for each contract. Management considers cost to be the best available measure of progress on these contracts. Changes in conditions and estimated earnings may result in revisions of estimated costs and earnings during the course of the contract and are reflected in the accounting period in which the facts which require the revision become known. In the normal course of business, the Company may also be subject to a risk of loss by incurring costs to complete a contract in excess of the fixed bid price. Customers are provided with a warranty which provides customer support for a 90-day period. No reserve has been provided, since warranty costs have been insignificant. After the 90-day warranty period, support is provided only if a maintenance contract is in place. Revenues derived from system maintenance contracts are deferred and recognized ratably over the contract period. F-17 REF RETAIL SYSTEMS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 -- ACCOUNTING POLICIES (CONTINUED) INCOME TAXES The Company accounts for income taxes under the liability method of accounting. Deferred tax assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using currently enacted tax rates. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments consist of cash and cash equivalents, short-term trade receivables and payables for which current carrying amounts approximate fair market value. Additionally, interest rates on outstanding debt are at rates which approximate market rates for debt with similar terms and average maturities. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. CASH FLOW DISCLOSURE For the years ended March 31, 1995 and 1996, the Company made cash payments for interest of $3,026 and $5,475, respectively. UNAUDITED INTERIM FINANCIAL STATEMENTS In the opinion of management, REF Retail Systems Corporation has made all adjustments consisting primarily of normal recurring accruals, necessary for a fair presentation of the financial condition of the Company as of June 30, 1996 and the results of operations and cash flows for the three month periods ended June 30, 1996 and 1995, as presented in the accompanying unaudited financial statements. NOTE 3 -- COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS IN PROGRESS Costs, estimated earnings and billings on uncompleted contracts are summarized as follows:
MARCH 31, ---------------------------- 1995 1996 ------------- ------------- Costs incurred on uncompleted contracts......................... $ 400,426 $ 762,849 Estimated earnings.............................................. 926,240 549,819 ------------- ------------- 1,326,666 1,312,668 Billings to date................................................ 579,526 888,753 ------------- ------------- Costs and estimated earnings in excess of billings.............. $ 747,140 $ 423,915 ------------- ------------- ------------- -------------
This amount is included in current assets as all contracts in progress are expected to be completed within one year. Billings in excess of costs and estimated earnings of $65,080 and $82,008 are reported as customer deposits at March 31, 1995 and 1996, respectively. F-18 REF RETAIL SYSTEMS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4 -- BUSINESS COMBINATIONS In August, 1995, the Company acquired all of the outstanding shares of Softworks for $207,539 (CDN$283,000) in a transaction accounted for as a purchase. For financial statement purposes, the assets acquired and liabilities assumed were recorded at their respective fair market values as follows: Tangible assets acquired......................................... $ 148,890 Software development costs....................................... 115,862 Total liabilities assumed........................................ (57,213) --------- Purchase price................................................. $ 207,539 --------- ---------
The software development costs relate to specific products which were determined to be technologically feasible at the date of acquisition and will be amortized in accordance with the polices disclosed in Note 2. NOTE 5 -- LEASE COMMITMENTS The Company leases equipment and its facilities under various operating leases. Future minimum payments under noncancelable leases are as follows:
