PRIMIX
10-Q, 2000-11-14
PREPACKAGED SOFTWARE
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<PAGE>

                                  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 September 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 November 2, 2000, there were 16,674,460 shares of registrant's
                           Common Stock outstanding.

<PAGE>

                              Primix Solutions Inc.

                                Table of Contents

<TABLE>
<CAPTION>

                                                                                                        PAGE
<S>                                                                                                    <C>

PART I - FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements

         Condensed Consolidated Balance Sheets at December 31, 1999 and September 30, 2000
                  (unaudited)                                                                              3

         Condensed Consolidated Statements of Operations for the three and nine months ended
                  September 30, 1999 and 2000 (unaudited)                                                  4

         Condensed Consolidated Statements of Cash Flows for the nine months ended
                  September 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 2.  Recent Sales of Unregistered Securities                                                          13

Item 6.  Exhibits and Reports on Form 8-K                                                                 13

Signatures                                                                                                14
</TABLE>

                                       2

<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements

                              Primix Solutions Inc.
                      Condensed Consolidated Balance Sheets
                                   (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>

                                                    December 31,      September 30,
                                                       1999              2000
                                                    ------------      -------------

                           Assets
<S>                                                  <C>               <C>

Current assets:
  Cash and cash equivalents                          $  5,685          $  3,775
  Marketable securities                                12,855             2,569
  Accounts receivable, net                              3,552             7,152
  Prepaid expenses and other current assets               501               635
  Notes receivable from related parties                   150               870
                                                     --------          --------
      Total current assets                             22,743            15,001

Property and equipment, net                               456             4,004

Other assets:
  Intangible assets, net                                3,812             8,277
  Notes receivable from related parties                   325               500
  Other assets                                              -               373
                                                     --------          --------
      Total other assets                                4,137             9,150
                                                     --------          --------
      Total assets                                   $ 27,336          $ 28,155
                                                     ========          ========

            Liabilities and Stockholders' Equity

Current liabilities:
  Accounts payable                                   $    967          $  1,330
  Accrued expenses                                      1,916             3,319
                                                     --------          --------
      Total current liabilities                         2,883             4,649


Stockholders' equity:
  Common stock                                             15                16
  Treasury stock                                       (1,296)                -
  Additional paid-in capital                           60,219            66,166
  Deferred compensation                                     -            (1,400)
  Accumulated deficit                                 (34,485)          (41,252)
  Cumulative translation adjustment                         -               (24)
                                                     --------          --------
      Total stockholders' equity                       24,453            23,506
                                                     --------          --------
      Total liabilities and stockholders' equity     $ 27,336          $ 28,155
                                                     ========          ========
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.

                                       3
<PAGE>

                              Primix Solutions Inc.
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)
                      (In thousands, except per share data)

<TABLE>
<CAPTION>

                                             Nine Months Ended        Three Months Ended
                                               September 30,             September 30,
                                          ----------------------      ----------------------
                                            1999          2000          1999          2000
                                          --------      --------      --------      --------
<S>                                       <C>           <C>           <C>           <C>

 Revenue:
    Professional services                 $  3,700      $  6,726      $  8,192      $ 17,077

 Operating expenses:
    Professional services                    2,886         4,339         6,490        10,908
    Sales and marketing                      1,063         1,521         2,387         4,810
    General and administrative               1,997         2,806         4,442         7,463
    Research and development                     -           133             -           541
    Amortization of intangible assets           59           341           168           635
    Stock compensation                           -            75             -           100
                                          --------      --------      --------      --------
      Total operating expenses               6,005         9,215        13,487        24,457
                                          --------      --------      --------      --------

 Operating loss                             (2,305)       (2,489)       (5,295)       (7,380)
 Interest income, net                          270           141           846           613
                                          --------      --------      --------      --------

 Net loss                                 $ (2,035)     $ (2,348)     $ (4,449)     $ (6,767)
                                          ========      ========      ========      ========

 Basic and diluted net loss per common
   share                                  $  (0.14)     $  (0.15)     $  (0.30)     $  (0.45)
                                          ========      ========      ========      ========

 Basic and diluted weighted average
  shares outstanding                        14,627        15,406        14,622        15,177
                                          ========      ========      ========      ========
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.

