EXHIBIT 23.1: Consent of Deloitte & Touche LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
333-16115, No. 333-16117, No. 333-16121, No. 333-76631, and No. 333-93227 of
InteliData Technologies Corporation on Form S-8 and in Registration Statement
No. 333-85313 of InteliData Technologies Corporation on Form S-3 of our report
dated March 14, 2001, incorporated by reference in the Current Report on Form
8-K/A under the Securities Exchange Act of 1934 of InteliData Technologies
Corporation dated January 11, 2001.
/s/ DELOITTE & TOUCHE LLP
McLean, Virginia
March 26, 2001
EXHIBIT 23.2: Consent of Deloitte & Touche LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
333-16115, No. 333-16117, No. 333-16121, No. 333-76631, and No. 333-93227 of
InteliData Technologies Corporation on Form S-8 and in Registration Statement
No. 333-85313 of InteliData Technologies Corporation on Form S-3 of our report
dated March 4, 2001, (relating to the consolidated financial statements of Home
Account Holdings, Inc. and subsidiary), appearing in this Current Report on Form
8-K/A under the Securities Exchange Act of 1934 of InteliData Technologies
Corporation dated January 11, 2001.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
March 26, 2001
EXHIBIT 99.2: Home Account Audited Financial Statements for the Years end
December 31, 2000 and 1999
HOME ACCOUNT HOLDINGS, INC. AND SUBSIDIARY
Consolidated Financial Statements for the
Years Ended December 31, 2000 and 1999
and Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Home Account Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Home Account
Holdings, Inc. and subsidiary (the "Company") as of December 31, 2000 and 1999,
and the related consolidated statements of operations, common stockholders'
deficit and mandatorily redeemable convertible preferred stock, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Home Account Holdings, Inc. and
subsidiary at December 31, 2000 and 1999, and the results of their operations
and their cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 1 to the financial statements, on January 11, 2001,
InteliData Technologies Corporation acquired 100% of the Company's outstanding
preferred and common stock.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
March 4, 2001
HOME ACCOUNT HOLDINGS INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
2000 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,508 $ 250,062
Accounts receivable, net of allowance of
$146,960 and $13,152 1,682,504 1,605,427
Receivables - other 44,876 27,272
Prepaid expenses and other current assets 176,764 187,071
---------- -----------
Total current assets 1,905,652 2,069,832
PROPERTY AND EQUIPMENT, NET 1,756,086 1,948,055
GOODWILL 2,822,134 3,628,458
OTHER ASSETS 19,262 19,262
---------- -----------
TOTAL ASSETS $6,503,134 $7,665,607
=========== ===========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND COMMON STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $2,178,339 $1,223,400
Accrued liabilities 663,030 478,356
Notes payable to stockholders 4,500,000
Interest payable 117,935
Short-term capital lease obligations 27,992 57,478
Deferred revenue 1,279,331 1,290,750
Other liabilities 83,120 100,609
---------- -----------
Total current liabilities 8,849,747 3,150,593
Long-term capital lease obligations 5,000 32,992
---------- -----------
Total liabilities 8,854,747 3,183,585
---------- -----------
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Mandatorily redeemable convertible preferred stock,
$0.001 par value, 64,381,430 shares authorized:
Series A, 38,741,666 shares designated, 29,637,374
shares issued and outstanding in 2000 and 1999
(aggregate liquidation preference $22,084,001) 22,084,001 22,084,001
Series B, 13,800,000 shares designated, 13,800,000
shares issued and outstanding in 2000 and 1999
(aggregate liquidation preference $16,008,000) 16,008,000 16,008,000
Series C, 11,839,764 shares designated, 7,643,053
shares issued and outstanding in 2000 (aggregate
liquidation preference $10,050,617) 10,050,617
----------- -----------
Total mandatorily redeemable convertible 48,142,618 38,092,001
preferred stock ----------- -----------
COMMON STOCKHOLDERS' DEFICIT:
Common stock, $0.001 par value, 110,000,000 and
84,895,596 shares authorized, 2,701,932 and
2,349,810 shares issued and outstanding 2,702 2,350
Additional paid-in-capital 1,835,451 779,271
Notes receivable from stockholders (562,525) (559,157)
Accumulated deficit (51,769,859)(33,832,443)
----------- ------------
Total common stockholders' deficit (50,494,231)(33,609,979)
----------- ------------
TOTAL LIABILITIES, MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND COMMON
STOCKHOLDERS' DEFICIT $ 6,503,134 $ 7,665,607
=========== ============
See notes to consolidated financial statements.
