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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d)
--- of the Securities Exchange Act of 1934 for the
quarterly period ended June 30, 2000 or
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: 0-20789
PRIMIX SOLUTIONS INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3249618
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Arsenal Marketplace, Second Floor, Watertown, Massachusetts 02472
(Address of principal executive offices)
Registrant's telephone number, including area code: (617) 923-6500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
--- ---
As of August 8, 2000, there were 16,339,164 shares of registrant's Common
Stock outstanding.
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Primix Solutions Inc.
Table of Contents
<TABLE>
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PART I - FINANCIAL INFORMATION PAGE
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Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at December 31, 1999 and June 30, 2000 (unaudited) 3
Condensed Consolidated Statements of Operations for the three and six months ended
June 30, 1999 and 2000 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 1999 and 2000 (unaudited) 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
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Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Primix Solutions Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
------------ --------
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Assets
Current assets:
Cash and cash equivalents $ 5,685 $ 2,784
Marketable securities 12,855 11,234
Accounts receivable, net 3,552 4,724
Prepaid expenses and other current assets 501 703
Note receivable from related party 150 --
-------- --------
Total current assets 22,743 19,445
Property and equipment, net 456 1,377
Other assets:
Intangible assets, net 3,812 8,813
Notes receivable from related parties 325 500
-------- --------
Total other assets 4,137 9,313
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Total assets $ 27,336 $ 30,135
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 967 $ 1,173
Accrued expenses 1,916 3,363
-------- --------
Total current liabilities 2,883 4,536
Stockholders' equity:
Common stock 15 16
Treasury stock (1,296) (373)
Additional paid-in capital 60,219 66,335
Deferred compensation -- (1,475)
Accumulated deficit (34,485) (38,904)
-------- --------
Total stockholders' equity 24,453 25,599
-------- --------
Total liabilities and stockholders' equity $ 27,336 $ 30,135
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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Primix Solutions Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Unaudited Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
1999 2000 1999 2000
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Professional services $ 2,552 $ 5,338 $ 4,492 $10,351
Operating expenses:
Professional services 2,169 3,573 3,604 6,626
Sales and marketing 790 1,645 1,324 3,259
Stock compensation -- 25 -- 25
General and administrative 1,309 2,512 2,445 4,630
Research and development -- 185 -- 408
Amortization of intangible assets 54 202 109 294
------- ------- ------- -------
Total operating expenses 4,322 8,142 7,482 15,242
------- ------- ------- -------
Operating loss (1,770) (2,804) (2,990) (4,891)
Interest income, net 278 242 576 472
------- ------- ------- -------
Net loss $(1,492) $(2,562) $(2,414) $(4,419)
======= ======= ======= =======
Basic and diluted net loss per common
share $ (0.10) $ (0.17) $ (0.17) $ (0.29)
======= ======= ======= =======
Basic and diluted weighted average
shares outstanding 14,621 15,246 14,620 15,063
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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Primix Solutions Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Unaudited
Six Months Ended
June 30,
------------------------------
1999 2000
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,414) $(4,419)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 563 470
Stock compensation -- 25
Changes in operating assets and liabilities:
Accounts receivable (686) (244)
Prepaid expenses and other current assets (124) (145)
Accounts payable (70) 29
Other current liabilities (173) 418
Deferred revenue (4) --
-------- -------
Net cash used in operating activities (2,908) (3,866)
-------- -------
Cash flows from investing activities:
Sales (purchases) of marketable securities, net (8,505) 1,621
Purchases of property and equipment (122) (960)
Purchase of Primant AB -- (205)
Additional purchase price of Advis, Inc. (41) --
Additional purchase price of Black Bean Studios, Inc. -- (6)
Increase in other assets (150) (25)
-------- -------
Net cash (used in) provided by investing activities (8,818) 425
-------- -------
Cash flows from financing activities:
Payment of note payable to related party (204) --
Proceeds from the exercise of stock options 45 433
Proceeds from common stock purchased through
employee stock purchase plan 29 107
Payment of capital lease obligations (125) --
-------- -------
Net cash (used in) provided by financing activities (255) 540
-------- -------
Net decrease in cash and cash equivalents (11,981) (2,901)
Cash and cash equivalents, beginning of period 26,693 5,685
-------- -------
Cash and cash equivalents, end of period $ 14,712 $ 2,784
======== =======
In connection with the acquisition of Primant AB, the following non-cash
transaction occurred:
Fair value of net assets acquired $ 5,288
Liabilities assumed (83)
Issuance of common stock (5,000)
-------
Cash paid for acquisition $ 205
=======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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Primix Solutions Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2000
(Unaudited)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein are
unaudited and reflect all adjustments, consisting of normal recurring
adjustments, which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods. These financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 as filed with the Securities and Exchange Commission.