                                       4

<PAGE>


                              Primix Solutions Inc.
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                               Nine Months Ended
                                                                                  September 30,
                                                                             ----------------------
                                                                              1999           2000
                                                                             --------      --------
<S>                                                                          <C>               <C>

         Cash flows from operating activities:
           Net loss                                                          $ (4,449)     $ (6,767)
           Adjustments to reconcile net loss to net cash used
              in operating activities:
                 Depreciation and amortization                                    857           956
                 Stock compensation                                                 -           100
                 Changes in operating assets and liabilities:
                   Accounts receivable                                           (329)       (2,672)
                   Prepaid expenses and other current assets                     (606)          127
                   Accounts payable                                                 6           186
                   Other current liabilities                                      (69)          359
                   Deferred revenue                                               (41)            -
                                                                             --------      --------
         Net cash used in operating activities                                 (4,631)       (7,711)
                                                                             --------      --------

         Cash flows from investing activities:
           Sales (purchases) of marketable securities,net                     (12,115)       10,287
           Purchases of property and equipment                                   (199)       (3,733)
           Purchase of Primant AB                                                   -          (205)
           Additional purchase price of Advis, Inc.                               (55)            -
           Increase in other assets                                              (325)       (1,268)
                                                                             --------      --------
         Net cash (used in) provided by investing activities                  (12,694)        5,081
                                                                             --------      --------

         Cash flows from financing activities:
           Payment of note payable to related party                              (204)            -
           Proceeds from the exercise of stock options                             45           543
           Proceeds from common stock purchased through
              employee stock purchase plan                                         92           201
           Payment of capital lease obligations                                  (125)            -
                                                                             --------      --------
         Net cash (used in) provided by financing activities                     (192)          744
                                                                             --------      --------
         Effect of exchange rate changes on cash and cash equivalents               -           (24)

         Net decrease in cash and cash equivalents                            (17,517)       (1,886)

         Cash and cash equivalents, beginning of period                        26,693         5,685
                                                                             --------      --------
         Cash and cash equivalents, end of period                            $  9,176      $  3,775
                                                                             ========      ========

         In connection with the acquisition of Primant AB, the following
            non-cash transaction occurred:
               Fair value of net assets acquired                                           $  5,411
               Liabilities assumed                                                             (206)
               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.

                                       5

<PAGE>

                              Primix Solutions Inc.
              Notes to Condensed Consolidated Financial Statements
                               September 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 shares 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 $5.1 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. In addition, the
Company paid for the related legal fees of the Primant optionholders.

         On August 21, 2000, the Company issued 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 were 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

                                       6



<PAGE>

$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.

         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 (approximately 2,310,000 and 4,037,000 shares at September 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 an officer of the Company. 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.

         During the third quarter of 2000, the Company made deposits totalling
approximately $2.2 million for leasehold improvements associated with the new
corporate headquarters.

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 January 2001 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

         The Company recorded deferred compensation of $1.5 million in
connection with the acquisition of Primant (see Note 3). For the three and nine
months ended September 30, 2000, the Company recorded $75,000 and $100,000,
respectively, of stock compensation expense.

                                       7

<PAGE>

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. Total comprehensive income (loss) is as
follows (in thousands):


<TABLE>
<CAPTION>

                                                             Three Months Ended         Nine Months Ended
                                                                 September 30,           September 30,
                                                             ------------------         -----------------
                                                               1999     2000             1999     2000
                                                             -------   --------         -------   -------
<S>                                                         <C>       <C>            <C>         <C>

Net income (loss)                                           $(2,035)  $(2,348)         $(4,449)  $(6,767)
Cumulative translation adjustment                                 -       (24)               -       (24)
                                                            -------   -------          -------   -------
Comprehensive income (loss)                                 $(2,035)  $(2,372)         $(4,449)  $(6,791)
                                                            =======   =======          =======   =======
</TABLE>

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 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 September 30,
2000, four customers accounted for 23%, 13%, 12%, and 11% of total accounts
receivable. Two customers accounted for 48% and 12% of total revenue for the
three months ended September 30, 1999. Four customers accounted for 17%, 14%,
12%, and 11% of total revenue for the three months ended September 30, 2000. Two
customers accounted for 33% and 10% of total revenue for the nine months ended
September 30, 1999. Two customers accounted for 15% and 13% of total revenue for
the nine months ended September 30, 2000.