HOME ACCOUNT HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
2000 1999
REVENUES:
Transaction services $ 4,825,611 $ 1,897,992
Consulting services 2,905,572 1,534,980
License and maintenance 719,219 752,595
------------ --------------
Total revenues 8,450,402 4,185,567
------------ --------------
COST OF REVENUES:
Transaction services 3,761,402 2,382,309
Consulting services 2,493,926 1,834,423
License and maintenance 68,914 11,361
------------ --------------
Total cost of revenues 6,324,242 4,228,093
------------ --------------
GROSS MARGIN
2,126,160 (42,526)
------------ --------------
OPERATING EXPENSES:
Research and development 9,260,653 7,873,282
General and administrative 6,377,204 3,681,884
Sales and marketing 4,183,395 3,139,832
------------ --------------
Total operating expenses 19,821,252 14,694,998
------------ --------------
OPERATING LOSS (17,695,092) (14,737,524)
OTHER INCOME (EXPENSE):
Interest income 91,759 128,822
Interest expense (334,083) (366,195)
------------- --------------
NET LOSS $(17,937,416) $(14,974,897)
============= =============
See notes to consolidated financial statements.
HOME ACCOUNT HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS DEFICIT AND MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
YEAR ENDED DECEMBER 31, 2000
Preferred Series A Total Common Stock
--------------------- Preferred Preferred Preferred ------------------
Old New Series B Series C Stock Old New
BALANCE, DECEMBER 31, 1998 $ 10,021,111 $5,887
Issuance of common stock upon
conversion of notes payable 1,921
Exchange of subsidiary stock for
holding company stock (see Note 3) (10,021,111) $ 18,550,278 18,550,278 (7,808) $ 8
Issuance of Series A preferred and
common stock for Direct Banking
acquisition (see Note 3) 3,533,723 3,533,723 2
Issuance of Series B preferred stock $16,008,000 16,008,000
Issuance of common stock for cash
and notes receivable 2,340
Net loss ------------ ---------- ----------- ----------- -------
BALANCE, DECEMBER 31, 1999 22,084,001 16,008,000 38,092,001 2,350
Issuance of Series C preferred stock
upon conversion of stockholder
notes payable $ 6,000,000 6,000,000
Issuance Series C preferred stock 4,050,617 4,050,617
Issuance of common stock at par 270
Issuance of common stock upon
exercise of stock options 1,215
Rescission of stock option exercises (730)
Stock compensation expense related to
option grants
Stock warrants issued in connection
with convertible notes payable
Repurchase of restricted common
stock (403)
Net loss
------------ ------------ ----------- ----------- ----------- ------- -------
BALANCE, DECEMBER 31, 2000 $ - $ 22,084,001 $16,008,000 $10,050,617 $48,142,618 $ - $2,702
============ ============ =========== =========== =========== ======= =======
Additional Total
Paid-in Notes Accumulated Common
Capital Receivable Deficit Equity
$ 113,712 $(12,716,820) $ (12,597,221)
2,269,275 2,271,196
(2,380,641) (6,140,726) (8,529,167)
462 464
776,463 $ (559,157) 219,646
(14,974,897) (14,974,897)
- ---------- ----------- ------------- --------------
779,271 (559,157) (33,832,443) (33,609,979)
78,030 78,300
958,453 (893,926) 65,742
(185,213) 793,525 607,582
234,017 234,017
105,126 105,126
(134,233) 97,033 (37,603)
(17,937,416) (17,937,416)
- ----------- ----------- ------------- --------------
$1,835,451 $ (562,525) $(51,769,859) $ (50,494,231)
=========== =========== ============= ==============
See notes to consolidated financial statements.