The preparation of the 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 and would impact future
results of operations and cash flows.
The results of operations for the reported 2000 period are not
necessarily indicative of the results to be achieved for the entire year ending
December 31, 2000.
2. ACQUISITION OF BLACK BEAN STUDIOS, INC.
On December 3, 1999, the Company acquired Black Bean Studios, Inc.
("Black Bean"), a privately held Boston, Massachusetts based design boutique
specializing in digital media, which augmented the depth and breadth of the
Company's capabilities in developing highly effective user interfaces at the
front end of e-Business solutions.
The transaction has been accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations".
Accordingly, the operating results of Black Bean are included in the Company's
consolidated financial statements effective December 4, 1999. The excess
purchase price over the net assets acquired of $1.9 million has been recorded as
goodwill and is being amortized over its estimated useful life of 10 years.
3. ACQUISITION OF PRIMANT AB
On May 31, 2000, the Company acquired Primant AB ("Primant"), a
privately held Sweden - based internet solutions company specializing in
Microsoft systems integrations, in order to augment the depth of its Microsoft
technical capabilities and to better serve a growing base of international
clients. On such date, the Company purchased all of the outstanding shares of
Primant for 895,522 of the Company's common stock, which was valued at $5.00 per
share, the fair market value of the stock on the acquisition date. The excess
purchase price over the net assets acquired of approximately $5.3 million is
being amortized over the estimated life of the acquired assets.
On July 6, 2000, the Company issued 104,478 shares of common stock in
exchange for shares of Primant issued upon the exercise of all outstanding stock
options of Primant (the "Option Exchange"). The Company made a cash payment of
approximately $205,000 in connection with the Option Exchange and the payment of
the legal fees of the Primant optionholders
In addition, the Company will issue 300,000 shares of common stock (the
"Restricted Shares") to the principal shareholders and employees of Primant in
the form of restricted stock awards (the "Awards"). The Awards will fully vest
on the fifth anniversary of the grant date, subject to accelerated vesting over
an 18-month period upon the achievement of certain performance objectives of
Primant. As a result of the commitment to grant Awards in connection with the
Primant acquisition, the Company recorded $1.5 million of deferred compensation.
The Restricted Shares will be issued at a purchase price less than fair market
value on the Primant acquisition date. On such date, the approximate difference
between the purchase price and the fair market value was $5. Accordingly, the
Company is amortizing the $1.5 million as stock compensation expense over a
5-year period. In the event these operating goals are met, resulting in the
acceleration of these options, the Company will accelerate the amortization
period.
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The transaction has been accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations".
Accordingly, the operating results of Primant are included in the Company's
consolidated financial statements effective June 1, 2000.
4. RECLASSIFICATION OF FINANCIAL STATEMENTS
Certain prior year amounts have been reclassified to conform to the
current year presentation.