         The following table presents geographical revenue from sources in total
and as a percent of total revenue for the three and nine months ended September
30, 1999 and 2000 (in thousands):
Footnote 10 Support:

<TABLE>
<CAPTION>

                                                  Three Months Ended                                 Nine Months Ended
                                     --------------------------------------------    --------------------------------------------
                                    September 30, 1999         September 30, 2000    September 30, 1999        September 30, 2000
                                    ------------------         ------------------    ------------------        ------------------
<S>                               <C>                       <C>                    <C>                         <C>

North America                           $3,700   100%               $5,378   80%         $8,192   100%           $15,381   90%
Europe                                       -     0%                1,348   20%              -     0%             1,696   10%
                                    ----------------            ---------------       ---------------          ------------------
                                        $3,700   100%               $6,726  100%         $8,192   100%           $17,077  100%
</TABLE>

                                       8

<PAGE>

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 fixed-time/fixed-price and time and
materials bases. The fixed-time/fixed-price 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 September 30, 2000, the Company's total headcount was 243
compared to 112 as of September 30, 1999.

RESULTS OF OPERATIONS

REVENUE

         Professional services revenue increased by $3.0 million to $6.7 million
for the three months ended September 30, 2000 from $3.7 million for the
comparable quarter in 1999. For the nine months ended September 30, 2000, total
revenue increased by $8.9 million to $17.1 million from $8.2 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. The increase in billable consultants was
mainly due to the Primant acquisition on May 31, 2000. Annualized revenue per
billable head was approximately $164,000 and $170,000 as of September 30, 2000
and 1999, respectively. Utilization for all consultants totalled 62% for the
three and nine months ended September 30, 2000 and 61% and 64% for the three and
nine months ended September 30, 1999, respectively. The decrease in annualized
revenue per billable head is due to the lower billing rates of the new
Scandinavian office (Primant).

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 paid to third party consultants and non-reimbursable expenses
related to client projects. Professional services expenses increased to $4.3
million, or 65% of revenue, for the three months ended September 30, 2000 from
$2.9 million, or 78% of revenue, for the comparable prior year period. For the
nine months ended September 30, 2000, professional services expenses increased
to $10.9 million, or 64% of total revenue, from $6.5 million, or 79% of total
revenue, for the comparable prior year period. The absolute dollar increase for
the three month period is primarily due to increased headcount and increased
travel costs due to the overall growth of the business. The absolute dollar
increase for the nine month period is primarily due to increased headcount, an
increased usage of third party consultants and increased travel costs due to the
overall growth of the business. Professional services expenses decreased as a
percentage of revenue mainly due to higher utilization rates of the professional
staff. Professional services headcount increased from 72 at September 30, 1999
to 167 at September 30, 2000, with 81% of this increase due to the Primant
acquisition on May 31, 2000.

                                       9

<PAGE>

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 $1.5 million, or 23% of
revenue, for the three months ended September 30, 2000 from $1.1 million, or 29%
of revenue, for the comparable prior year period. For the nine months ended
September 30, 2000, sales and marketing expenses increased to $4.8 million, or
28% of total revenue, from $2.4 million, or 29% of total revenue, for the
comparable prior year period. The absolute dollar increase for the three and
nine month periods is primarily due to increased headcount, increases in
advertising, trade shows, public relations and travel costs, and commissions as
a result of higher revenue levels. Sales and marketing headcount increased from
9 at September 30, 1999 to 21 at September 30, 2000, with 77% of this increase
due to the Primant acquisition on May 31, 2000.

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 $2.8 million, or 42% of revenue, for the
three months ended September 30, 2000 from $2.0 million, or 54% of revenue, for
the comparable prior year period. For the nine months ended September 30, 2000,
general and administrative expenses increased to $7.5 million, or 44% of total
revenue, from $4.4 million, or 54% of total revenue, for the comparable prior
year period. The absolute dollar increase for the three month period is
primarily due to increased headcount-related costs and increased rent due to the
opening of additional offices, employee training costs, travel, and
non-capitalized software and related maintenance costs associated with the
Company's overall increased headcount. The absolute dollar increase for the nine
month period is primarily due to increased headcount-related costs and increased
rent due to the opening of additional offices, professional fees, employee
training costs, recruiting fees, travel, and non-capitalized software and
hardware and related maintenance costs associated with the Company's overall
increased headcount. General and administrative headcount increased from 30 at
September 30, 1999 to 51 at September 30, 2000, with 37% of this increase due to
the Primant acquisition on May 31, 2000.