FISCAL YEAR ENDING MARCH 31, - ------------------------------------------------------------------------------- 1997........................................................................... $ 78,863 1998........................................................................... 147,582 1999........................................................................... 173,229 2000........................................................................... 147,186 2001........................................................................... 149,946 Thereafter..................................................................... 806,782 ------------- $ 1,503,588 ------------- -------------
Rental expense under operating leases was $84,090 and $139,235 for the years ended March 31, 1995 and 1996, respectively. NOTE 6 -- NOTES PAYABLE The Company's notes payable to banks at March 31, 1996 are Small Business Development Loans, are secured by assets of the Company and consist of the following: Note payable -- bank, monthly payments $1,759 through December, 2000, interest at 2% above prime (8.75% at March 31, 1996)...... $ 54,273 Note payable -- bank, monthly payments $2,201 through February, 2001, interest at 2% above prime (8.75% at March 31, 1996)...... 70,268 --------- 124,541 Less current portion............................................. 25,718 --------- $ 98,823 --------- ---------
F-19 REF RETAIL SYSTEMS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6 -- NOTES PAYABLE (CONTINUED) The Company has notes payable at March 31, 1996 for the purchase of a software license and distribution rights and the purchase of inventory as follows: Note payable related to acquisition of Softworks, monthly payments of $1,533 through August, 2000, secured by assets of the Company, interest at 7%..................................... $ 81,231 Inventory note payable, monthly payments of $2,384 through February, 1999, interest at 9.7%p............................... 72,616 --------- 153,847 Less current portion............................................. 41,064 --------- $ 112,783 --------- ---------
The Company also has an interest bearing note payable to an officer with a balance of $28,305 and $63 at March 31, 1995 and 1996, respectively. The note carries an interest rate of 7.42% and is payable in monthly installments of $1,471. NOTE 7 -- INCOME TAXES Income tax expense is comprised of the following at March 31:
1995 1996 ----------- ------------ Current income taxes: Federal.......................................................... $ 160,740 $ (100,914) Provincial....................................................... 105,200 (8,416) ----------- ------------ Total current income taxes..................................... 265,940 (109,330) Deferred income taxes expense (benefit)............................ (19,470) 101,355 ----------- ------------ Income taxes expense (benefit)..................................... $ 246,470 $ (7,975) ----------- ------------ ----------- ------------
A reconciliation of the expected Canadian federal income taxes for the years ended March 31, 1995 and 1996 is as follows:
1995 1996 ----------- ---------- Expected tax provision at 29%........................................ $ 229,000 $ 53,349 Provincial income tax provision, net of federal tax effect........... 114,500 25,880 Small business tax rate benefit...................................... (71,000) (16,000) Net benefit from research and development credits.................... (28,800) (68,000) Other................................................................ 2,770 (3,204) ----------- ---------- Total income taxes expense (benefit)............................... $ 246,470 $ (7,975) ----------- ---------- ----------- ----------
Deferred tax (assets) liabilities are comprised of the following at March 31:
1995 1996 --------- ----------- Capitalized software development..................................... $ 90,400 Research and development credit...................................... $ 15,205 34,552 Deferred revenue..................................................... (8,772) Depreciation......................................................... 4,090 4,470 --------- ----------- Net deferred income tax liabilities................................ $ 19,295 $ 120,650 --------- ----------- --------- -----------