5. COMPUTATION OF BASIC AND DILUTED NET LOSS PER COMMON SHARE
In accordance with the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 128, "Earnings Per Share", basic net loss
per share is computed by dividing net loss by the weighted average common shares
outstanding, with no consideration given for any potentially dilutive
securities. Diluted net loss per share is the same as basic net loss per share
because the inclusion of common stock issuable pursuant to stock options and
warrants (number of dilutive shares were approximately 2,240,000 and 3,140,000
at June 30, 1999 and 2000, respectively) would be antidilutive.
6. OTHER ASSETS
In March 1999, the Company issued a promissory note in the amount of
$75,000 to Michael Troiano, who was appointed the Company's President in
December 1999. The promissory note was due on December 31, 2001 and bore
interest at a rate of 6.75% per annum. In January 2000, the $75,000 note was
cancelled and a new promissory note totaling $250,000 was issued. The note bears
interest at a rate of 7% per annum until September 30, 2002 when the interest
rate will convert to the prime rate plus two percentage points for the remainder
of the term. The outstanding principal balance is payable quarterly in arrears
in equal installments beginning on January 1, 2005. The note is due on September
30, 2029.
In July 2000, the Company issued a promissory note in the amount of
$800,000 to an officer of the Company. The note is secured by a security
interest in 200,000 shares of the Company's common stock owned by the officer.
The note is payable on July 21, 2001 and bears interest at a rate of 7.508% per
annum.
In July 2000, the Company issued a promissory note in the amount of
$70,000 to an officer of the Company. The note is secured by a security interest
in 17,500 shares of the Company's common stock owned by the officer. The note is
payable on July 25, 2001 and bears interest at a rate of 7.508% per annum.
7. COMMITMENTS
In June 2000, the Company entered into a ten-year lease commitment for
approximately 73,000 square feet at an annual rental rate of approximately $1.8
million. The Company expects to move into the new facility in November 2000 with
a five - month free rental period, subject to an adjustment clause in the
agreement. The Company utilized a letter of credit to satisfy the security
deposit requirement.
8. DEFERRED COMPENSATION
For the three months ended June 30, 2000, the Company recorded $25,000
of stock compensation expense.
9. COMPREHENSIVE INCOME
During 1998, the Company adopted SFAS No. 130, "Reporting of
Comprehensive Income". Comprehensive income (loss) refers to the change in an
entity's equity during a period, exclusive of investment by and distributions to
owners. Comprehensive income (loss) includes net income (loss) and other
comprehensive income (loss) items. The Company has no other comprehensive income
(loss) items as defined in SFAS No. 130 and, therefore, reported net loss is
equal to comprehensive loss for all periods presented.
10. SEGMENT DISCLOSURE AND CONCENTRATION OF CREDIT RISK/SIGNIFICANT
CUSTOMERS
SFAS No. 105, "Disclosure of Information about Financial Instruments
with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of
Credit Risk", requires disclosure of any significant off-balance-sheet and
credit risk
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concentrations. Financial instruments that potentially subject the Company to
concentrations of credit risk are accounts receivable, cash equivalents and
marketable securities. At December 31, 1999, one customer accounted for
approximately 42% of total accounts receivable. At June 30, 2000, two customers
accounted for 16% and 13% of total accounts receivable. Two customers accounted
for 20% and 15% of total revenue for the three months ended June 30, 1999. Two
customers accounted for 17% and 16 % of total revenue for the three months ended
June 30, 2000. One customer accounted for 21% of total revenue for the six
months ended June 30, 1999. Three customers accounted for 18%, 14% and 13% of
total revenue for the six months ended June 30, 2000.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following information should be read in conjunction with the
financial statements and notes thereto contained herein and the risk factors
contained in the section entitled "Certain Factors That May Affect Future
Results" on page 15 of the Company's 1999 Annual Report on Form 10-K filed with
the Securities and Exchange Commission.
This Form 10-Q 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. Factors that might cause such
a difference are discussed in the section entitled "Certain Factors That May
Affect Future Results" below.