HOME ACCOUNT HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (17,937,416) $(14,974,897)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 1,557,288 791,704
Amortization of debt issuance costs 105,126
Stock compensation expense 919,629
Changes in operating assets and liabilities:
Accounts receivable (77,077) (1,598,237)
Receivables - other (17,604) (27,272)
Prepaid expenses 10,307 (187,071)
Other assets (10,456)
Accounts payable and accrued liabilities 1,139,613 1,339,645
Interest payable 117,935
Deferred revenue (11,419) (1,563,295)
Other liabilities (17,489) 100,609
-------------- ------------
Net cash used in operating activities (14,211,107) (16,129,270)
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (563,245) (1,379,245)
Proceeds from sale of property and equipment 4,250
Cash paid for Direct Banking Acquisition (865,578)
-------------- -------------
Net cash used in investing activities (558,995) (2,244,823)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stockholder note payable 10,500,000 2,271,196
Proceeds from issuance of common stock 66,012 219,646
Proceeds from issuance of preferred stock 4,050,617 16,008,000
Proceeds from short-term loan 2,500,000
Payments on short-term loan (2,500,000)
Payments on capital lease (57,478)
Payments to repurchase common stock (37,603)
--------------- -------------
Net cash provided by financing activities 14,521,548 18,498,842
--------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (248,554) 124,749
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 250,062 125,313
-------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,508 $ 250,062
=============== =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 114,651 $ 366,098
Noncash investing and financing activities:
Conversion of stockholder note payable 6,000,000 2,271,196
to preferred stock
Purchase of equipment under capital lease 90,470
Issuance of common stock for notes receivable 893,926 559,157
Rescission of stockholder notes receivable 793,525
Purchase of Direct Banking 3,319,042
See notes to consolidated financial statements.
HOME ACCOUNT HOLDINGS, inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SALE OF THE COMPANY
Organization - Home Account Holdings, Inc. (the "Company"), a Delaware
------------
corporation, and its wholly-owned subsidiary, Home Account Network, Inc.
(the "Home Account"), is an enabler of internet-based financial services.
The company provides online banking, online credit card services,
financial management and electronic commerce solutions for any provider of
online financial services. Home Account was formed in June 1999 through a
common control merger (similar to a pooling of interest) of Home Account
Network and Proprietary Financial Products Corporation ("PFP").
On June 28, 1999, Home Account purchased First Data Resources' Direct
Banking unit ("Direct Banking"), a subsidiary of First Data Corporation.
The Company operates as a single business segment.
Sale of the Company - On January 11, 2001, InteliData Technologies
---------------------
Corporation ("InteliData") acquired 100% of the Company's outstanding
preferred and common stock in exchange for 6,900,000 shares of InteliData
common stock and approximately $320,000 cash. All of the Company's
outstanding notes payable to stockholders as of the closing date and
associated accrued interest payable were exchanged for the note holders'
right to receive a portion of the InteliData shares issued in the
transaction in preference to holders of the Company's preferred stock (the
"Debt Preference").
In 2000, the Company approved the 2000 Incentive Plan (the "Incentive
Plan") to retain certain officers of the Company during a change of
control transaction, and for a one year period after such a transaction.
Upon acquisition of the Company by InteliData, the Incentive Plan provided
for the granting to plan participants of an aggregate of 15% of the net
amount of InteliData shares allocable to the Company's preferred
stockholders after payment of the Debt Preference and other expenses
associated with the transaction. Two-thirds of the Incentive Plan
allocation vested as of January 11, 2001, and the remaining one-third
vests on January 11, 2002. In connection with the Incentive Plan
allocation, the Company will record a charge to compensation expense of
approximately $3,000,000 in 2001, representing the vested Incentive Plan
allocation adjusted for the Debt Preference and transaction expenses.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - All significant intercompany transaction
----------------------------
and balances have been eliminated in consolidation.
Cash Equivalents - The Company considers cash investments with a maturity
----------------
of three months or less at the time of purchase to be cash equivalents.
Property and equipment are stated at cost. Depreciation is calculated on
----------------------
the straight- line method over the estimated useful lives of the assets
ranging from three to ten years.
Goodwill represents the excess of the purchase price over the estimated
--------
fair values of identifiable net assets associated with the Company's
purchase of Direct Banking. Goodwill is being amortized over an estimated
useful life of 5 years on a straight-line basis.
Revenue Recognition - The Company recognizes revenue in accordance with
--------------------
Statement of Position ("SOP") 97-2, Software Revenue Recognition. SOP 97-2
requires that revenue recognized from software arrangements be allocated
to each element of the arrangement based on the relative fair values of
the elements, such as software products, upgrades, enhancements, post
contract customer support, installation or training. Under SOP 97-2, the
determination of fair value is based on objective evidence that is
specific to the vendor. If evidence of fair value for each element of the
arrangement does not exist, all revenue from the arrangement is deferred
until such time as evidence of fair value does exist or until all elements
of the arrangement are delivered.
