SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Second quarter ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
Commission File Number 0-12196
PREMIS CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-1424202
(State of Incorporation) (I.R.S. Employer Identification Number)
13220 County Road #6, Plymouth, MN. 55441
(Address of Principal Executive Offices)
(612) 550-1999
(Issuer's Telephone Number)
15301 Hwy 55 West, Plymouth, MN. 55447
(Former Address of Principal Executive Offices, if changed since last report)
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No ____
Number of shares outstanding at September 30, 1996:
Common Stock, Par Value: $.01 Shares: 2,707,052
Transitional small business disclosure format (check one).
Yes No X
<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED STATEMENTS OF OPERATIONS
For the 3 months For the 6 months
Ended September 30 Ended September 30
1996 1995 1996 1995
Revenue:
System Sales $ 1,628,366 $ 1,129,026 $ 3,212,552 $ 2,111,475
Maintenance Fees & Other Income 320,573 221,399 650,566 428,704
Total Revenue 1,948,939 1,350,425 3,863,118 2,540,179
Cost of Sales:
Systems 843,663 513,569 1,593,038 1,016,034
Royalty Expense 77,292 67,593 154,183 122,034
Support/Other 143,370 101,038 284,843 193,053
Total Cost of Sales 1,064,325 682,200 2,032,064 1,331,121
Gross Profit 884,614 668,225 1,831,054 1,209,058
Selling, General and
Administrative Expense 363,321 303,652 765,064 604,504
Net Income (Before Taxes) 521,293 364,573 1,065,990 604,554
Income Tax Expense 203,270 143,008 415,731 239,000
Net Income $ 318,023 $ 221,565 $ 650,259 $ 365,554
Net Income per Share 0.11 0.07 0.22 0.12
Weighted Average Shares 3,024,906 3,046,854 3,002,294 2,979,758
Outstanding
<PAGE>
PART I - FINANCIAL INFORMATION
BALANCE SHEET
September 30, March 31,
1996 1996
(Unaudited)
ASSETS:
Current Assets:
Cash $ 918,185 $ 968,083
Accounts Receivable (Net of Allowance
for Doubtful Accounts) 1,557,377 1,204,874
Inventory 226,610 282,720
Deferred Taxes 33,000 33,000
Prepaid Expenses 238,910 11,537
Total Current Assets 2,974,082 2,500,214
Other Assets:
Furniture & Equipment 231,678 225,437
Leased Equipment 31,773 31,773
Less Accumulated Depreciation & Amortization (185,807) (173,685)
Capital Lease - Building 950,000
Software Distribution Rights net of accumulated
depreciation and amortization of $142,063 and
$88,159, respectively 215,408 249,301
Total Other Assets 1,243,052 332,826
TOTAL ASSETS 4,217,134 2,833,040
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade Accounts Payable 380,790 137,964
Other Accrued Liabilities 185,347 228,524
Accrued Income Tax 47,181 510,000
Unearned Income 105,604 187,211
Capital Lease Obligation - Current 223,690
Customer Deposits 12,419 41,861
Notes Payable 53,065 102,928
Total Current Liabilities 1,008,096 1,208,488
Long-Term Liabilities:
Notes Payable 112,097 112,097
Capital Lease Obligation - Long-Term 723,885
Total Long-Term Liabilities 835,982 112,097
TOTAL LIABILITIES 1,844,078 1,320,585
Stockholders' Equity:
Common Stock 10,000,000 shares authorized
2,707,052 and 2,590,694 outstanding,
respectively, $.01 par value 27,070 26,094
Additional Paid-in Capital 940,527 731,181
Retained Earnings 1,405,439 755,180
Total Stockholders' Equity 2,373,056 1,512,455
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,217,134 $ 2,833,040
<PAGE>
PART I - FINANCIAL INFORMATION
Statement of Change in Financial Position
For the Six Months
Ended September 30,
1996 1995
(Unaudited) (Unaudited)
Cash Flows from Operating Activities:
Net Income $ 650,259 $ 365,554
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 54,017 1,728
Changes in assets and liabilities:
Current Assets (442,516) (17,062)
Current Liabilities (374,220) 140,214
Net Cash Provided (Used) by Operating Activities $ (112,460) $ 490,434
Cash Flows from Investing Activities:
Purchase of property and equipment (14,241) (38,267)
Net Cash Provided (Used) by Investing Activities (14,241) (38,267)
Cash Flows from Financing Activities:
Repayment of debt (49,863) 0
Decrease of lease obligation (2,426) 0
Sale of stock 129,092 0
Net Cash Provided (Used) by Financing Activities $ 76,803 $ 0
Net Increase (Decrease) in Cash (49,898) 452,167
Cash at beginning of year $ 968,083 $ 426,959
Cash at end of period $ 918,185 $ 879,126
<PAGE>
PREMIS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 1996
Note 1: Basis of Presentation
The accompanying condensed balance sheet as of September 30, 1996, and the
condensed income statements and statements of changes in financial position
for the three-month period ended September 30, 1996, are presented without
audit. In the opinion of the management, all normally recurring adjustments
necessary for a fair presentation of the financial statements in conformity
with generally accepted accounting principles have been made.
