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