UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTi
OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number 0-12196
PREMIS CORPORATION
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1424202
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
13220 County Road 6, Plymouth, Minnesota 55441
(Address of principal executive office)
(612) 550-1999
(Issuer's telephone number)
Not Applicable
(Former name, former address and former
fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares outstanding of the Issuer's Common Stock, $.01 par value,
was 5,028,952 as of September 30, 1999.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
PART 1 - FINANCIAL INFORMATION:
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PREMIS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data) (Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
REVENUES:
Systems $ 3,199 $ 3,461 $ 3,199 $ 3,839
Maintenance and other services 91 303 269 489
_______ _______ _______ _______
Total revenues 3,290 3,764 3,468 4,328
COST OF REVENUES:
Systems 35 102
Support and other 39 84 78 262
_______ _______ _______ _______
Total cost of revenues 39 119 78 364
GROSS PROFIT 3,251 3,645 3,390 3,964
OPERATING EXPENSES:
Selling, general and administrative 164 531 258 1,085
Research and development 432 1,112
_______ _______ _______ _______
Total operating expenses 164 963 258 2,197
Operating income 3,087 2,682 3,132 1,767
Interest income, net 35 7 54 9
Other (expense) income 220 (83) 226 (26)
_______ _______ _______ _______
BEFORE TAXES 3,342 2,606 3,412 1,750
Income tax (benefit) expense 313 - 313 (4)
_______ _______ _______ _______
NET INCOME $ 3,029 $ 2,606 $ 3,099 $ 1,754
Basic earnings (loss) per $ .60 $ .55 $ .62 $ .37
Diluted earnings (loss) per share $ .57 $ .52 $ .59 $ .36
Shares used to compute:
Basic earnings (loss) per share 5,028 4,734 5,028 4,732
Diluted earnings (loss) per share 5,283 5,027 5,283 5,027
PREMIS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, 1999 March 31, 1999
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 5,769 $ 2,781
Accounts receivable, net 42 116
Current Portion of Note Receivable 100
Prepaid expenses and other current assets 64 41
Refundable income taxes 249 264
________ ________
Total current assets 6,124 3,302
Property and equipment, net 29 45
________ ________
TOTAL ASSETS $ 6,153 $ 3,347
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 172 $ 479
Accrued Taxes Payable 313
Unearned revenue 226 456
________ ________
Total current liabilities 711 935
Shareholders' equity:
Common stock 50 50
Additional paid in capital 9,635 9,659
Stock Subscription Receivable (51) (51)
Accumulated deficit (4,450) (7,549)
Cumulative translation adjustment 258 302
________ ________
Total shareholders' equity 5,442 2,412
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,153 $ 3,347
________ ________
PREMIS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
Six Months Ended
September 30,
1999 1998
OPERATING ACTIVITIES
Net income (loss) $ 3,411 $ 1,754
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 159
Gain on sale of fixed assets (15) (5)
Proceeds from note receivable 47
Changes in assets and liabilities:
Current assets (165) 289
Current liabilities (223) (54)
_______ _______
Net cash provided by operating activities 3,006 2,190
FINANCING ACTIVITIES
Proceeds from the exercise of common stock options 4
Repurchase of common stock (25)
Capital lease obligations (30)
Repayment of debt (55)
_______ _______
Net cash (used in) financing activities (25) (81)
Effect of exchange rate changes on cash 5 111
_______ _______
Net increase in cash and cash equivalents 2,986 1,226
Cash and cash equivalents, beginning of fiscal year 2,783 1,360
_______ _______
Cash and cash equivalents, end of period $ 5,769 $ 3,586
_______ _______
PREMIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared
by the Company without audit, with the exception of the balance sheet for March
31, 1999, which was derived from audited financial statements, and reflect all
adjustments (consisting only of normal and recurring adjustments and accruals)
which are, in the opinion of management, necessary to present a fair statement
of the results for the interim periods presented. The statements have been
prepared in accordance with the regulations of the Securities and Exchange
Commission, but omit certain information and footnote disclosures necessary to
present the statements in accordance with generally accepted accounting
principles. The results of operations for the interim periods presented are
not necessarily indicative of the results to be expected for the full fiscal
year. These condensed consolidated financial statements should be read in
conjunction with the Financial Statements and footnotes thereto included as
an exhibit to the Company's Annual 10-KSB Report for the fiscal year ended
March 31, 1999.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiary. All intercompany balances and transactions have been eliminated
in consolidation.
3. NET INCOME (LOSS) PER SHARE
All earnings (loss) per share amounts for all periods have been presented, and
where necessary, restated to conform to the Statement 128 requirements. Shares
used in the net income (loss) per share calculation are as follows:
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
Shares- Basic earnings (loss) per share 5,029 4,734 5,029 4,732
Dilutive common stock equivalents 255 293 255 146
_____ _____ _____ _____
Shares- Dilutive earnings (loss) per share 5,283 5,027 5,283 4,878
Basic earnings (loss) per share is computed on the basis of the weighted
average number of common shares outstanding.