RESEARCH AND DEVELOPMENT

         Research and development expenses consist primarily of compensation and
benefits for research and development personnel. Research and development
expenses increased to $133,000, or 2% of revenue, for the three months ended
September 30, 2000 from $0 for the comparable prior year period. For the nine
months ended September 30, 2000, research and development expenses increased to
$541,000, or 3% of revenue, from $0 for the comparable prior year period. The
absolute dollar increase for the three and nine 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 October 1999 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 $341,000 and $59,000 for the three
months ended September 30, 2000 and September 30,1999, respectively, and
amortization of intangible assets of $635,000 and $168,000 for the nine months
ended September 30, 2000 and September 30, 1999, respectively, is attributable
to the acquisition of Advis, Inc. in December 1998, Black Bean in December 1999
and Primant in May 2000.

STOCK COMPENSATION

         In connection with the Primant acquisition, the Company issued 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 acccelerated 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 were 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

                                       10


<PAGE>

operating goals are met, resulting in the acceleration of these options, the
Company will accelerate the amortization period. For the three and nine months
ended September 30, 2000, the Company recorded $75,000 and $100,000,
respectively, of stock compensation expense.

INTEREST INCOME, NET

         Interest income, net decreased to $141,000 for the three months ended
September 30, 2000 from $270,000 for the comparable prior year period. For the
nine months ended September 30, 2000, interest income, net decreased to $613,000
from $846,000 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.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's operating activities utilized approximately $7.7 million
for the nine months ended September 30, 2000, resulting primarily from the net
loss and the increase in accounts receivable. At September 30, 2000, cash, cash
equivalents and marketable securities totalled $6.3 million, a $12.2 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 notes issued to officers, provided
approximately $5.1 million for the nine months ended September 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 $744,000 for the nine
months ended September 30, 2000.

         In March 1999, the Company issued a promissory note in the amount of
$75,000 to an officer of the Company. 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 January 2001 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 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.

         During the third quarter of 2000, the Company made deposits totalling
approximately $2.2 million for leasehold improvements and 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 by January 31, 2001.

         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

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<PAGE>

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.

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, the Company's ability to manage
expenses in line with revenue and all factors that contribute to meeting such
goals, the Company's ability to attain profitability and positive cash flow in
2001, 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

         FOREIGN EXCHANGE. The accounts of the Company's foreign subsidiary are
translated in accordance with SFAS No. 52, Foreign Currency Translation. In
translating the accounts of the foreign subsidiary into U.S. dollars, assets and
liabilities are translated at the rate of exchange in effect at quarter end,
while stockholders' equity is translated at historical rates. Revenue and
expense accounts are translated using the weighted average exchange rate in
effect during the quarter. Foreign currency translation and transaction gains or
losses for the Company's subsidiary are included in the accompanying
consolidated statements of operations since the functional currency for the
subsidiary is the U.S. dollar. The Company had accounts receivable of $1.1
million and $0 denominated in foreign currency as of September 30, 2000 and
December 31, 1999, respectively.

         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.

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<PAGE>

                           PART II - OTHER INFORMATION

ITEM 2.  RECENT SALES OF UNREGISTERED SECURITIES

                  On May 31, 2000, the Company acquired Primant AB ("Primant"),
                  a privately held Sweden - based internet solutions company
                  specializing in Microsoft systems integrations. In connection
                  with this acquisition, on August 21, 2000, the Company issued
                  300,000 shares of common stock 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 acccelerated vesting
                  over an 18-month period upon the achievement of certain
                  performance objectives of Primant. Such shares were issued
                  pursuant to Regulation S promulgated under the Securities Act
                  of 1933, as amended.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

                 (a)      Exhibits

         10.1     Promissory Note for $800,000 dated as of July 21, 2000 from
                  Joseph Seebach for the benefit of the Company filed herewith.

         10.2     Stock Pledge Agreement dated as of July 21, 2000 by and
                  between the Company and Joseph Seebach filed herewith.

         10.3     Promissory Note for $70,000 dated as of July 25, 2000 from
                  David W. Chapman for the benefit of the Company filed
                  herewith.

         10.4     Stock Pledge Agreement dated as of July 25, 2000 by and
                  between the Company and David W. Chapman filed herewith.

         27.1     Financial Data Schedule

                 (b)      Reports on Form 8-K
                          None.

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<PAGE>


                                   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:   November 14, 2000

                        PRIMIX SOLUTIONS INC.



                        /s/ DAVID W. CHAPMAN
                        -------------------------------

                        David W. Chapman
                        Chief Financial Officer and Principal Financial Officer

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