In December 1998, the American Institute of Certified Public Accountants
issued SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition
with Respect to Certain Transactions. SOP 98-9 amends SOP 97-2 to require
the entity to recognize revenue for multiple element arrangements using
the "residual method" when: (1) there is vendor-specific evidence of the
fair values of all of the undelivered elements; (2) vendor-specific
evidence of fair value does not exist for one or more of the delivered
elements; and (3) the revenue recognition criteria of SOP 97-2 are
satisfied. SOP 98-9 was adopted by the Company and did not have a material
effect on the Company's consolidated results of operations, financial
position or cash flows.
License revenue is recognized when there is persuasive evidence of an
arrangement and delivery to the customer has occurred, the fee is fixed
and determinable, and collectibility is considered probable. Advance
payments are recorded as deferred revenue until the products are shipped,
services are delivered and all obligations are met. The Company's products
do not require significant customization.
Maintenance contracts generally require the Company to provide technical
support and software updates and upgrades to customers. Revenue from
maintenance contracts is recognized ratably over the term of the
maintenance contract, on a straight-line basis.
Consulting service revenue is comprised of consulting and implementation
services which are billed on a time and materials basis for which revenue
is generally recognized at the time the service is performed, and
implementation fees for transactional services for which revenue is
deferred and recognized over the life of the service agreement, generally
three years.
Revenue from transactional services is recognized as transactions are
processed.
Income Taxes - The Company accounts for income taxes under an asset and
-------------
liability approach. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
income tax purposes, and operating loss and tax credit carryforwards
measured by applying currently enacted tax laws.
Valuation allowances are provided when necessary to reduce net deferred
tax assets to an amount that is more likely than not to be realized.
Use of Estimates - The preparation of financial statements in conformity
----------------
with accounting principles generally accepted in the United States of
America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. The Company performs ongoing credit evaluations of its
customers' respective financial conditions, and, generally, requires no
collateral from its customers. The Company maintains an allowance for
uncollectible accounts receivable based on the expected collectibility of
accounts receivable.
Concentration of Credit Risk - Financial instruments that potentially
-----------------------------
subject the Company to concentration of credit risk consist of accounts
receivable. The Company's credit risk is mitigated by the Company's credit
evaluation process and the reasonably short collection terms. The Company
does not require collateral or other security to support accounts
receivable and maintains an allowance for potential credit losses.
Stock-Based Compensation - The Company accounts for its employee stock
-------------------------
option plan in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees.
Accordingly, no accounting recognition is given to stock options granted
to employees at fair market value until they are exercised.
The Company accounts for stock options issued to non-employees in
accordance with the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, and
Emerging Issues Task Force Issue No. 96-18 under the fair value method.
Impairment of Long-Lived Assets - The Company evaluates its long-lived
---------------------------------
assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets or intangibles may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted net
cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair
value of the assets.
Recently Issued Accounting Standards - Statement of Financial Accounting
------------------------------------
Standards (SFAS) No.133, Accounting for Derivative Instruments and Hedging
Activities, is effective for all fiscal years beginning after June 15,
2000. SFAS 133, as amended, establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. Under SFAS 133,
certain contracts that were not formerly considered derivatives may now
meet the definition of a derivative. The Company will adopt SFAS 133
effective January 1, 2001. Management does not expect the adoption of SFAS
133 to have a significant impact on the financial position, results of
operations, or cash flows of the Company.
Reclassifications - Certain prior amounts have been reclassified for
-----------------
consistency with the current year presentation. Such reclassifications had
no impact to net loss or total stockholders' equity.
3. BUSINESSES ACQUIRED
On June 22, 1999, Home Account was formed through the merger of Home
Account Network Inc. and PFP, a Florida corporation, which owned
intellectual property rights, patents and related copyrights and
trademarks. Home Account and PFP were wholly owned subsidiaries of Vault
Holdings. In the transaction, Home Account issued 7,073,870 shares of
common stock to PFP's
shareholders. Home Account also assumed all PFP options which were
converted to options to purchase approximately 98,522 shares of Home
Account's common stock. Immediately subsequent to the merger, Vault
Holdings exchanged all Home Account common, Series A preferred shares and
options one for one for a newly formed holding company's (Home Account
Holdings Corporation, the "Company") common and Series A preferred stock.
The transaction was accounted for as a common control merger (similar to a
pooling of interests) and, accordingly, the financial statements of the
Company include the accounts of PFP from inception.
On June 28, 1999, the Company acquired 100% of the outstanding common
stock of Direct Banking in a purchase transaction.