OVERVIEW
Primix Solutions Inc. ("Primix" or the "Company") is a strategic
Internet services firm that helps clients define, develop and deploy e-business
solutions that deliver superior business results.
The Company has generally derived its professional services revenues
from engagements that have been priced on a fixed-time/fixed-price model. This
model contains inherent risks that are greater than engagements priced on a time
and materials basis. Accordingly, the Company diligently evaluates the scope of
each project and its related risk. To the extent that the Company has not
adequately assessed the risk associated with its engagements, revenues could be
materially delayed and therefore adversely affect the Company's results. As is
the nature with most consulting firms, the Company's costs are relatively fixed.
As of June 30, 2000, the Company's total headcount was 216 compared to
94 as of June 30, 1999.
RESULTS OF OPERATIONS
REVENUE
Professional services revenue increased by $2.7 million to $5.3 million
for the three months ended June 30, 2000 from $2.6 million for the comparable
quarter in 1999. For the six months ended June 30, 2000, total revenue increased
by $5.9 million to $10.4 million from $4.5 million for the comparable prior year
period. These increases were the result of increases in both the size and number
of consulting engagements serviced and the increase in the number of billable
consultants. Billable headcount increased from 60 at June 30, 1999 to 153 at
June 30, 2000, with 53% of this increase due to the Primant acquisition on May
31, 2000.
PROFESSIONAL SERVICES
The cost of professional services consists primarily of compensation
and benefits for employees engaged in the delivery of professional services as
well as fees to third party consultants and non-reimbursable expenses related to
client projects. Professional services expenses increased to $3.6 million, or
67% of revenue, for the three months ended June 30, 2000 from $2.2 million, or
85% of revenue, for the comparable prior year period. For the six months ended
June 30, 2000, professional services expenses increased to $6.6 million, or 64%
of total revenue, from $3.6 million, or 80% of total revenue, for the comparable
prior year period. The absolute dollar increase for the three and six month
periods is primarily due to increased headcount, an increased usage of third
party consultants and increased travel costs. Professional services expenses
decreased as a percentage of revenue mainly due to higher utilization rates of
the professional staff. Professional services headcount increased from 60 at
June 30, 1999 to 153 at June 30, 2000, with 53% of this increase due to the May
2000 acquisition of Primant. The Company expects professional services expenses
to increase during the remainder of 2000 as the Company seeks to hire additional
professional services personnel.
SALES AND MARKETING
Sales and marketing expenses consist primarily of compensation and
benefits for sales and marketing personnel and costs for advertising and
marketing. Sales and marketing expenses increased to $1.6 million, or 31% of
revenue, for the three months ended June 30, 2000 from $790,000, or 31% of
revenue, for the comparable prior year period. For the
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six months ended June 30, 2000, sales and marketing expenses increased to $3.3
million, or 31% of total revenue, from $1.3 million, or 29% of total revenue,
for the comparable prior year period. The absolute dollar increase for the three
and six month periods is primarily due to increased headcount, increases in
advertising, trade shows, public relations and direct mailing costs, and
commissions as a result of higher revenue levels. Sales and marketing headcount
increased from 11 at June 30, 1999 to 14 at June 30, 2000. The Company expects
sales and marketing expenses to increase during 2000 as the Company seeks to
hire additional sales and marketing personnel and due to continued increases in
advertising and promotional activities.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of compensation
and benefits for executive, finance, information technology, human resource,
recruiting and administrative personnel, rent expense, depreciation expense,
professional fees, recruiting fees, and system support costs. General and
administrative expenses increased to $2.5 million, or 47% of revenue, for the
three months ended June 30, 2000 from $1.3 million, or 51% of revenue, for the
comparable prior year period. For the six months ended June 30, 2000, general
and administrative expenses increased to $4.6 million, or 45% of total revenue,
from $2.4 million, or 54% of total revenue, for the comparable prior year
period. The absolute dollar increase for the three and six month periods is
primarily due to increased headcount-related costs and increased rent due to the
opening of additional offices, professional fees, employee training costs, and
recruiting fees. General and administrative headcount increased from 23 at June
30, 1999 to 45 at June 30, 2000, with 50% of this increase due to the May 2000
acquisition of Primant. The Company expects general and administrative expenses
to increase during the remainder of 2000 to support the Company's expanding
business.