4. COMPREHENSIVE INCOME (LOSS)
The Company adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS No. 130") effective April 1, 1998. SFAS
No. 130 requires that items defined as other comprehensive income, such as
foreign currency translation adjustments, be separately classified in the
financial statements and that the accumulated balance of other comprehensive
income be reported separately from retained earnings and additional paid-in
capital in the equity section of the balance sheet. The components of
comprehensive income for the three and six months ended September 30, 1999 and
1998 are as follows:
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
Comprehensive income (loss):
Net income (loss) $ 3,029 $ 2,606 $ 3,099 $ 1,754
Other comprehensive income (loss):
Foreign currency translation adjustments 97 88 (44) 89
_______ _______ _______ _______
Comprehensive income (loss) $ 3,126 $ 2,694 $ 3,055 $ 1,843
5. SOFTWARE REVENUE RECOGNITION
In November 1997, the Financial Accounting Standards Board issued Statement of
Position ("SOP") 97-2 "Software Revenue Recognition" to replace SOP-91-1. The
Company adopted SOP 97-2 in the first quarter of fiscal 1999 and it did not
materially impact revenue recognition for this time period.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITI ON AND RESULTS OF OPERATIONS
Forward-Looking Statements
The statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, except for the historical
information contained herein, are forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended, and are
subject to the safe harbor created by that statute. Such statements are subject
to certain risks and uncertainties, some of which are discussed below. Other
factors that could cause actual results to differ materially from those
described in the forward-looking statements include: The likelihood and
volatility regarding the expected date of arrival of certain cash payments
under license and sale agreements. The risk of delays in receiving approvals
for certain tax maters from foreign governments. Readers are cautioned not
to place undue reliance on the forward-looking statements contained in this
Report, since such statements necessarily reflect the knowledge and belief of
the Company which speak as to matters only as of the date hereof. The Company
does not undertake, and shall have 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.
General
On July 15, 1999 the shareholders of the Company approved the following three
proposals placed before the Annual Meeting:
1. Sale of the Company's ownership of its subsidiary, PREMIS Systems Canada
Incorporated ("PSC") and PSC's OpenEnterprise software (the "Transaction"):
2. Adoption of a Plan of Complete Liquidation and Dissolution of the
Company (the "Plan of Liquidation"):
3. Holdback of up to $1 million of the proceeds of the Transaction for a
period of up to 12 months to identify and secure a business combination which
may provide shareholders with additional value, and thereby delaying or
terminating implementation of the Plan of Liquidation.
The management of the Company is proceeding to satisfy the obligations of the
Company, sell its remaining assets and review opportunities for a business
combination. As of the date of this report on Form 10QSB it is anticipated
that the sale of PSC to ACA Facilitair will be completed by late November,
1999.
The results of the quarter ended September 30, 1999 should not be viewed as the
results of a company seeking to operate in the normal course of business. The
staff has been reduced to a small group of people whom are meeting the
obligations of extended software maintenance contracts, preparing for the sale
of PCS, and liquidating the remaining unused assets of the company. The
comparisons of current and prior year periods set forth below should be
evaluated in light of the Company's objective, which is winding down and
ceasing operations.
Results of Operations
Revenue. The Company's revenues are divided into two categories: systems
revenues and maintenance and other services revenues. $3,199,000 in systems
revenues were recorded for the period ended September 30, 1999. Under a
software license agreement with NCR Corporation, a one-time software license
fee would be paid to the Company by NCR in two installments of $3,250,000. The
first license fee installment was received during the second quarter of fiscal
1999. The second and final installment was received during this second quarter
of fiscal 2000 and recorded as systems revenues. Maintenance fees and other
services revenues are composed principally of system maintenance contracts.
Revenues derived from system maintenance contracts are deferred and recognized
ratably over the contract period, which is typically twelve months.
Total revenues for the second quarter of fiscal 2000, were $3,290,000 compared
to $3,764,000 for the same period in fiscal 1998. The Company expects
continued low level of maintenance and support revenues throughout the
remainder of fiscal 2000. For the six months ended September 30, 1999 the
total revenues were $3,468,000 compared to $4,328,000 for the same period in
the prior year.
Gross Profit. Gross profit for the second quarter of fiscal 2000 was
$3,251,000 compared to $3,645,000 for the same period in fiscal 1999. For the
remainder of the fiscal year, Gross profit is expected to vary significantly as
the liquidation proceeds on course. For the six months ended September 30, 1999
the gross profit was $3,390,000 compared to $3,964,000 for the same period in
the prior year.
Selling, General And Administrative. Selling, general and administrative
expenses for the second quarter of fiscal 2000 were $164,000 compared to
$531,000 for the same period in fiscal 1999. A large portion of the fiscal
2000 SG&A are one-time expenses related to the liquidation. For the six months
ended September 30, 1999 the selling, general and administrative expense was
$258,000 compared to $1,085,000 for the same period in the prior year.
Research And Development. The Company had no research and development expense
for the second quarter period ended September 30, 1999 compared to $432,000 for
the period ending September 30, 1998. The Company does not expect to have
research and development expense during the remainder of the fiscal year 2000.
