SECURITIES AND EXCHANGE COMMISSION
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended:December 31, 2004 Commission File Number:000-21685
INTELIDATA TECHNOLOGIES CORPORATION
| DELAWARE | 54-1820617 | |
| (State of incorporation) | (I.R.S. Employer Identification Number) |
11600 Sunrise Valley Drive, Suite 100, Reston, VA 20191
(Address of Principal Executive Offices) (Zip Code)
(703) 259-3000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Name of Each Exchange on Which Registered | |
| None | None |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock par value $0.001 per share
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 (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.
Yesþ Noo
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-Ko.
The aggregate market value of the Common Stock held by non-affiliates of the registrant on June 30, 2004, was approximately $31,499,000 based on the last sales price reported that date on the Nasdaq Stock Market of $0.66 per share. In determining this figure, the Registrant has assumed that all of its directors and executive officers and each person who owns 5% or more of the outstanding common stock are affiliates. Such assumptions should not be deemed to be conclusive for any other purpose.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act): Yesþ Noo
The number of shares of the registrant’s Common Stock outstanding on March 28, 2005 was 51,133,492.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Explanatory Note
This amendment to the InteliData Technologies Corporation Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 is being filed to amend in their entirety subsections (b) and (d) of Item 9A, Controls and Procedures. In addition, this amendment is being filed to amend in its entirety the information contained in the Summary Compensation Table in Item 11, Executive Compensation, in order to correct an immaterial arithmetical error.
This amendment does not amend or update any other information set forth in the original Annual Report on Form 10-K for the fiscal year ended December 31, 2004, previously filed on March 31, 2005, or the original Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004, previously filed on May 2, 2005.
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PART II
ITEM 9A. CONTROLS AND PROCEDURES
(b) MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of the Company’s management, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2004, based on the framework in the “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation the Company has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2004 as a result of the six material weaknesses discussed below.
Selection and Application of Generally Accepted Accounting Principles
The Company’s controls over the selection and application of generally accepted accounting principles are ineffective as a result of inadequate resources and technical accounting expertise within the accounting function to resolve non-routine or complex accounting matters. The Company’s three certified public accountants do not have specialized expertise in technical matters such as lease accounting and lack the technical skills to correctly interpret and apply accounting pronouncements to non-routine transactions or complex transactions. The inadequate resources and technical accounting expertise resulted in adjustments, which were material to the financial statements as of December 31, 2004. Such adjustments related to the accounting for lease transactions and warrants issued to purchase the Company’s common stock and resulted in a restatement of the Company’s consolidated financial statements; the details and magnitude of which are discussed in Note 2(n) and Note 14 (unaudited) to the consolidated financial statements and Item 6 — Selected Financial Data, originally filed on March 31, 2005, in the Annual Report on Form 10-K.
Financial Close and Reporting Process
The Company’s design and operation of controls with respect to the process of preparing and reviewing the annual and interim financial statements are ineffective. Deficiencies identified include the lack of appropriate review of the footnotes, reconciliations, and supporting workpapers including the deferred rent liability schedule and the schedule underlying the statement of cash flows. The Company also lacks adequate controls related to complying with disclosure requirements such as the use of disclosure checklists, lacks adequate controls over spreadsheets used in the financial close and reporting process, and lacks an independent review of journal entries. While these deficiencies did not result in a material misstatement of the financial statements, due to the potential pervasive effect on the financial statement account balances and disclosures and the importance of the annual and interim financial closing and reporting process, in the aggregate, management has concluded that there is more than a remote likelihood that a material misstatement in our annual or interim financial statements could occur and would not be prevented or detected.
Recognition of Revenue and Deferred Revenue
The Company did not design and implement appropriate controls related to the recognition of revenue for software contracts and controls related to the balance sheet classification of the related deferred revenue accounts in accordance with generally accepted accounting principles. In particular, the Company does not have adequate controls to capture and analyze the terms and conditions of new contracts or procedures to capture, analyze, and properly record the impact of amendments or side agreements to existing contracts. An audit adjustment to reclassify deferred revenue from current to long-term was recorded by the Company and side agreements were detected by management during the fourth quarter of 2004. While the lack of adequate controls to capture and analyze the terms and conditions of contracts including side agreements and the deferred revenue adjustment did not result in a material misstatement of the financial statements, based on the significance of revenue and the elevated risk of misstatement associated with software revenue recognition, in the aggregate, management has concluded there is more than a remote likelihood that a material misstatement in our annual or interim financial statements could occur and would not be prevented or detected.