F-20 REF RETAIL SYSTEMS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8 -- EMPLOYEE BENEFITS During fiscal year 1996, the Company established a defined contribution employee retirement plan. All employees with at least one year of employment are eligible to participate. The Company's contributions to the plan range from 1% to 2% of the employee's compensation depending upon length of service. The Company's contribution for the year ended March 31, 1996 was $15,504. NOTE 9 -- SIGNIFICANT CUSTOMERS Sales to one customer represented 42% and 40% of total revenues during 1995 and 1996, respectively. This customer represented 14% of trade accounts receivable at March 31, 1996. In addition, two different customers represented 10% and 13% of 1995 revenues and two separate customers represented 10% and 11% of 1996 revenues. NOTE 10 -- OTHER INCOME Other income in 1996 represents proceeds from the settlement of a law suit brought against former employees. F-21 PREMIS CORPORATION PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED) The following unaudited pro forma financial statements give effect to the acquisition by PREMIS Corporation (PREMIS) of REF Retail Systems Corporation (REF) in a transaction to be accounted for as a purchase. The unaudited pro forma balance sheet is based on the individual balance sheets of PREMIS and REF appearing elsewhere in this Prospectus and has been prepared to reflect the acquisition by PREMIS of REF as of June 30, 1996. The unaudited pro forma statement of income is based on the individual statements of income of PREMIS and REF appearing elsewhere in this Prospectus, and combines the results of operations of PREMIS and REF for the year ended March 31, 1996 and for the three months ended June 30, 1996 as if the acquisition occurred on April 1, 1995. These unaudited pro forma financial statements should be read in connection with the historical financial statements and notes thereto of PREMIS and REF included elsewhere in this Prospectus. The accompanying unaudited pro forma financial statements do not necessarily reflect the financial position or results of operations of the Company had the Company acquired REF as of June 30, 1996 (for purposes of the Pro Forma Combined Balance Sheet) or as of April 1, 1995 (for purposes of the Pro Forma Combined Statement of Operations for the year ended March 31, 1996 or for the three months ended June 30, 1996). F-22 PREMIS CORPORATION PRO FORMA COMBINED BALANCE SHEET YEAR ENDED JUNE 30, 1996 (UNAUDITED)
PREMIS REF PRO FORMA PRO FORMA ACTUAL ACTUAL ADJUSTMENTS COMBINED ---------- ---------- ----------- ------------ ASSETS: Cash and cash equivalents.......... $ 368,366 $ 107,101 $ 1,150,000(e) $ 1,625,467 Trade accounts receivable.......... 2,077,471 587,123 2,664,594 Inventory.......................... 217,794 78,118 295,912 Prepaid expenses and other current assets............................ 163,636 80,479 244,115 Costs and estimated earnings in excess of billings................ 529,703 529,703 ---------- ---------- ------------ Total current assets............. 2,827,267 1,382,524 5,359,791 Property and equipment, net........ 1,027,750 371,617 1,399,367 Goodwill........................... 4,945,660(b) 4,945,660 Capitalized software development... 236,421 602,393 838,814 ---------- ---------- ------------ Total assets..................... $4,091,438 $2,356,534 $ 12,543,632 ---------- ---------- ------------ ---------- ---------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY: Trade accounts payable............. $ 361,853 $ 54,002 $ 415,855 Other accrued liabilities.......... 172,069 82,050 254,119 Accrued income taxes............... 131,211 159,473 290,684 Unearned income.................... 139,098 104,066 243,164 Customer deposits.................. 94,603 12,016 106,619 Notes payable...................... 78,255 62 78,317 Deferred rent...................... 49,791 49,791 Current portion of capital lease obligation........................ 226,115 226,115 ---------- ---------- ------------ Total current liabilities........ 1,203,204 461,460 1,664,664 Deferred income taxes.............. 59,927 59,927 Notes payable...................... 112,097 280,807 392,904 Capital lease obligations.......... 723,885 723,885 ---------- ---------- ------------ Total long-term liabilities...... 835,982 340,734 1,176,716 Class B Special stock.............. 35,700 (35,700)(c) Common stock....................... 27,015 1 (1)(c) 44,515 17,500(e) Additional paid-in capital......... 937,821 7,632,500(e) 8,570,321 Retained earnings.................. 1,087,416 1,471,516 (1,471,516)(c) 1,087,416 Cumulative translation adjustment........................ 47,123 (47,123)(c) ---------- ---------- ------------ 2,052,252 1,554,340 9,702,252 ---------- ---------- ------------ Total liabilities and shareholders' equity $4,091,438 $2,356,534 $ 12,543,632 ---------- ---------- ------------ ---------- ---------- ------------
F-23 PREMIS CORPORATION PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1996 (UNAUDITED)