The Company paid $712,578 in cash, issued 1,600 common shares and
4,741,980 shares of Series A preferred stock valued at $3,534,188 and
incurred $153,000 in transaction costs for total purchase consideration of
$4,399,766.
The purchase consideration was allocated to the acquired assets and
assumed liabilities based on their respective fair values as follows:
Current assets $ -
Fixed assets 548,146
Assumed liabilities (180,000)
Goodwill 4,031,620
----------
Total purchase consideration $4,399,766
==========
The acquired goodwill is being amortized over an estimated useful life of
5 years on a straight-line basis.
4. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2000 and 1999 consisted of the
following:
2000 1999
Computer equipment $3,615,342 $3,137,902
Furniture, fixtures and office equipment 478,448 396,893
Leasehold improvements 50,570 50,570
Total 4,144,360 3,585,365
Less accumulated depreciation (2,388,274) (1,637,310)
----------- -----------
Net $1,756,086 $1,948,055
=========== ===========
5. INCOME TAXES
The Company's deferred income tax assets are comprised of the following:
2000 1999
Deferred tax assets:
Federal and state net operating losses $13,787,995 $11,058,789
Deferred revenue 524,526
Goodwill basis difference 330,592 106,016
Basis difference in fixed assets 260,781 318,877
Other 128,477 17
------------ ------------
Total gross deferred tax assets before
valuation allowance 15,032,371 11,483,699
Valuation allowance (15,032,371) (11,483,699)
------------ ------------
Net deferred tax assets $ - $ -
============ ============
No tax benefit has been recorded through December 31, 2000 because of the
net operating losses incurred and full valuation allowance provided. A
valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. The Company
established a 100% valuation allowance at December 31, 2000 due to the
uncertainty of realizing future tax benefits from its net operating loss
carryforwards and other deferred tax assets.
At December 31, 2000, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $40,500,000. These
carryforwards will begin to expire in 2010 and 2005 for federal and state
purposes, respectively.
Internal Revenue Code Section 382 places a limitation (the "Section 382
Limitation") on the amount of taxable income which can be offset by net
operating loss ("NOL") carryforwards after a change in control (generally
greater than 50% change in ownership) of a loss corporation. California
has similar rules. Generally, after a control change, a loss corporation
cannot deduct NOL carryforwards in excess of the Section 382 Limitation.
Due to these "change in ownership" provisions, utilization of the NOL may
be subject to an annual limitation regarding their utilization against
taxable income in future periods.
6. NOTES PAYABLE TO STOCKHOLDERS
During the first quarter of 2000, the Company borrowed $6,000,000 under
Promissory Notes (the "Notes") on a pro-rata basis from the holders of
Series B mandatory redeemable convertible preferred stock. The Notes were
issued in three tranches: (1) $1,500,000 on January 14, 2000, (2)
$1,500,000 on February 24, 2000, and (3) $3,000,000 on March 24, 2000. The
Notes bore interest at 10% per annum. The principal balances of the Notes
were converted into shares of Series C mandatorily redeemable convertible
preferred stock concurrent with the sale of Series C mandatorily
redeemable convertible preferred stock in May 2000 (Note 7). The
conversion price was the same price as the cash sale price of the Series C
mandatorily redeemable convertible preferred stock.
In August 2000, the Company borrowed $3,000,000 from preferred
stockholders under convertible subordinated promissory notes (the
"Convertible Notes"). Additionally, in connection with this transaction
the Company issued pro-rata to the holders of Series B mandatorily
redeemable convertible preferred stock detachable warrants to purchase
456,275 shares of Series C mandatorily redeemable convertible preferred
stock at $1.315 per share (Note 7). The Convertible Notes bear interest at
a rate equal to 10% per annum and are payable on demand. They are
convertible at the option of the note holders into shares of capital stock
of the Company if such shares are issued in a subsequent equity financing.
The Convertible Notes are otherwise convertible at the option of the note
holders into shares of Series C preferred stock in the event of a merger,
consolidation, or acquisition of the Company.
In November 2000, the Company borrowed $1,500,000 from stockholders under
promissory notes (the "Non-Convertible Notes"). The Non-Convertible Notes
bear interest at a rate equal to 10% per annum and are payable on demand.
In connection with the acquisition of the Company by InteliData (Note 1),
holders of the Convertible Notes, Non-Convertible Notes and warrants
agreed to exchange the principal balances and related accrued interest
payable, and the warrants for the right to receive a portion of the
InteliData shares issued in the Debt Preference.
7. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
In June 1999, the Company issued 24,895,394 shares of Series A mandatorily
redeemable convertible preferred stock ("preferred stock") and 8,400
shares of common stock in exchange for all 14,882,638 shares of
outstanding common stock and 10,021,111 shares of outstanding convertible
preferred stock of Home Account, its wholly owned subsidiary.
Additionally, in June 1999, 4,741,980 shares of Series A preferred stock
and 1,600 shares of common stock were issued to purchase Direct Banking.
In June 1999, the Company issued 13,800,000 shares of Series B preferred
stock for $1.16 per share.
In May 2000 and June 2000, the Company issued 7,604,562 and 38,491 shares,
respectively, of Series C preferred stock for which it received total
proceeds of $10,050,617. Of these proceeds, $6,108,082 was applied to the
repayment of principal and accrued interest payable on outstanding notes
payable to stockholders (Note 5).
Significant terms of the Series A, B, and C preferred stock are as
follows:
* At the option of the holder, each share of preferred stock is
convertible at any time into one share of common stock, subject to
adjustment for certain dilutive issuances. As of December 31, 2000, no
such adjustments had occurred. Shares automatically convert into
common stock upon the earlier of (a) completion of a public offering
with aggregate proceeds equal to or greater than $25,000,000 and the
initial price to the public equals or greater than 300% of the
original Series B issue price ($3.48 per share) or (b) upon the
consent of more than 50% of the holders of the Series B preferred
stock, voting together as a single class.
* Series A, B, and C convertible preferred stock are entitled to annual
noncumulative cash dividends of $0.059, $0.093, and $0.105 per share,
respectively, when and if declared by the Board of Directors.
* In the event of any liquidation of the Company (which includes the
acquisition of the Company by another entity), the holders of Series
A, B, and C preferred stock have a liquidation preference over common
stock of $0.7452 per share, $1.16 per share, and $1.315 per share
respectively, plus all declared but unpaid dividends. In the event of
any liquidation of the Company, the holders of Series A, B, and C
preferred stock have equal liquidation preference. Upon payment of all
preferred stock liquidation preferences, any remaining proceeds will
be distributed ratably among the holders of common stock and holders
of preferred stock on the basis of the number of shares of common
stock held and the number of shares of common stock into which the
shares of the holders of preferred stock held are then convertible.
* Upon the election, made in writing to the Company, by the holders of a
majority of the Series B preferred stock, the Company will be required
to redeem all outstanding shares of Series B preferred stock for an
amount equal to $1.16 per share plus 8% per annum without compounding
of the amount of each installment of the redemption from original
issuance date to the date of payment of that installment. Holders of
Series A and C preferred stock will have 30 days after the notice is
given of the election of Series B preferred stock to make such
election for an amount equal to $0.7452 per share and $1.315 per share
respectively, plus 8% per annum without compounding of the amount of
each installment of the redemption from original issuance date to the
date of payment of that installment.
* Holders of preferred stock have the same voting rights as the holders
of common stock.
Warrants to Purchase Preferred Stock
In August 2000, in connection with the issuance of an aggregate $3,000,000
in convertible promissory notes which bear interest at 10% per annum and
are payable on demand (Note 5), the Company issued detachable warrants to
purchase 456,275 shares of Series C preferred stock at $1.315 per share.
The warrants expire in August 2004 and were outstanding at December 31,
2000. The Company recorded an adjustment to the carrying value of the debt
for the fair value of the warrants ($105,126) at the time of issuance. The
discount was amortized as interest expense during 2000.
8. STOCKHOLDERS' EQUITY
Common Stock Reserved For Future Issuance
At December 31, 2000, the Company has reserved the following shares of
common stock for issuance in connection with:
Conversion of Series A preferred stock 29,637,374
Conversion of Series B preferred stock 13,800,000
Conversion of Series C preferred stock 7,643,053
Options issued and outstanding 12,748,195
Warrants issued and outstanding for Series C preferred stock 456,275
Options available under stock option plans 2,744,007
----------
Total 67,028,904
==========
Notes Receivable from Stockholders
As of December 31, 2000, the Company had issued an aggregate of 2,346,932
shares of common stock to its employees. In connection with these
issuances, the Company loaned a portion of the purchase price to certain
employees under secured full-recourse notes. The notes bear interest
generally at 6.0-6.5% per annum with the entire principal balance and all
accrued and unpaid interest due and payable on the earlier of (a) five
years or (b) the sale by the employee of the stock. In the event of
employee termination, at the option of the Company, the notes can be
accelerated and the entire unpaid balance including interest is due within
30 days. The restricted shares vest ratably over a five-year period.
