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EXHIBIT 99.3
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma balance sheet as of September 30, 1998,
gives the effect to the acquisition of certain assets of Banking Solutions Inc.
as if the purchase had occurred on that date. The accompanying unaudited pro
forma statements of operations for the year ended December 31, 1997 and the
three months ended September 30, 1998 have been prepared to reflect adjustments
to Towne Services' historical results of operations to give effect to the
purchase as if it had occurred at the beginning of the respective periods. The
pro forma adjustments are based upon available information and certain
assumptions that management believes to be reasonable. Final purchase
adjustments may differ from the pro forma adjustments herein.
The accompanying pro forma statements are not necessarily indicative of the
results of operations which would have been attained had the purchase been
consummated on the dates indicated or which may be attained in the future.
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TOWNE SERVICES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
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HISTORICAL HISTORICAL PRO FORMA
TOWNE SERVICES, INC. BANKING SOLUTIONS, INC. ADJUSTMENTS
-------------------- ----------------------- ---------------
REVENUES $ 722,364 $ 8,085,813 $ -
COST AND EXPENSES
Costs of processing, servicing, and support 832,102 3,867,946 -
Research & Development 332,470 266,322 -
Purchased in process development - - -
Sales and Marketing 839,323 459,774 -
Stock compensation expense - - -
General and Administrative 1,139,642 3,665,590 798,000 (c)
-------------------- ----------------------- ---------------
Total costs and expenses 3,143,537 8,259,632 798,000
-------------------- ----------------------- ---------------
Operating (loss) income (2,421,173) (173,819) (798,000)
Other expenses:
Interest (income) expense, net 95,946 5,719 (9,586) (d)
Other (Income) Expense (1,018) - -
-------------------- ----------------------- ---------------
Total other expenses 94,928 5,719 (9,586)
Net loss $ (2,516,101) $ (179,538) $ (788,414)
==================== ======================= ===============
Net loss per common share $ (0.26)
====================
Weighted average common shares outstanding 9,600,592
====================
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PRO FORMA
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REVENUES $ 8,808,177
COST AND EXPENSES
Costs of processing, servicing, and support 4,700,048
Research & Development 598,792
Purchased in process development -
Sales and Marketing 1,299,097
Stock compensation expense -
General and Administrative 5,603,232
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Total costs and expenses 12,201,169
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Operating (loss) income (3,392,992)
Other expenses:
Interest (income) expense, net 92,079
Other (Income) Expense (1,018)
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Total other expenses 91,061
Net loss $ (3,484,053)
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Net loss per common share $ (0.34)
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Weighted average common shares outstanding 10,136,676
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NINE MONTHS ENDED SEPTEMBER 30, 1998
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HISTORICAL HISTORICAL PRO FORMA
TOWNE SERVICES, INC. BANKING SOLUTIONS, INC. ADJUSTMENTS
-------------------- ----------------------- -------------
REVENUES $ 3,136,865 $ 6,638,031 $ -
COST AND EXPENSES
Costs of processing, servicing, and support 1,321,576 3,225,843 -
Research & Development 293,079 351,538 -
Sales and Marketing 3,596,783 844,068 -
Stock compensation expense 6,231,156 - -
General and Administrative 2,696,936 2,239,434 598,500 (c)
-------------------- ----------------------- -------------
Total costs and expenses 14,139,530 6,660,883 598,500
-------------------- ----------------------- -------------
Operating loss (11,002,665) (22,852) (598,500)
Other expenses:
Interest (income) expense, net (27,123) 12,866 (16,434) (d)
Other (Income) Expense 4,242 -
Financing 323,000 - -
-------------------- ----------------------- -------------
Total other expenses 300,119 12,866 (16,434)
Loss before extraordinary loss (11,302,784) (35,718) (582,066)
Extraordinary loss on early extinguishment 476,239
-------------------- ----------------------- -------------
Net Loss (11,779,023) (35,718) (582,066)
Preferred Stock Dividends (5,108,000) - -
Accretion of warrants with redemption (691,972) - -
-------------------- ----------------------- -------------
Net loss attributable to
common shareholders $ (17,578,995) $ (35,718) $ (582,066)
==================== ======================= =============
Net loss per common share $ (1.23)
====================
Weighted average common shares outstanding 14,309,909
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PRO FORMA
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REVENUES $ 9,774,896
COST AND EXPENSES
Costs of processing, servicing, and support 4,547,419
Research & Development 644,617
Sales and Marketing 4,440,851
Stock compensation expense 6,231,156
General and Administrative 5,534,870
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Total costs and expenses 21,398,913
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Operating loss (11,624,017)
Other expenses:
Interest (income) expense, net (30,691)
Other (Income) Expense 4,242
Financing 323,000
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Total other expenses 296,551
-
Loss before extraordinary loss (11,920,568)
-
Extraordinary loss on early extinguishment 476,239
----------------
-
Net Loss (12,396,807)
-
Preferred Stock Dividends (5,108,000)
-
Accretion of warrants with redemption (691,972)
----------------
-
Net loss attributable to -
common shareholders $ (18,196,779)
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Net loss per common share $ (1.23)
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Weighted average common shares outstanding 14,845,993
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TOWNE SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(a) On November 30, 1998, Towne Services, Inc. acquired all of the
outstanding common stock of Banking Solutions, Inc. The acquisition was
accounted for as a purchase, with the excess purchase price over the fair value
of the net assets acquired to be allocated to goodwill. Goodwill has been
estimated to be $14,171 and will be amortized over 25 years. A summary of the
purchase price and the related purchase allocation follows:
AGGREGATE PURCHASE PRICE
Cash paid at closing $ 9,976
Financial, accounting, legal and other direct acquisition costs 430
Cash paid to extinguish debt and payable 438
Issuance of 536,084 shares of Towne Services, Inc.
common stock 4,517
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Aggregate purchase price $15,361
PRELIMINARY ALLOCATION OF PURCHASE PRICE
Aggregate purchase price $15,361
Add net book value of liabilities assumed 1,225
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Excess of cost over the net book value of assets acquired 16,586
Adjustments to record assets and liabilities at fair
market value:
Property, Plant and Equipment 191
Customer contracts (1,153)
Deferred revenue (1,453)
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Total adjustments (2,415)
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Goodwill $14,171
(b) Represents elimination of historical equity balances of Banking
Solutions.
(c) Represents amortization of customer contracts over 5 years and goodwill
over 25 years.
(d) Represents elimination of interest expense on debt repaid upon
acquisition.