PREMIS REF RETAIL PRO FORMA PRO FORMA ACTUAL ACTUAL ADJUSTMENTS COMBINED ---------- ---------- ----------- ----------- STATEMENT OF OPERATIONS DATA: Revenue Systems sales.................... $4,923,132 $2,725,256 $ 7,648,388 Maintenance fees, supplies and other income.................... 979,029 471,260 1,450,289 ---------- ---------- ----------- Total Revenue.................. 5,902,161 3,196,516 9,098,677 Cost of sales...................... 3,036,322 1,434,018 4,470,340 ---------- ---------- ----------- Gross profit....................... 2,865,839 1,762,498 4,628,337 Selling, general and administrative.................... 1,204,065 1,726,537 $ (131,694)(a) 3,293,474 494,566(b) Research and development........... 303,000 303,000 ---------- ---------- ----------- ----------- Income from operations........... 1,358,774 35,961 (362,872) 1,031,863 Interest expense................... (4,142) (5,475) (9,617) Other income....................... 148,000 148,000 ---------- ---------- ----------- Income before income taxes....... 1,354,632 178,486 1,170,246 Income tax expense (benefit)....... 527,000 (7,975) 46,093(a) 565,118 ---------- ---------- ----------- Net income......................... 827,632 186,461 605,128 ---------- ---------- ----------- ---------- ---------- ----------- Net income per share............... $ 0.28 $ 0.14 ---------- ----------- ---------- ----------- Weighted average common and common equivalent shares outstanding..... 2,925,581 1,486,928(d) 4,412,509 ---------- ----------- ---------- -----------
F-24 PREMIS CORPORATION PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
PREMIS REF RETAIL PRO FORMA PRO FORMA ACTUAL ACTUAL ADJUSTMENTS COMBINED ---------- ---------- ----------- ----------- STATEMENT OF OPERATIONS DATA: Revenue Systems sales............... $1,570,791 $ 967,473 $ 2,538,264 Maintenance fees, supplies and other income........... 343,388 80,528 423,916 ---------- ---------- ----------- Total revenue................. 1,914,179 1,048,001 2,962,180 Cost of sales................. 967,739 482,397 1,450,136 ---------- ---------- ----------- Gross profit.................. 946,440 565,604 1,512,044 Selling, general and administrative............... 302,574 440,093 (28,919)(a) 837,390 123,642(b) Research and development...... 94,650 94,650 ---------- ---------- ----------- ----------- Income from operations...... 549,216 125,511 (94,723) 580,004 Interest expense.............. (4,519) (4,209) (8,728) ---------- ---------- ----------- Income before income taxes...................... 544,697 121,302 571,276 Income tax expense (benefit).................... 212,461 (14,690) 10,122(a) 207,893 ---------- ---------- ----------- Net income.................... 332,236 135,992 363,383 ---------- ---------- ----------- ---------- ---------- ----------- Net income per share.......... $ 0.11 $ 0.08 ---------- ----------- ---------- ----------- Weighted average common and common equivalent shares outstanding.................. 2,979,683 1,486,928(d) 4,466,611 ---------- ----------- ---------- -----------
F-25 PREMIS CORPORATION NOTES TO PRO FORMA INFORMATION (UNAUDITED) REF ACQUISITION ADJUSTMENTS (a) Adjustment to reflect the decrease in salary, benefits and auto expenses for an officer of REF Retail Systems Corporation (REF) whose employment terminates with the acquisition by PREMIS Corporation (PREMIS) and the income tax effect of this adjustment. (b) The purchase price of REF exceeds the fair value of the assets acquired. As a result, PREMIS will record goodwill of approximately $4.9 million with annual amortization of $494,566. The Company amortizes goodwill over a period of 10 years. The recoverability of the unamortized goodwill will be assessed on an ongoing basis by comparing anticipated undiscounted future cash flows from operations to net book value. (c) Adjustment to reflect the elimination of REF shareholder equity and REF retained earnings. (d) Adjusted to reflect net offering proceeds of $6,500,000 needed to fund the acquisition of REF through the issuance of 1,486,928 common shares based on a public offering price of $5.00 per share ($4.37 per share net of offering costs). The weighted average common and common equivalent shares outstanding have been adjusted to reflect the number of shares issued in the offering to provide cash to be paid in connection with the acquisition of REF. (e) Adjustment to give effect to the sale of 1,750,000 shares offered hereby at a public offering price of $5.00 per share ($4.37 per share net of offering costs) and the application of the net proceeds therefrom, including the purchase of REF's stock. F-26 -----END PRIVACY-ENHANCED MESSAGE-----