Any unvested shares are subject to repurchase rights by the Company upon
occurrence of certain events or conditions, such as employment
termination, at the original purchase price. In 2000, the Company
repurchased 403,372 unvested common shares from employees who were
terminated. There were 1,289,500 shares subject to repurchase at December
31, 2000.
During December 2000, the Company rescinded common stock option exercises
for 729,591 shares with individuals who had exercised options in May 2000.
The individuals who exercised these shares paid for a portion of the
exercises by issuing notes payable to the Company. The transactions were
voided and the options were returned to the option holder. On the date of
the rescissions, the deemed fair value of the Company's common stock was
less than the amount of the original exercise price of the common stock
options. In connection with the rescissions, the Company recorded $607,582
in compensation expense, which included $33,833 in forgone interest income
on the outstanding notes.
Stock Issued in Shareholder Settlement
During 2000, a co-founder of the Company raised various claims against the
Company relating to past compensation and stock options. On May 1, 2000,
the Company and Home Account entered into a settlement agreement and
releases with the co-founder and certain of his family member and related
entities which released Home Account and the Company from all claims by
these persons and entities. Additionally former directors of Home Account
were released from all claims in their capacity as directors. Under the
agreement, Home Account agreed to: (1) pay the co-founder and a related
entity an aggregate of $500,000 in cash plus approximately $43,000 in cash
for expenses; (2) grant a fully vested option to purchase 500,000 shares
of Common Stock of the Company at $0.29 per share; and (3) issue an
aggregate of 270,000 shares of Common Stock at par value to certain
co-founder family members and related entities.
In addition to recording compensation expense in the amount of $543,000
for the cash payments, the Company also recorded compensation expense in
the amount of $116,900, representing the estimated fair value of the fully
vested options on the date of grant, and $78,030, representing the
difference between the issuance price of the common stock (par value) and
the deemed fair value of the common stock on the date of issuance.
Stock Option Plans
The Company maintains two option plans. The 1999 Employee Stock Option
Plan and the 1999 Director Stock Option Plan ("Plans"). The Plans provide
for the issuance of incentive stock options and non-statutory stock
options to employees, non-employee directors or consultants at prices not
less than the fair value at the date of grant. A total of 18,884,134
shares of the Company's common
stock have been authorized for issuance under the Plans. Options generally
vest ratably over periods up to five years from the date of grant.
Stock Option Activity
A summary of the Company's stock option activity follows:
Outstanding Weighted Average
Options Exercise Price
Outstanding, December 31, 1998 6,587,884 $ 1.15
Granted (weighted average fair
value of $0.04 per share) 9,604,231 0.35
Exercised (2,339,810) 0.33
Canceled or expired (1,279,296) 0.37
----------- ------
Outstanding, December 31, 1999 12,573,009 $ 0.77
Granted (weighted average fair
value of $0.07 per share) 3,847,860 0.51
Exercised (485,494) 0.31
Canceled or expired (2,217,180) 0.55
Outstanding, December 31, 2000 13,718,195 $ 0.76
=========== ======
Available for grant at December 31, 2000 2,744,007
===========
The following table summarizes information about currently outstanding and
vested stock options at December 31, 2000:
Options Outstanding Options Vested
--------------------------------------- ------------------
Weighted Weighted Weighted
Average Average Average
Range of Number of Remaining Exercise Number of Exercise
Exercise Price Shares Contractual Life Price Shares Price
$1.00 3,387,175 2.79 $ 1.00 3,077,978 $ 1.00
$1.39 - 1.44 2,954,184 4.21 1.43 1,475,088 1.43
$0.29 - 0.60 7,376,836 8.96 0.38 2,730,210 0.32
--------- ---- ------- --------- ----
13,718,195 6.41 $ 0.76 7,283,276 $ 0.83
========= ==== ======= ========= ======
Options Granted to Nonemployees
In 2000, the Company granted to consultants in conjunction with services
performed fully vested options to purchase 841,718 shares of common stock.
The Company recorded compensation expense of $117,117 representing the
estimated fair value of the options on the date of grant. Additionally,
the Company granted a fully vested option to purchase 270,000 shares of
common stock in conjunction with a shareholder settlement and recorded
compensation expense of $116,900 related to such grant (Note 7).
