-----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, TPXs0cIh3xzkgxk3iip46AvQkpjcu+QReMLxmDj8CQpfBKNcs6enVlmS4RQOHcDk EU25tRxRRJyTF0cT3rgeUA== 0000724910-97-000015.txt : 19971117 0000724910-97-000015.hdr.sgml : 19971117 ACCESSION NUMBER: 0000724910-97-000015 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: 10QSB SEC ACT: SEC FILE NUMBER: 000-12196 FILM NUMBER: 97720612 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 10QSB 1 UNITED STATES 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 September 30, 1997 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission file number 0-12196 PREMIS CORPORATION (Exact name of small business issuer as specified in its charter) Minnesota 41-1424202 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 13220 County Road 6, Plymouth, Minnesota 55441 (Address of principal executive office) (612)550-1999 (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 The number of shares outstanding of the Issuer's Common Stock, $.01 par value, was 4,714,177 as of October 23, 1997. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ x ] PART 1 - FINANCIAL INFORMATION: ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREMIS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended September 30, September 30, ------------------ ---------------- 1997 1996 1997 1996 ---- ---- ---- ---- REVENUES: Systems $1,263 $1,628 $2,845 $3,213 Maintenance and other services 380 321 874 650 ----- ------ ------ ------ Total revenues 1,643 1,949 3,719 3,863 COST OF REVENUES: Systems 794 921 1,861 1,747 Support and other 166 143 330 285 ----- ------ ------ ------ Total cost of revenues 960 1,064 2,191 2,032 ------ ------ ------ ------ GROSS PROFIT 683 885 1,528 1,831 OPERATING EXPENSES: Selling, general and administrative 694 284 1,421 615 Research and development 449 80 833 150 ------ ------ ------ ------ Total operating expenses 1,143 364 2,254 765 ------ ------ ------ ------ Operating income(loss) (460) 521 (726) 1,066 Interest income, net 14 - 46 - Other income 4 - 29 - ------ ------ ------ ------ INCOME (LOSS) BEFORE TAXES (442) 521 (651) 1,066 Income tax expense - 203 2 416 ------ ------ ------ ------ NET INCOME (LOSS) $ (442) $ 318 $ (653) $ 650 ====== ====== ====== ====== Net income (loss) per share $ (.09) $ .11 $ (.14) $ .22 ====== ====== ====== ====== Shares used in per share calculation 4,712 3,025 4,714 3,002 ====== ====== ====== ====== PREMIS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) September 30, 1997 March 31, 1997 ------------------ -------------- (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents $2,774 $2,434 Accounts receivable, net 1,379 2,137 Inventory 46 396 Prepaid expenses and other current assets 640 883 Deferred income taxes 134 134 ------ ------ Total current assets 4,973 5,984 ------ ------ Property and equipment, net 1,369 1,395 Note receivable 466 523 Software distribution rights, net 124 165 ------ ------ TOTAL ASSETS $6,932 $8,067 ====== ====== LIABILITIES Current liabilities: Accounts payable and accrued expenses $ 850 $1,272 Unearned revenue 1,112 787 Bank line of credit 130 246 Current portion of notes payable 157 174 Current portion of capital lease obligation 59 56 ------ ------ Total current liabilities 2,308 2,535 ------ ------ Long-term liabilities: Capital lease obligation 825 855 Unearned income 62 187 Notes payable 115 152 ------ ------ Total long-term liabilities 1,002 1,194 ------ ------ Shareholders' equity: Common stock 47 47 Additional paid in capital 9,644 9,703 Accumulated Deficit (6,059) (5,406) Foreign currency translation adjustment (10) (6) ------ ------ Total shareholders' equity 3,622 4,338 ------ ------ TOTAL LIABILITIES AND ------ ------ SHAREHOLDERS' EQUITY $6,932 $8,067 ====== ====== PREMIS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Six Months Ended September 30, ------------------ 1997 1996 ---- ---- OPERATING ACTIVITIES Net income $(653) $ 650 Adjustments to reconcile net income (loss) to net cash (used) provided by operating activities: Depreciation and amortization 166 54 Changes in assets and liabilities: Current assets 1,354 (443) Current liabilities (222) (374) ------ ------ Net cash provided by (used in) operating activities 645 (113) ------ ------ INVESTING ACTIVITIES Repurchase of common stock (61) - Purchase of property and equipment (99) (14) ------ ------ Net cash used in investing activities (160) (14) ------ ------ FINANCING ACTIVITIES Proceeds from the exercise of common stock options 2 129 Proceeds from notes payable 47 - Proceeds from notes receivable 51 - Repayments (borrowings) under bank line of credit (116) - Capital lease obligations (27) (2) Payments on notes payable (102) (50) ------ ------ Net cash (used in) provided by financing activities (145) 77 ------ ------ Net increase (decrease) in cash and cash equivalents 340 (50) Cash and cash equivalents, beginning of fiscal year 2,434 968 ------ ------ Cash and