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Segregation of Duties
The Company did not design and implement controls related to the segregation of duties including a lack of segregation of duties between a preparer and reviewer of journal entries and a lack of segregation of duties in the Company’s revenue and payroll processes. Within the revenue process, there is lack of segregation of duties between the handling of customer master files, billing, and accounts receivable. Similarly, the payroll process is handled by one individual from the initial preparation of the payroll, to the receipt and approval of the payroll. While these deficiencies did not result in a material misstatement of the financial statements, due to the potential pervasive effect on financial statement account balances and disclosures and the absence of other mitigating controls, management has concluded there is more than a remote likelihood that a material misstatement in our annual or interim financial statements could occur and would not be prevented or detected.
Control Environment
The Company’s design and operation of controls within the control environment component are ineffective. Deficiencies identified include employees do not have to sign a confirmation that they have read the code of conduct, a lack of a comprehensive delegation of authority policy for approvals of significant contracts and other transactions, and a lack of training programs particularly in the financial close and reporting group. Management has concluded that these deficiencies, when considered in the aggregate along with the significance and number of all other deficiencies, including the material weaknesses disclosed in this report, are indicative of an ineffective control environment that constitutes a material weakness.
Risk Assessment
The Company’s design of controls within the risk assessment component is ineffective as the Company lacks an established process to identify risks and changes in risks, including the risk of fraud. Due to the significance of the risk assessment component and, in particular, the consideration of the risk of fraud, management has concluded that this constitutes a material weakness.
Deloitte & Touche LLP, the Company’s independent registered public accounting firm, audited the consolidated financial statements and has issued an attestation report on management’s assessment of the Company’s internal control over financial reporting which is included herein.
(d) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the most recent fiscal quarter, there has been no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting. As described in (b) above, the Company has restated its consolidated financial statements for the years ended December 31, 2003 and 2002.
Due to the pending merger with Corillian and devoting its limited resources to consummating the merger, at this time InteliData has not devised a plan to address its material weaknesses. InteliData and Corillian are currently evaluating the material weaknesses as part of the merger integration activities. If the merger with Corillian is not consummated, InteliData’s management will undertake to devise such plans and, if appropriate, report those plans in a future filing.
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PART III
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the annual, long-term and all other compensation for services rendered in all capacities to InteliData, it subsidiaries and predecessors for the years ended December 31, 2004, 2003 and 2002 of (a) InteliData��s Chief Executive Officer, and (b) each of the other three highly compensated executive officers (other than the chief executive officer) of InteliData whose aggregate cash compensation exceeded $100,000 for the fiscal year ended December 31, 2004 (collectively, the “Named Executive Officers”):
| Long-Term Compensation | ||||||||||||||||||||||||||||
| Annual Compensation | Awards | |||||||||||||||||||||||||||
| Restricted | Securities | All Other | ||||||||||||||||||||||||||
| Stock | Underlying | Compensation | ||||||||||||||||||||||||||
| Year | Salary ($) | Bonus ($)(1) | Other ($) | Awards ($) | Options(#) | ($)(2) | ||||||||||||||||||||||
| Alfred S. Dominick, Jr. | 2004 | 375,000 | — | — | — | 80,000 | 14,235 | |||||||||||||||||||||
| Chairman & Chief | 2003 | 354,233 | — | — | — | — | 31,856 | |||||||||||||||||||||
| Executive Officer | 2002 | 300,000 | 50,000 | — | — | — | 63,417 | |||||||||||||||||||||
| Karen Kracher | 2004 | 165,192 | — | — | 19,500 | (5) | 100,000 | 2,240 | ||||||||||||||||||||
President(3) | 2003 | — | — | — | — | — | — | |||||||||||||||||||||
| 2002 | — | — | — | — | — | — | ||||||||||||||||||||||
| Michael E. Jennings | 2004 | 125,000 | — | — | 7,800 | (6) | — | 46,557 | ||||||||||||||||||||
| Former President & | 2003 | 200,000 | — | — | 40,500 | — | 62,090 | |||||||||||||||||||||
| Chief Operating | 2002 | 200,000 | 30,000 | — | 42,500 | 45,000 | 65,115 | |||||||||||||||||||||
Officer(4) | ||||||||||||||||||||||||||||
| Albert N. Wergley | 2004 | 188,511 | (8) | — | — | 7,800 | — | 52,808 | ||||||||||||||||||||
| Former Vice President, | 2003 | 200,000 | — | — | 27,000 | (9) | — | 2,585 | ||||||||||||||||||||