RESEARCH AND DEVELOPMENT
Research and development expenses consist primarily of compensation and
benefits for research and development personnel. Research and development
expenses increased to $185,000, or 3% of revenue, for the three months ended
June 30, 2000 from $0 for the comparable prior year period. For the six months
ended June 30, 2000, research and development expenses increased to $408,000, or
4% of revenue, from $0 for the comparable prior year period. The absolute dollar
increase for the three and six month periods is due to the fact that there was
no research and development group from January 1999 to September 1999. This
group was formed in order to develop reusable code and other proprietary assets
for use in the Company's business within the solutions practice.
AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets of $202,000 and $54,000 for the three
months ended June 30, 2000 and June 30,1999, respectively, and amortization of
intangible assets of $294,000 and $109,000 for the six months ended June 30,
2000 and June 30, 1999, respectively, is attributable to the acquisition of
Advis, Inc. in December 1998, Black Bean in December 1999 and Primant in May
2000. Regarding the Primant acquisition, the excess purchase price over the net
assets acquired of approximately $5.3 million is being amortized over the
estimated life of the acquired assets.
STOCK COMPENSATION
In connection with the Primant acquisition, the Company will issue
300,000 shares of common stock (the "Restricted Shares") to the principal
shareholders and employees of Primant in the form of restricted stock awards
(the "Awards"). The Awards will fully vest on the fifth anniversary of the
grant date, subject to accelerated vesting over an 18-month period upon the
achievement of certain performance objectives of Primant. As a result of the
commitment to grant Awards in connection with the Primant acquisition, the
Company recorded $1.5 million of deferred compensation. The Restricted Shares
will be issued at a purchase price less than fair market value on the Primant
acquisition date. On such date, the approximate difference between the
purchase price and the fair market value was $5. Accordingly, the Company is
amortizing the $1.5 million as stock compensation expense over a 5-year
period. In the event these operating goals are met, resulting in the
acceleration of these options, the Company will accelerate the amortization
period. For the three months ended June 30, 2000, the Company recorded
$25,000 of stock compensation expense, which represents one month of
amortization of the deferred compensation expense.
INTEREST INCOME, NET
Interest income, net decreased to $242,000 for the three months ended
June 30, 2000 from $278,000 for the comparable prior year period. For the six
months ended June 30, 2000, interest income, net decreased to $472,000 from
$576,000 for the comparable prior year period. The decrease in interest income
is primarily the result of a decline in the average combined daily balances of
the Company's cash, cash equivalents and marketable securities.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities utilized approximately $3.9 million
for the three months ended June 30, 2000, resulting primarily from the net loss
and the increase in other current liabilities. At June 30, 2000, cash, cash
equivalents and marketable securities totalled $14.0 million, a $4.5 million
decrease from December 31, 1999.
The Company's investing activities, which primarily consisted of net
sales of short-term marketable securities, purchases of property and equipment,
and cash outflows associated with the acquisition of Primant, provided
approximately $425,000 for the three months ended June 30, 2000.
The Company's financing activities, which mainly consisted of proceeds
from the exercise of stock options and from the issuance of common stock for the
employee stock purchase plan, provided approximately $540,000 for the three
months ended June 30, 2000.