Certain footnote disclosures and other information normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto included
in the Company's audited financial statements as of March 31, 1996 as included
in its 10KSB filing on June 29,1996. The balance sheet as of March 31, 1996
has been taken from the audited financial statements as of that date.
Note 2: Business
(a) General development of business: PREMIS Corporation was incorporated
as a Minnesota corporation in April 1982 to design, develop, market and support
integrated turnkey computer systems for business use that are based on the
Company's proprietary applications software. The Company's systems are designed
for use by food brokers, food processors and manufacturers, and multi store
retail chains.
(b) Financial information by industry segment: Net sales, operating income
and identifiable assets of the Registrant's integrated turnkey systems business
constitute 100% of the Company's operations and therefore segment information is
not applicable.
(c) Narrative description of business:
The Company develops, markets and supports a line of industry-specific
information management software systems designed to assist businesses with
management of their day-to-day operations and long- term strategic planning.
The Company's proprietary software products are typically sold in combination
with PC workstation equipment and client/server hardware. The Company's
turn-key systems provide an enterprise-wide solution to the information needs of
multi-store specialty retailing businesses, food brokers and food distributors
and include a variety of integrated functions such as:
<PAGE>
- - point of sale data collection and management transaction review
- - "real time" sales analysis reporting by store,product,customer or 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
- - Intranet communications connections between stores and main corporate offices
The Company's strategy is to develop leading-edge, industry-specific software
systems to collect business information, analyze the data and provide concise,
meaningful reports to individuals within an organization. The Company initially
developed software products targeted toward food distribution firms. In 1994,
the Company entered the specialty retail market when it acquired the exclusive
marketing rights for the IRIS software system which assists with the back office
and headquarters management functions of multi-store specialty retail chains.
Since that time, the Company has continued to enhance the applications and
functionality of its software products and has evolved from a provider of a
single application specialty software into a turn-key vendor of enterprise-wide
information management systems.
The Company's main products are the REF OpenEnterpriseT described in Note 3, and
the IRIST, ADVANTAGET, and RETAINT Systems. The ADVANTAGE Computerized
Brokerage System is designed to assist food brokers with the day to day
management of their business. It controls orders and commissions and reports
on sales performance according to salesperson, product line, and customer. The
ADVANTAGE System also has Electronic Data Interchange communications capability
to provide computer-to-computer transmission of sales orders, invoices, pricing
and other information with manufacturers and distributors.
The RETAIN Retail Analysis and Inventory Notation System, which includes both
hardware and software elements, is designed to assist food brokers,
manufacturers' representatives and manufacturers in obtaining and analyzing
highly valued information concerning the retail distribution of their products.
The RETAIN System includes an optional handheld data entry unit which is used to
record product price, distribution, and related information at a retail store.
The RETAIN System may also be purchased as an option to the ADVANTAGE System.
The PREMIS IRIS System was first introduced in the year 1987. This software
system is designed to assist multi-store retail merchants with their point of
sale and inventory management activities. The system modules are fully
integrated and include inventory, purchasing, sales analysis and point of sale
and others. A system usually consists of point of sale hardware and software
which resides in the retail stores and a host system which resides at the chain
headquarters.
<PAGE>
Note 2: Subsequent Events
On October 1, 1996 the Company closed on a secondary offering of 1,750,000
shares of common stock with proceeds to the Company of $7,868,875. On
October 8, 1996 the underwriter exercised its option to purchase an additional
262,500 shares to cover over-allotments with proceeds of $1,180,331. The
Company stated that planned to use the proceeds from the offering to acquire
REF Retail Systems Corporation, a Toronto-based provider of Windows NTR-based
specialty retailing management software and systems.
On October 1, 1996 the Company completed the acquisition of all the outstanding
shares of REF Retail Systems Corporation and it has been merged into PREMIS
Systems Canada LTD, a newly formed Canadian Subsidiary of PREMIS Corporation.
The financial position and results of operations of the former REF Retail
Systems Corporation will be reported as PREMIS Systems Canada consolidated with
PREMIS Corporation for the third and fourth fiscal quarters of the current
fiscal year ending March 31, 1997.
The Registrant's business is not seasonal, however, installations of the Point
of Sales systems are greatly reduced in December when retailers experience their
busiest time of the year.