cash equivalents, end of the quarter $2,774 $ 918 ====== ====== PREMIS CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS UNAUDITED 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements have been prepared by the Company without audit, with the exception of the balance sheet for March 31, 1997, which was derived from audited financial statements, and reflect all adjustments (consisting only of normal and recurring adjustments and accruals) which are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented. The statements have been prepared in accordance with the regulations of the Securities and Exchange Commission, but omit certain information and footnote disclosures necessary to present the statements in accordance with generally accepted accounting principles. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the Financial Statements and footnotes thereto included as an exhibit to the Company's Annual 10-KSB Report for the fiscal year ended March 31, 1997, and the Registration Statement on Form S-2 (SEC File No. 333-10917) which was declared effective September 26, 1996, as previously filed with the Securities and Exchange Commission. 2. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. 3. NET INCOME (LOSS) PER SHARE Net income (loss) per share for the three month and six month periods ended September 30, 1997 and 1996 are computed using the weighted average number of shares of common stock outstanding during the periods, including common stock equivalents if dilutive. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"). The Company is required to implement SFAS No. 128 for interim and annual periods ending after December 15, 1997. SFAS No. 128 prescribes a presentation of basic net income per share, which is calculated utilizing only weighted average common shares outstanding, and a net income per share - assuming dilution. After the effective date, all prior period earnings per share data must be restated to conform with SFAS No. 128. There is no impact expected to net income (loss) per share for the three month and six month periods ended September 30, 1997 and September 30, 1996. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements The statements included in this Management's Discussion and Analysis of Financial Condition and Results of Operations, except for the historical information contained herein, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by that statute. Such statements are subject to certain risks and uncertainties, some of which are discussed below. Other factors that could cause actual results to differ materially from those described in the forward-looking statements include: volatility in the demand and price for retail software systems; the risk of push-outs of delivery dates for system orders; the risk of order cancellations; the risk of delays in introducing new software products and the market's acceptance of such products; and the successful integration of the personnel, products and operations of PREMIS Systems Canada Incorporated (formerly, REF Retail Systems Corp., Incorporated) with those of PREMIS Corporation. The reader is urged to consider the more comprehensive summary of such risks found in the Company's Registration Statement on Form S-2 (SEC File No. 333-10917) which was declared effective September 26, 1996. Readers are cautioned not to place undue reliance on those forward looking statements which speak as to matters only as of the date hereof. The Company has no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Results of Operations REVENUE. Revenues decreased by 16 percent to $1,643,000 for the second quarter of fiscal 1998, down from $1,949,000 in the same period of fiscal 1997. For the six months ended September 30, 1997, revenue decreased 4 percent to $3,719,000 from $3,863,000 in fiscal 1997. The decrease for the second quarter and six month period ended September 30, 1997 resulted primarily from lower revenues generated from the U.S. Postal Service "Store of the Future" contract. In May 1997, the Company completed its final installation under the "Store of the Future" program while transitioning to POS ONE installations. Under the POS ONE contract the Company is a subcontractor to NCR Corp. The Company expects revenue generated per site under POS ONE installations to be approximately 70% less than comparable "Store of the Future" sites because the Company no longer provides the hardware. Under the POS ONE program the Company is developing point-of-sale software as a subcontractor to NCR Corp. which is expected to be installed during fiscal year 1998. POS ONE will be deployed in three phases. Phase One is expected to generate revenues of approximately $2,200,000 upon roll-out. Phases Two and Three have not been awarded by the USPS. With the anticipated general availability of PREMIS OpenStore and PREMIS OpenOffice, the Company expects revenues derived from its systems sales