In March 1999, the Company issued a promissory note in the amount of
$75,000 to Michael Troiano, who was appointed as the Company's President in
December 1999. The promissory note was due on December 31, 2001 and bore
interest at a rate of 6.75% per annum. In January 2000, the $75,000 note was
cancelled and a new promissory note totaling $250,000 was issued. The note bears
interest at a rate of 7% per annum until September 30, 2002 when the interest
rate will convert to the prime rate plus two percentage points for the remainder
of the term. The outstanding principal balance is payable quarterly in arrears
in equal installments beginning on January 1, 2005. The note is due on September
30, 2029.
In June 2000, the Company entered into a ten-year lease commitment for
approximately 73,000 square feet at an annual rental rate of approximately $1.8
million. The Company expects to move into the new facility in November 2000 with
a five - month free rental period, subject to an adjustment clause in the
agreement. The Company utilized a letter of credit to satisfy the security
deposit requirement.
In July 2000, the Company made a deposit totalling approximately
$340,000 for office furniture that will be used in the new corporate
headquarters. The Company expects to enter into a lease for the furniture
totalling approximately $1.4 million during the fourth quarter of 2000.
In July 2000, the Company issued a promissory note in the amount of
$800,000 to an officer of the Company. The note is secured by a security
interest in 200,000 shares of the Company's common stock owned by the officer.
The note is payable on July 21, 2001 and bears interest at a rate of 7.508% per
annum.
In July 2000, the Company issued a promissory note in the amount of
$70,000 to an officer of the Company. The note is secured by a security interest
in 17,500 shares of the Company's common stock owned by the officer. The note is
payable on July 25, 2001 and bears interest at a rate of 7.508% per annum.
The Company currently anticipates that the existing cash, cash
equivalents and marketable securities balances will be sufficient to meet its
anticipated working capital and capital expenditure requirements for at least
the next twelve months. Thereafter, the Company may need to raise additional
funds. The Company may in the future seek to expand its business through
possible acquisitions or the opening of additional offices. The Company,
however, has no commitments or agreements with respect to any future acquisition
and no assurances can be given with respect to the likelihood or financial or
business effect of any future acquisition. Future acquisitions could be financed
by internally generated funds, bank borrowings, public offerings or private
placements of equity or debt securities, or a combination of the foregoing.
There can be no assurance that additional financing will be available when
needed on terms favorable to the Company or at all.
YEAR 2000 READINESS
To date, the Company has not experienced any problems with its computer
systems relating to the Year 2000 issue. The Company also is unaware of any
material Year 2000 problems with its clients or vendors. Accordingly, the
Company does not anticipate incurring material expenses or experiencing any
material operational disruptions as a result of any Year 2000 problems.
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CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Statements made or incorporated into this Form 10-Q include a number of
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. Forward
looking statements include, without limitation, statements containing the words
"anticipates," "believes," "expects," "intends," "future," and words of similar
import which express management's beliefs, expectations or intentions regarding
the Company's future performance. The Company's actual results could differ
materially from its historical results and from those set forth in the
forward-looking statements and may fluctuate between operating periods. Factors
that might cause such differences and fluctuations include the following: the
Company's ability to efficiently consolidate the operations of Primant, the
Company's ability to attract, train and retain qualified strategic, creative and
technical personnel, the Company's ability to retain its sales and consulting
staffs, the Company's ability to close sales, risks related to the management of
growth, development and promotional expenses related to the introduction of new
service offerings, changes in technology and industry standards, limited
operating history, changes in the market for the Company's services, the rate of
acceptance of the Company's services, dependence of the Company's business on
the Internet, increased competition, changing of pricing policies by the Company
or its competitors, the timing of receipt of orders from major customers,
development of Internet and Intranet products or enhancements by vendors of
existing client/server or legacy software systems that compete with the
Company's consulting services, dependence on key personnel, proprietary
technology and the inherent difficulties in protecting intellectual property,
dependence on third-party technology, and exposure for product and professional
services liability. The market price of the Company's Common Stock has been, and
in the future will likely be, subject to significant fluctuations in response to
variations in quarterly operating results and other factors, such as
announcements of technological innovations or new products and services by the
Company or its competitors, or other events.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company owns financial instruments that are sensitive to market
risks as part of its investment portfolio. The investment portfolio is used to
preserve the Company's capital until it is required to fund operations. All of
these market-risk sensitive instruments are classified as held-to-maturity and
are not held for trading purposes. The Company does not own derivative financial
instruments in its investment portfolio. The investment portfolio contains
instruments that are subject to the risk of a decline in interest rates.