<PAGE>
PREMIS CORPORATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation
The information in this discussion, except for the historical information
contained herein, contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and is subject
to the safe harbor created by that statute. Such statements are subject to
certain risks and uncertainties. In addition to the factors discussed below,
other factors that could cause actual results to differ materially from those
described in the forward-looking statements include: volatility in the demand
and price for software systems; the risk of push-outs of delivery dates for
system orders; the risk of order cancellations; the risk of delays in
introducing new software products and the market's acceptance of such products;
the successful integration of the personnel, products and operations of REF
Retail Systems Corporation with those of PREMIS Corporation; and other risk
factors described in the Company's most recently filed SEC documents. Readers
are cautioned not to place undue reliance on those forward looking statements
which speak as to matters only as of the date hereof. The Company has no
obligation to publicly release the results of any revisions to these forward-
looking statements which may be made to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
The fiscal year ending March 31, 1996, was a successful year for the Company
with a net income of $827,632 compared to a net income of $474,687 for the prior
year. The Company has followed that year with continued growth in the first
six months of fiscal 1996. The sales for new enhancements and releases for both
the Advantage and IRIS product lines, introduced in fiscal 1993, 1994 and 1995
and the United States Postal Service concept "Store of the Future" continued to
grow during this six month period.
In July 1996, the Company agreed to acquire REF Retail Systems Corporation, a
Toronto-based provider of Windows NTR-based retail management software and
systems which complement the Company's existing retail software products. REF's
retail software combines and easy-to-use, point of sale ("POS") transaction
processing interface with sophisticated data analysis and information reporting
capabilities. The Windows NTR graphical user interface significantly reduces
the cost of training cashier personnel and shortens the time required to process
a sale. The REF software is designed to accelerate information access and
provide a wide variety of management reports on a "real time" basis to various
levels of an organization. The sophisticated data acquisition and processing
features of the REF product position these systems toward the high end of the
specialty retail market, which broadens the range of product offerings for the
Company's specialty retail systems. Management believes the REF acquisition
will provide the Company with an improved sales capability and contribute a
higher level of technology and functionality for its products.
The Company completed the acquisition of REF on October 1, 1996 and it has been
merged into PREMIS Systems Canada LTD, a newly formed Canadian Subsidiary of
PREMIS Corporation. The financial position and results of operations of the
former REF Retail Systems Corporation will be consolidated with PREMIS
Corporation for the third and fourth fiscal quarters of the current fiscal year
ending March 31, 1997.
<PAGE>
Three Months Ended September 30, 1996, Compared to
Three Months Ended September 30, 1995
For the three months ended September 30, 1996 sales were 44% greater than the
comparable period of 1995, at $1,948,939 versus $1,350,425. Gross margin on
sales were up 32%, at $884,614 versus $668,225 reflecting an unusually large
hardware content in a few customer system upgrades. Selling, general and
administrative expense was up only 20% over the comparable period in fiscal
1996, at $363,321 versus $303,652, reflecting improved productivity to offset
the cost increases required to support a higher level of sales. Net income
before taxes was up 43%, at $521,293 versus $364,573. Net income was up 44% at
$318,023 versus $221,565. Net income per share was up 57% to $.11 versus $.07
for the prior year. The improvements for the quarter represent growth in
products offered in the marketplace, with continued growth in products sold to
the United States Postal Service.
Six Months ended September 30, 1996, Compared to
Six Months Ended September 30, 1995
For the six months ended September 30, 1996, sales were 52% greater than the
comparable period for 1995, at $3,863,118 versus $2,540,179. Gross margin was
up 51%, at $1,831,054 versus $1,209,058 for the same period in fiscal 1996.
Selling, general and administrative expenses was up 27% at $765,064 versus
$604,504, reflecting improved productivity per employee to offset cost increases
required to support a higher level of sales. Net profit before taxes was up 76%
at $1,065,990 verses $604,554 in fiscal 1995. Net income was up 78% at
$650,259 versus $365,554. Net income per share was up 83% to $.22 versus $.12
for the prior year. The improvements for the six month period also represent
growth in products offered in the marketplace, with continued growth in products
sold to the United States Postal Service.
Liquidity and Capital Resources
The Company feels that proceeds from its recent secondary stock offering closed
on October 1, 1996 and cash flow from operations will provide adequate liquidity
and capital to execute its business plan.
<PAGE>
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of shareholders was held on July 17, 1996. The
following proposals were voted upon, with the following results:
FOR AGAINST ABSTAINED
Election of Directors
F. T. Biermeier 1,717,472 0 0
G. Mary Ann Calhoun 1,717,472 0 0
H. Gerald Schmidt 1,717,472 0 0
Amendment of Articles of 1,609,393 107,079 1000
Incorporation to Increase the
Authorized Stock to 10,000,000
Ratification of Appointment 1,731,431 0 0
of Price Waterhouse LLP
as Auditors for the Year
Ending March 31, 1997
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
* 2.1 Stock Purchase Agreement for Acquisition of REF Retail
Systems Corporation
* 3.1 Amendment to Articles of Incorporation, effective
August 2, 1996
27 Financial Data Schedule
* Incorporated by reference to exhibit filed as a part of Registration
Statement in Form S-2 (Commission File No. 333-10917)
(b) The following Reports on Form 8-K were filed during the quarter ended
September 30,1996:
8K 07/19/96 Agreement to purchase outstanding shares of REF
Retail Systems, Inc.
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PREMIS CORPORATION
November 15, 1996 By: /s/ F. T. Biermeier
Date F. T. Biermeier
Chairman, Chief Executive Officer,
President and Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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