| General Counsel & | 2002 | 200,000 | 20,000 | — | 25,500 | 30,000 | 2,366 | |||||||||||||||||||||
Secretary(7) | ||||||||||||||||||||||||||||
| (1) | Bonus awards are reported for the year earned, but may have been paid in the subsequent year. | |
| (2) | For 2004, includes: (i) travel and temporary housing expenses for Mr. Jennings ($21,361.63); (ii) the dollar value of insurance premiums paid by InteliData for the benefit of Mr. Dominick ($6,505.94); (iii) the amount of InteliData matching contributions made on behalf of the named individual under InteliData’s 401(k) Plan as follows: Mr. Dominick ($2,500.00), Ms. Kracher ($2,240.35), Mr. Jennings ($1,961.46), and Mr. Wergley ($2,807.78); (iv) $5,229.49 for the forgiveness of a loan from InteliData to Mr. Dominick; (v) the fair market value ($6,935.00) of the 2000 Toyota Camry given to Mr. Jennings pursuant to his Separation Agreement and General Release with InteliData; (vi) the amount of consulting fees ($15,000.00), plus expenses ($1,299.00), paid to Mr. Jennings in 2004; and (vii) an amount of severance ($50,000.00) paid to Mr. Wergley pursuant to his Separation Agreement and General Release with InteliData. | |
| For 2003, includes: (i) travel and temporary housing expenses for Mr. Dominick ($17,490) and Mr. Jennings ($59,090); (ii) the dollar value of insurance premiums paid by InteliData for the benefit of Mr. Dominick ($11,866); and (iii) the amount of Company matching contributions made on behalf of the named individual under InteliData’s 401(k) Plan as follows: Mr. Dominick ($2,500), Mr. Jennings ($3,000), and Mr. Wergley ($2,585). | ||
| For 2002, includes: (i) travel and temporary housing expenses for Mr. Dominick ($53,396) and Mr. Jennings ($62,365); (ii) the dollar value of insurance premiums paid by InteliData for the benefit of Mr. Dominick ($7,521); and (iii) the amount of Company matching contributions made on behalf of the named individuals under InteliData’s 401(k) Plan as follows: Mr. Dominick ($2,500), Mr. Jennings ($2,750), and Mr. Wergley ($2,366). | ||
| (3) | Ms. Kracher joined InteliData in January 2004 and became an officer of InteliData in August 2004. | |
| (4) | Mr. Jennings resigned from his position as President & Chief Operating Officer on August 15, 2004. | |
| (5) | For 2004, consists of the fair market value of a restricted stock award on the date of the award of 25,000 shares on May 21, 2004. The award vests, subject to Ms. Kracher’s continued employment, on November 21, 2005. |
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| (6) | For 2004, consists of the fair market value of a restricted stock award on the date of the award of 10,000 shares on May 21, 2004. The award terminated due to Mr. Jennings’ resignation. For 2003, consists of the fair market value of a restricted stock award on the date of the award of 30,000 shares on April 15, 2003. The award vested on October 15, 2004. For 2002, consists of the fair market value of a restricted stock award on the date of the award of 25,000 shares on February 21, 2002. The award vested on August 21, 2003. | |
| (7) | Mr. Wergley resigned from his position as Vice President, General Counsel & Secretary on November 5, 2004. | |
| (8) | Includes unused vacation pay ($11,588.47) accrued to Mr. Wergley through November 5, 2004. | |
| (9) | For 2004, consists of the fair market value of a restricted stock award on the date of the award of 10,000 shares on May 21, 2004. The award terminated due to Mr. Wergley’s resignation. For 2003, consists of the fair market value of a restricted stock award on the date of the award of 20,000 shares on April 15, 2003. The award vested on October 15, 2004. For 2002, consists of the fair market value of a restricted stock award on the date of the award of 15,000 shares on February 21, 2002. The award vested on August 21, 2003. |
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(b) EXHIBITS
| Exhibit No. | Description | |
| # 23.3 | Consent of Independent Registered Public Accounting Firm. | |
| # 31.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| # | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| INTELIDATA TECHNOLOGIES CORPORATION | ||||
| By: | /s/ Alfred S. Dominick, Jr. | |||
| Alfred S. Dominick, Jr. | ||||
| Chairman, Chief Executive Officer, and Acting Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Alfred S. Dominick, Jr. Alfred S. Dominick, Jr. | Chairman, Chief Executive Officer, and Acting Chief Financial Officer | July 7, 2005 | ||
| /s/ Karen A. Kracher Karen A. Kracher | President and Chief Sales and Marketing Officer | July 7, 2005 | ||
| /s/ Monique L. Marcus Monique L. Marcus | Vice President, Finance & Treasurer (Principal Accounting Officer) | July 7, 2005 | ||
| /s/ Neal F. Finnegan Neal F. Finnegan | Director | July 7, 2005 | ||
| /s/ Patrick F. Graham Patrick F. Graham | Director | July 7, 2005 | ||
| /s/ Michael E. Jennings Michael E. Jennings | Director | July 7, 2005 | ||
| /s/ L. William Seidman L. William Seidman | Director | July 7, 2005 | ||
| /s/ Norman J. Tice Norman J. Tice | Director | July 7, 2005 |
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