SOURCE: Primal Solutions, Inc.

Primal Solutions, Inc.

August 14, 2008 13:18 ET

Primal Solutions Announces Results for Second Quarter 2008 and the Six Months Ended June 30, 2008

IRVINE, CA--(Marketwire - Aug 14, 2008) - Primal Solutions (OTCBB: PMSO), a market leader for innovative managed solutions that turn data into revenue, today announced financial results for the quarter and six months ended June 30, 2008.

Second Quarter 2008 Highlights

--  Revenue: total revenue of $1,610,000 was flat compared to $1,614,000
    for the same period in the year earlier.  Recurring revenue up 21% over the
    year earlier quarter to $1,363,000 (84% of total revenue) from $1,131,000
    (70% of total revenue) based primarily on increased subscriber counts
--  Operating loss: $45,000 loss, which included a $242,000 non-recurring,
    non-cash stock option expense
--  Net income: $756,000 after a $945,000 non-recurring non-cash gain on
    debt extinguishment
--  Cash from operations: generated $148,000 in cash from operations while
    paying down $239,000 in debt
--  Working capital: reduced working capital deficit to $816,000 from $2.3
    million at the beginning of the year
--  Debt restructuring: fully settled $982,000 junior secured debt
    obligation
--  Capital structure: implemented 1-for-35 reverse stock split of the
    Company's common stock
    

For the quarter ended June 30, 2008, revenues were flat compared to the same period in 2007 at $1,610,000 versus $1,614,000, respectively. Net income increased to $756,000, or $0.52 per fully diluted share, from a loss of $99,000, or ($0.09) per fully diluted share, for the same period in 2007. This increase included a $945,000 non-recurring, non-cash gain on debt extinguishment.

Revenues decreased slightly to $3,138,000 for the six months ended June 30, 2008, compared to $3,219,000 for the same period in 2007. Net income was $838,000, or $0.72 per fully diluted share, for the six months ended June 30, 2008, compared to a net loss of $228,000, or ($0.21) per fully diluted share, for the same period in 2007. This increase included a $1.1 million non-recurring, non-cash gain on debt extinguishment.

Joe Simrell, Chief Executive Officer and Chief Financial Officer of Primal Solutions, commented, "During the second quarter we successfully completed our debt reduction initiative by fully settling our junior secured debt at a significant discount and restructuring our senior secured convertible debt. This was accomplished while recording the fifth consecutive quarter of positive operating cash flow."

Mr. Simrell continued, "In June 2008, the Company effectuated a 1-for-35 reverse split of our common stock, and as a result changed our trading symbol to PMSO. In conjunction with our debt reduction initiative, we felt the timing was right for us to address issues surrounding our capital structure. Investors looking for opportunities in profitable micro-cap stocks, but unwilling to invest in penny stocks, can now consider Primal since our per-share price is above $1.00. Longer term, we believe this will support our desire to move up to an exchange listing."

Mr. Simrell added, "With strong recurring revenue and a significantly improved balance sheet, our focus is on growing the business while maintaining operating profitability and positive cash flow. Operationally, this means continued investment in our IPC Platform and associated analytics capabilities during 2008, which has resulted in a higher investment in research & development compared to 2007. Our customers and prospects operate in a very competitive and dynamic marketplace. It is important that we continue to deliver product enhancements and new capabilities that provide our customers with a competitive edge."

About Primal

Primal Solutions, Inc. (OTCBB: PMSO) is a market leader for innovative managed solutions that turn data into revenue. Our IPC Platform™ Suite -- delivered as a managed service and powered by patent-pending technology -- captures, correlates, tracks, manages, monetizes, and analyzes communications transaction data to enable communications providers to generate increased revenues, improve profitability, and control costs. A trusted partner, Primal has long running relationships with leading Cable MSOs, including Time Warner Cable, Bright House Networks, Bresnan Communications, and Bend Broadband.

Forward-looking Statements

This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of known and unknown risks and uncertainties that may cause the company's actual results or outcomes to be materially different from those anticipated and discussed herein. These include the company's historic lack of profitability, end-use customers' acceptance and actual demand for the company's products, which may differ significantly from expectations, the need for the company to manage its growth, the need to raise funds for operations, and other risks associated with the regulation of the Internet and the telecommunications industry. Additional discussion of these and other factors affecting the company's business and prospects is contained in the company's Form 10-KSB for the year ended December 31, 2007 on file with the Securities and Exchange Commission.

Primal, the Primal Solutions logo, IPC Platform, and IPC Analytics are trademarks of Primal Solutions, Inc. All other trademarks and product names are the property of their respective owners.