to increase in fiscal 1998. GROSS PROFIT. Gross profit decreased to $683,000 in the second quarter of fiscal 1998 down from $885,000 in the same period of fiscal 1997. Gross profit as a percentage of revenue decreased from 45 percent in the second quarter of fiscal 1997 to 42 percent in the second quarter of fiscal 1998. Gross profit decreased to $1,528,000 in the six month period ended September 30, 1997, down from $1,831,000 in the same period of fiscal 1997. As a percentage of revenue, gross profit was 41 and 47 percent for the six months ended September 30, 1997 and 1996, respectively. The decline in the margin as a percentage of revenue is primarily attributable to lower margin custom developed software and the continued support of previously installed custom development software systems. The Company expects gross profit as a percentage of revenue and in absolute dollars to increase in the second half of fiscal 1998 with the general availability of PREMIS OpenStore and PREMIS OpenOffice. Additionally, the expected roll-out of USPS POS ONE software will favorably impact gross profit. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expenses increased by 144 percent to $694,000 in the second quarter of fiscal 1998, up from $284,000 in the same period of fiscal 1997. Selling, general and administrative expenses increased by 131 percent for the six month period ended September 30, 1997 to $1,421,000, up from $615,000 in the same period of fiscal 1997. As a percentage of revenue, expenses were 42 and 38 percent for the three month and six month period ended September 30, 1997, compared to 15 and 16 percent in the same period of the prior fiscal year. The Company expects its first roll-out of PREMIS OpenStore during the second half of fiscal 1998, which represents a significant component of the PREMIS OpenEnterprise suite of products. With the general availability of PREMIS OpenStore and PREMIS OpenOffice, the Company expects to increase its sales and marketing expenditures during the remainder of fiscal 1998. The Company will continue to invest in infrastructure, sales and marketing activities of its products, development of market opportunities, and promotion of PREMIS Corporation's competitive position. RESEARCH AND DEVELOPMENT. Research and development expense for the second quarter and six month period ended September 30, 1997 was $449,000 and $833,000, respectively. This compares to $80,000 and $150,000 for the three month and six month periods ended September 30, 1996. The increased research and development expenditures are related to the PREMIS OpenEnterprise suite of products which include PREMIS OpenStore, PREMIS OpenOffice and PREMIS OpenNet. Research and development expenditures for the remainder of the current fiscal year are expected to continue at the same levels incurred for the first six months of fiscal 1998. INTEREST AND OTHER INCOME. The difference in interest and other income between periods reflects interest earned on investments, as well as interest earned on the 5 year 12% note receivable in the original amount of $651,000 related to the licensing in fiscal 1997 of ADVANTAGE, the Company's Food Brokerage Technology. Such note is due and payable in monthly installments of $14,481. The interest income is off-set by interest expense on various debt instruments, including the Company's building capital lease obligation. Other income was generated from a sub-leasing arrangement for a portion of the Company's current U.S. office facility. The sub-leasing arrangement expired on June 30, 1997. INCOME TAX EXPENSE. The Company recognized no income tax expense during the second quarter of fiscal 1998, compared to $203,000 in the same period of fiscal 1997. However, the Company believes it is more likely than not that deferred tax assets, which total $134,000 at September 30, 1997, will be realized. The computation of the deferred tax assets and valuation allowance are based in part on taxable income expected to be earned on existing contracts. The amount of the deferred tax assets considered realizable could be reduced in the near term if estimates of future taxable income are reduced. Liquidity and Capital Resources The Company's cash and cash equivalents increased by approximately $340,000 from March 31, 1997 to September 30, 1997. The increase resulted primarily from cash provided by operating activities of $645,000. The cash provided by operating activities was primarily off-set by the reduction in the bank line of credit of $116,000, payment obligations on notes payable and the repurchase of the Company's common stock. As of September 30, 1997, the Company had working capital of $2.8 million. The Company's Canadian subsidiary has a line of credit of $289,000 ($400,000 CAN) of which $130,000 was outstanding at September 30, 1997. The Company anticipates using available cash to fund growth in operations, research and development activities