INTEREST RATE RISK. The Company's investment portfolio includes
investment grade debt instruments. These bonds are subject to interest rate
risk, and could decline in value if interest rates fluctuate. Due to the short
duration and conservative nature of these instruments, the Company does not
believe that it has a material exposure to interest rate risk.
PART II - OTHER INFORMATION
Item 2. Recent Sales of Unregistered Securities
In connection with the acquisition of Advis, Inc. ("Advis"), a
Boston-based e-Business consulting company, on December 31, 1998, the
Company issued 171,000 shares of Common Stock to David W. Buck, the
sole stockholder of Advis. Such shares were valued at $1.875 per share,
the fair market value of the Common Stock on such date. Such shares
were issued pursuant to Section 4(2) of the Securities Act of1933, as
amended, and Rule 506 of Regulation D promulgated thereunder. See Note
2 to the Consolidated Financial Statements included in the Company's
Form 10-K filed with the Securities and Exchange Commission on March
30, 2000.
In connection with the acquisition of Black Bean Studios, Inc.
("Black Bean"), a Boston-based multi-disciplinary design firm, on
December 3, 1999, the Company issued 100,000 shares of Common Stock to
the stockholders of Black Bean. Such shares were valued at $10.75 per
share, the fair market value of the Common Stock on such date. Such
shares were issued pursuant to Section 4(2) of the Securities Act of
1933, as amended, and Rule 506 of Regulation D promulgated thereunder.
See Note 2 to the Consolidated Financial Statements.
On May 31, 2000, the Company acquired Primant AB ("Primant"),
a privately held Sweden-based internet solutions company specializing
in Microsoft systems integrations, in order to augment the depth of its
Microsoft technical capabilities and to better serve a growing base of
international clients. On such date, the Company purchased all of the
outstanding shares of Primant for 895,522 of the Company's Common
Stock, which was valued
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at $5.00 per share, the fair market value of the stock on the
acquisition date. Such shares were issued pursuant to Regulation S
promulgated thereunder. See Note 3 to the Consolidated Financial
Statements.
On July 6, 2000, the Company issued 104,478 shares of Common
Stock in exchange for shares of Primant issued upon the exercise of all
outstanding stock options of Primant (the "Option Exchange"). The
Company made a cash payment of approximately $205,000 in connection
with the Option Exchange and the payment of the legal fees of the
Primant optionholders. Such shares were issued pursuant to Regulation S
promulgated thereunder. See Note 3 to the Consolidated Financial
Statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Share Purchase Agreement dated as of May 26,
2000, filed as an exhibit to the Company's
Current Report on Form 8-K filed with the
Securities and Exchange Commission on June 15,
2000.
10.2 Promissory Note for $250,000 dated as of
January 1, 2000 from Michael Troiano for the
benefit of the Company filed herewith.
10.3 Stock Pledge Agreement dated as of January 1,
2000 by and between the Company and Michael
Troiano filed herewith.
10.4 Lease Agreement dated as of June 19, 2000 by
and between Arthur D. Little, Inc. and the
Company filed herewith.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
On June 15, 2000, the Company filed a report on
Form 8-K to report the Primant AB acquisition in
Item 2 thereof.
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SIGNATURES
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, thereunto duly authorized.
Dated: August 14, 2000
PRIMIX SOLUTIONS INC.
/s/ DAVID W. CHAPMAN
-------------------------------------------------------
David W. Chapman
Chief Financial Officer and Principal Financial Officer
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