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 June 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 June 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
June 30,
1999 1998
REVENUES:
Systems $ $ 108
Maintenance and other services 177 493
______ ______
Total revenues 177 563
COST OF REVENUES
Systems 64
Support and other 39 180
______ ______
Total cost of revenues 39 244
GROSS PROFIT 138 319
OPERATING EXPENSES
Selling, general and administrative 93 575
Research and development 658
______ ______
Total operating expenses 93 1,233
______ ______
Operating income (loss) 45 (914)
Interest income, net 20 2
Other income 5 56
______ ______
NET INCOME (LOSS) BEFORE TAXES 70 (856)
Income tax (benefit) expense (4)
______ ______
NET INCOME (LOSS) $ 70 $ (852)
Net (loss) per share - Basic and Diluted $ .01 $ (.18)
Weighted Average Shares Outstanding 5,029 4,729
PREMIS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, 1999 March 31, 1999
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,671 $ 2,782
Accounts receivable, net 43 116
Refundable Income Taxes 264 264
Prepaid expenses and other current assets 89 41
Current Portion of Note receivable - 100
Total current assets 3,067 3,303
Property and equipment, net 31 45
TOTAL ASSETS $ 3,098 $ 3,348
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 21 $ 27
Accrued Liabilities 307 453
Unearned Income 455 456
Total current liabilities 783 936
Shareholders' equity:
Common stock 50 51
Additional paid in capital 9,635 9,659
Stock subscription receivable (51) (51)
Accumulated deficit (7,479) (7,549)
Cumulative translation adjustment 161 302
Total shareholders' equity 2,316 2,412
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 3,098 $ 3,348
PREMIS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
Three Months Ended
June 30,
1999 1998
OPERATING ACTIVITIES
Net income (loss) $ 70 $ (882)
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 83
Changes in assets and liabilities:
Current assets 116 25
Current liabilities (286) 4
_________ _________
Net cash provided by operating activities (100) (740)
INVESTING ACTIVITIES
Proceeds from the sale of property and equipment 14 (3)
_________ _________
Net cash provided by (used in) investing activities 14 (3)
_________ _________
FINANCING ACTIVITIES
Proceeds from the exercise of common stock options 4
Proceeds from notes receivable 19
Capital lease obligations (15)
Payments on notes payable (32)
Repurchase of common stock (25) (32)
_________ _________
Net cash (used in) financing activities (25) (24)
_________ _________
Net increase in cash and cash equivalents (111) (767)
Cash and cash equivalents, beginning of fiscal year 2,782 1,360
_________ _________
Cash and cash equivalents, end of period $ 2,671 $ 593
_________ _________
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 March31,
1999.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All intercompany balances and transactions have been
eliminated in consolidation.
3. NET INCOME (LOSS) PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share", which was adopted on December 31, 1997. All
earnings (loss) per share amounts for all periods have been presented to
conform to the Statement 128 requirements. Basic earnings (loss) per share is
computed on the basis of the weighted average number of common shares
outstanding. Diluted earnings (loss) per share does not include the effect of
outstanding stock options and warrants in a loss period as they are
anti-dilutive.
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 June 30, 1999 and 1998
(in 000's) are as follows:
Three Months Ended
June 30,
1999 1998
Comprehensive income (loss):
Net income (loss) $ 70 $ (852)
Other comprehensive income (loss):
Foreign currency translation
adjustments 141 1
Comprehensive income (loss) $ 211 $ (851)
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 has not had
a material impact on revenue recognition in fiscal 1999, to date.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION 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. The risks inherent in the
sub-lease of leased properties. 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 ofter 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 to ACA Facilitair BV
(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 September
1999.
The results of the quarter ended June 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 which 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. No systems revenues were
recorded for the period ended June 30, 1999. 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 first quarter of fiscal 2000, were $177,729 compared to
$563,000 for the same period in fiscal 1999. For fiscal 2000 these revenues
consisted of maintenance revenue and custom development related to maintenance
contracts. The Company derives its revenues from a small number of customer
software support contracts. The Company expects continued low level of
maintenance and support revenues throughout the remainder of fiscal 2000.
Gross Profit. Gross profit for the first quarter of fiscal 2000 was $138,387
compared to $319,000 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.
Selling, General And Administrative. Selling, general and administrative
expenses were $93,430 compared to $575,000 for the same period in fiscal 1999.
A large portion of which is related to one-time expenses related to the
liquidation.
Research And Development. The Company had no research and development expense
for the first quarter period ended June 30, 1999 compared to $658,000 for the
period ending June 30, 1998. The Company does not expect to have research and
development expense during the remainder of the fiscal year 2000.
Interest And Other Income. Interest income for the period reflects interest
earned on investments. Interest income for the first quarter period was
$19,660 compared to $2,000 for the same period in fiscal 1999.
Income Tax Expense. For the three month period ending June 30, 1999, no income
tax expense was recorded, since the Company believes its net operating loss
carryforward are adequate to offset current period earnings. The Company has
previously recorded a deferred tax asset and related income tax benefit
associated with its accumulated net operating losses in the amount of $264,000,
in the 1999 Fiscal year.
Liquidity and Capital Resources
The Company's cash and cash equivalents decreased by $110,539 from March 31,
1999 to June 30, 1999. The decrease is primarily the result of severance,
payments for lease terminations and contract settlements associated with the
liquidation of the Company. As of June 30, 1999, the Company had working
capital of $2,284,853 compared to working capital of $2,366,865 at March 31,
1999.
Under a software license agreement with NCR Corporation, a one-time software
license fee may 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 installment is payable only if NCR receives
an order for Phase II application software as part of the United States Postal
Service POS ONE program, which utilizes PREMIS OpenStore software. As of
August 12, 1999 the POS ONE program continues to rollout Phase I systems and an
order for Phase II application software has not yet been awarded to NCR.
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 shareholder 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 receipt of the second NCR license payment and closing of the sale of PSC
to ACA Facilitair, 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.
The Company occupies its headquarters in Plymouth, Minnesota pursuant to a 36
month lease, effective January 1, 1999, for approximately 7,000 square feet at
a minimum monthly base rent of $4,333. The Company is actively seeking a
sublease for this 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 July 1, 1999, the Company has no lease obligations for its Canadian
subsidiary other than a month to month lease of 400 square feet 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 August 12, 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 to ACA Facilitair BV
(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: August 13, 1999
PREMIS CORPORATION
(Registrant)
/S/ F. T. Biermeier
F. T. Biermeier
Chairman and Chief Executive Officer
Chief Financial Officer
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