For the six months ended September 30, 1999 there were no research and
development expenditures compared to $1,112,000 for the same period in the
prior year.
Interest And Other Income. Interest income for the period reflects interest
earned on investments. Interest income for the first quarter period was
$35,000 compared to $7,000 for the same period in fiscal 1999. Other income
for the quarter was $220,000 as compared to an expense of $83,000 for the prior
year. For the six months ended September 30, 1999 interest income was $54,000
compared to $9,000 for the same period in the prior year while other income was
$226,000 compared to an expense of $26,000 in the same period in the prior
year.
Income Tax Expense. For the three month period ending September 30, 1999,
$313,000 was recorded for income tax expense was recorded, compared to none for
the same period in fiscal 1999. The Company has recorded a deferred tax asset
and related income tax benefit associated with its accumulated net operating
losses in the amount of $249,000, in the 1999 Fiscal year. For the six months
ended September 30, 1999, $313,000 was recorded for income tax expense compared
to none for the same period in the prior year.
Liquidity and Capital Resources
The Company's cash and cash equivalents decreased by $2,985,000 for the six
months ending September 30, 1999. The increase is primarily the result of the
after tax benefit of the NCR payment received in the quarter ending September
30,1999. As of September 30, 1999, the Company had working capital of
$5,442,000 compared to working capital of $2,367,000 at March 31, 1999.
On July 15, 1999, the shareholders of the Company voted to sell its Canadian
subsidiary to ACA Facilitair, liquidate the Company and distribute the cash
assets to the shareholders. The shareholders also approved a holdback from the
distribution of $1,000,000 to seek a merger partner for the Company, if the
second NCR license payment is received.
Upon closing of the sale of PSC, the net cash of the Company, after providing
for its obligations, less $1,000,000 to be held back, will be distributed to
its shareholders. During the period from approximately July 15, 1999 to July
15, 2000 the Company will be seeking a business combination with another
entity. In the absence of such a combination within this general time frame,
the Company will liquidate and distribute the remaining net proceeds to the
shareholders.
There were no capital expenditures for property and equipment in the first
three months of fiscal 2000.
On September 15, 1999 the Company entered into a lease termination agreement
with the landlord of the building housing its headquarters in Plymouth,
Minnesota. The agreement called for the payment of one months minimum rent and
$4,000 to secure a release from its obligations under a 36 month lease which
became effective January 1, 1999, for approximately 7,000 square feet at a
minimum monthly base rent of $4,333. In addition the Company paid a realtor
fee of $18,000 to find a new occupant for space.
Effective July 1, 1999, the Company's Canadian subsidiary received a release
from its obligations under a lease that became effective January 1, 1999, for a
approximately 8,300 square feet and a minimum monthly rental of CDN$7,463.
As of October 1, 1999, the Company has no lease obligations in either Canada or
the US other than month to month leases for storage of its business records.
PART 2 - OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS
In September 1998, the Company commenced legal proceedings against Robert E.
Ferguson, a former owner of REF Retail Systems Corp. ("REF") which the Company
acquired on October 1, 1996, seeking damages in an unspecified amount related
to alleged breaches of the agreement for the purchase of REF, and related
matters. The legal proceeding against Mr. Ferguson was filed in the Ontario
Court of Justice, General Division on September 22, 1997 (Case No.
97-CV-132581). The Ferguson suit has not been settled as of November 11, 1999.
The Company expects to provide for its continuing litigation under the plan of
liquidation.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of the shareholders of the Company on July 15,
1999, the following proposals were voted upon by the shareholders:
1. Sale of the Company's ownership of its subsidiary, PREMIS Systems Canada
Incorporated ("PSC") and PSC's OpenEnterprise software (the "Transaction"):
For: 3,284,147 Against: 19,900 Abstain: 4,600
2. Adoption of a Plan of Complete Liquidation and Dissolution of the
Company (the "Plan of Liquidation"):
For: 3,053,305 Against: 50,142 Abstain: 205,200
3. Holdback of up to $1 million of the proceeds of the Transaction for a period
of up to 12 months to identify and secure a business combination which may
provide shareholders with additional value, and thereby delaying or terminating
implementation of the Plan of Liquidation.
For: 3,045,253 Against: 243,994 Abstain: 19,400
4. Election of five (5) Directors:
For Against
F. T. Biermeier 4,635,862 63,350
Mary Ann Calhoun 4,635,862 63,350
Gerald F. Schmidt 4,635,862 63,350
Albert D. Hanser 4,635,862 63,350
Terrence W. Glarner 4,635,862 63,350
5. Ratification of appointment of PriceWaterhouseCoopers, LLP as the
independent auditors of the Company for the year ending March 31, 2000:
For: 4,486,441 Against: 21,950 Abstain: 9,977
All proposals were approved by the shareholders, by a majority of the
outstanding shares of record on June 1, 1999.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
None.
(B) REPORTS ON FORM 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 12, 1999
PREMIS CORPORATION
(Registrant)
/S/ F. T. Biermeier
F. T. Biermeier
Chairman and Chief Executive Officer
and Chief Financial Officer
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