                          PRIMAL SOLUTIONS, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS


                                                  -----------  -----------
                                                    June 30,   December 31,
                                                      2008         2007
                                                  -----------  -----------
ASSETS
Current Assets
  Cash and cash equivalents                       $   422,000  $   524,000
  Accounts receivable, net                            118,000      137,000
  Prepaid expenses and other current assets            83,000      144,000
                                                  -----------  -----------
    Total current assets                              623,000      805,000
                                                  -----------  -----------

  Property and equipment, net of accumulated
   depreciation of $971,000 and $1,512,000,
   respectively                                       123,000      271,000
  Goodwill                                            593,000      593,000
  Other assets                                         56,000       76,000
                                                  -----------  -----------
                                                  $ 1,395,000  $ 1,745,000
                                                  ===========  ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
  Accounts payable                                $    69,000  $    57,000
  Accrued liabilities                                 256,000      376,000
  Accrued salaries and benefits                       310,000      532,000
  Deferred revenue                                    144,000      172,000
  Short-term borrowings and current portion of
   long-term debt                                      44,000      632,000
  Current portion of senior convertible debt, net
   of discount of $0 and $177,000, respectively       616,000    1,323,000
                                                  -----------  -----------
    Total current liabilities                       1,439,000    3,092,000

Long-term debt, net of current portion                      -      706,000
Noncurrent portion of senior convertible debt,
 net of discount of $0 for each period                884,000            -
Other long-term liabilities                            57,000       58,000
                                                  -----------  -----------
                                                    2,380,000    3,856,000

Commitments and contingencies (Notes 3, 4 and 5)

Stockholders' Deficit
Preferred stock, $0.01 par value; 5,000,000
 shares authorized; none issued and outstanding
Common stock and additional paid-in capital,
 $0.01 par value;  95,000,000 shares authorized;
 1,096,652(1) shares issued and outstanding in
 each period                                       16,842,000   16,554,000
Accumulated deficit                               (17,827,000) (18,665,000)
                                                  -----------  -----------
    Net stockholders' deficit                        (985,000)  (2,111,000)
                                                  -----------  -----------
                                                  $ 1,395,000  $ 1,745,000
                                                  ===========  ===========



(1) Amounts have been restated to reflect the 1-for-35 reverse split
    effective June 19, 2008.


                          PRIMAL SOLUTIONS, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



                        Three months ended June     Six months ended June
                                  30,                       30,
                        ------------------------  ------------------------
                            2008         2007         2008         2007
                        -----------  -----------  -----------  -----------

Net revenue             $ 1,610,000  $ 1,614,000  $ 3,138,000  $ 3,219,000

  Cost of revenue           352,000      431,000      702,000      889,000
  Research and
   development              478,000      385,000      903,000      745,000
  Selling, general and
   administrative           825,000      680,000    1,389,000    1,386,000
                        -----------  -----------  -----------  -----------
    Total costs           1,655,000    1,496,000    2,994,000    3,020,000
                        -----------  -----------  -----------  -----------

Operating (loss) income     (45,000)     118,000      144,000      199,000
Gain from debt
 extinguishment             945,000            -    1,082,000            -
Interest and other
 expenses, net             (144,000)    (217,000)    (385,000)    (424,000)
                        -----------  -----------  -----------  -----------
Income (loss) before
 income tax provision       756,000      (99,000)     841,000     (225,000)
Income tax provision              -            -        3,000        3,000
                        -----------  -----------  -----------  -----------

Net income (loss)       $   756,000  $   (99,000) $   838,000  $  (228,000)
                        ===========  ===========  ===========  ===========


Basic earnings per
 share                  $      0.69  $     (0.09) $      0.76  $     (0.21)
Diluted earnings per
 share                  $      0.52  $     (0.09) $      0.72  $     (0.21)

Basic weighted average
 number of common and
 common equivalent
 shares outstanding (1)   1,096,652    1,096,652    1,096,652    1,096,652

Diluted weighted
 average number of
 common and common
 equivalent shares
 outstanding (1)          1,532,733    1,096,652    1,532,733    1,096,652


Contact Information

  • Investors Contact:
    Terrea Tamanaha
    +1 949.608.5776
    Email Contact

    or

    Media Contacts:
    Madison Alexander
    PR for Primal Solutions
    Julia Young
    Email Contact
    O: +1.949.838.4564

    Dan Chmielewski
    Email Contact
    O: +1.714.832.8716
    M: +1.949.231.2965