and investment in capital equipment. Capital expenditures for property and equipment in the first six months of fiscal 1998 were $99,000. These expenditures primarily consisted of sales promotional equipment, computers and related equipment. The Company expects to invest another $150,000 throughout the remainder of 1997 mainly for computer equipment and upgrades and facilities. On April 15, 1997, the Company authorized open market repurchase of its common stock at times and prices to be determined by management for a period of 90 days. The Company repurchased 28,600 shares at a cost of $61,000. As of November 11, 1997, the Company has no definitive plans to acquire additional shares. Effective July 15, 1997, Edward W. Anderson ceased to be employed by the Company as President and Chief Executive Officer of PREMIS Systems Canada, Incorporated (formerly, REF Retail Systems Corp., Incorporated). Under certain circumstances, the Company may be required to pay Mr. Anderson an amount equal to his base salary that would have been payable for the balance of the initial 5 year term which commenced October 1, 1996. Mr. Anderson's annual base salary at the time of termination was CND$150,000. The Company's obligation to make such payments, if any, arise under its Employment Agreement with Mr. Anderson. No determination of the amount or timing of such payments, if any, has been made as of November 11, 1997. See Part 2, Item 1 herein for information on legal proceedings against Mr. Anderson. At its current level of operations, the Company believes that its existing cash and cash equivalents are sufficient to meet the Company's current working capital and capital expenditure requirements through at least the next 12 months. PART 2 - OTHER INFORMATION: ITEM 1. LEGAL PROCEEDINGS The Company has commenced legal proceedings against Edward W. Anderson and Robert E. Ferguson, the former owners of REF Retail Systems Corp., Incorporated ("REF"), which the Company acquired on October 1, 1996. Effective July 15, 1997, Mr. Anderson ceased to be employed by the Company as President and Chief Executive Officer of PREMIS Systems Canada (formerly REF). Mr. Ferguson resigned as an officer, director and employee of REF on October 1, 1996. The legal proceeding against Mr. Anderson was filed in the United States District Court, District of Minnesota, Fourth Division on September 16, 1997 (Case No. 97-2087 MJD/AJB). The legal proceeding against Mr. Ferguson was filed in the Ontario Court of Justice, General Division on September 22, 1997 (Case No. 97-CV-132581). In both proceedings, the Company is seeking damages in an unspecified amount related to alleged breeches of the agreement for the purchase of REF, and related matters. Additionally, the Anderson claim seeks to annul and declare void an employment agreement with Mr. Anderson dated October 1, 1996. Under the employment agreement with Mr. Anderson the Company would be required to pay Mr. Anderson an amount equal to his base salary that would have been payable for the balance of the initial five year term which commenced October 1, 1996. Mr. Anderson's annual base salary at the time of termination was CND$150,000. Mr. Anderson was also granted 650,000 common stock options under the terms of the employment agreement. As of October 31, 1997, both Anderson and Ferguson have filed answers and Anderson has filed a counterclaim alleging breach of the employment agreement by the Company. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULT UPON SENIOR SECURITIES Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of stockholders of the Company was held on August 6, 1997. At such meeting, the stockholders approved (i) the election of all four director nominees named in the Company's proxy statement (F. T. Biermeier For 3,684,639 - Abstain 14,625; Mary Ann Calhoun For 3,684,639 - Abstain 14,625; Gerald F. Schmidt For 3,684,639 - Abstain 14,625; and S. Albert D. Hanser For 3,684,639 - Abstain 14,625); (ii) the appointment of Price Waterhouse LLP, as independent auditors for the Company was ratified (3,687,689 votes for, 5,075 votes against, 6,500 abstentions and zero broker non-votes). For further information respecting all such matters, reference is made to the Company's proxy statement dated July 16, 1997. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8K (A) EXHIBITS None. (B) REPORTS ON FORM 8-K None. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: November 14, 1997 PREMIS CORPORATION (Registrant) /S/ F. T. Biermeier F. T. Biermeier Chairman and Chief Executive Officer /S/ Richard R. Peterson Richard R. Peterson Chief Financial Officer (Principal Financial and Accounting Officer) EX-27 2 ART. 5 FDS FOR 2ND QUARTER 10-QSB
5 1,000 3-MOS MAR-31-1998 SEP-30-1997 2774 0 1660 281 46 4973 1782 413 6932 2308 0 47 0 0 3575 6932 1643 1643 960 960 1143 0 37 (442) 0 (442) 0 0 0 (442) (.09) (.09)
-----END PRIVACY-ENHANCED MESSAGE-----