Additional Stock Plan Information
SFAS No. 123 requires the disclosure of pro forma net income (loss) and
earnings (loss) per share. Under SFAS No. 123, the fair value of
stock-based awards to employees is calculated through the use of option
pricing models, even though such models were developed to estimate the
fair value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock option
awards. These models also require subjective assumptions regarding the
expected time to exercise. which greatly affect the calculated values. The
Company's calculations were made using the minimum value method with the
following weighted assumptions: expected term of 30 months; risk-free
interest rate of 6.2% in 2000 and 5.6% in 1999; no dividends during the
expected term; and no volatility factor. The Company's calculations are
based on a single option valuation approach and forfeitures are recognized
as they occur. If the computed fair values of the Company's stock option
awards had been amortized to compensation expense over their related
vesting periods, the Company's pro forma net loss would have been
$18,215,488 and $15,260,476 in 2000 and 1999, respectively.
9. RETIREMENT PLAN
Effective July 1, 1999, the Company adopted a defined contribution
retirement plan (the "Retirement Plan") covering substantially all
employees with at least six months of service which operates under Section
401(k) of the Internal Revenue Code. Eligible employees may contribute
amounts to the Retirement Plan subject to certain limitations. The Company
can match employee contributions at the discretion of the Board of
Directors. No contributions have been made as of December 31, 2000.
10. MAJOR CUSTOMERS
During 2000, two customers each accounted for 10% of revenues, while in
1999 one customer accounted for 20% of revenues. At December 31, 2000,
three customers accounted for 11%, 10% and 10% of outstanding accounts
receivable, while at December 31, 1999, one customer accounted for 15% of
outstanding accounts receivable.
11. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases offices in Charleston, South Carolina, Emeryville,
California, and Omaha, Nebraska, under operating lease arrangements.
Future minimum net lease payments under noncancellable operating leases
(with initial or remaining lease terms in excess of one year) and future
minimum capital lease payments are as follows:
Computer
Equipment
Capital Operating
Leases Leases
Year ending December 31:
2001 $ 31,094 $ 417,868
2002 5,083 426,568
2003 320,007
2004 and thereafter 139,797
-------- ----------
Total minimum lease payments 36,177 $1,304,240
Less amount representing interest 3,185
--------
Present value of capital lease obligations 32,992
Less current portion 27,992
--------
Long - term portion of capital
lease obligations $ 5,000
========
Rent expense under operating leases for 2000 and 1999 was $571,200 and
$720,488, respectively.
12. SUBSEQUENT EVENTS
On January 11, 2001, the Company borrowed an additional $500,000 from
existing investors and issued promissory notes simultaneous with the
closing of the InteliData acquisition of the Company (Note 1). The
promissory notes carried the same terms and conditions as the
Non-Convertible Notes issued by the Company on November 22, 2000 (Note 5).
The notes were then immediately exchanged by the note holders for the
right to receive a portion of the InteliData shares issued in the
transaction in preference to holders of the Company's preferred stock.
******
EXHIBIT 99.3: Unaudited Pro Forma Condensed Combining Financial Information
The unaudited pro forma condensed combining financial information for InteliData
Technologies Corporation ("InteliData" or "INTD") set forth below gives effect
to the acquisition of Home Account Holdings, Inc. ("Home Account" or "HAHI").
The historical financial information set forth below has been derived from, and
is qualified by reference to the consolidated financial statements of InteliData
and Home Account, and should be read in conjunction with those financial
statements and the notes referred to below.
The unaudited pro forma condensed combining balance sheet data as of December
31, 2000 set forth below gives effect to the acquisition of Home Account as if
it occurred on December 31, 2000. The unaudited pro forma condensed combining
statement of operations data for the year ended December 31, 2000 set forth
below gives effect to the acquisition as if it occurred on January 1, 2000. The
unaudited pro forma condensed combining financial information set forth below
reflects certain adjustments, including among others, adjustments to reflect the
amortization of the excess purchase price. The information set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
notes to the financial statements of InteliData (which are incorporated by
reference herein from InteliData's Annual Report on Form 10-K for the year ended
December 31, 2000) and Home Account's audited financial statements and notes to
the financial statements for the year ended December 31, 2000. The unaudited pro
forma condensed combining financial information set forth below does not purport
to represent what the consolidated results of operations or financial condition
of InteliData would actually have been if the Home Account acquisition had in
fact occurred on such date or to project the future consolidated results of
operations or financial condition of InteliData.
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
AS OF DECEMBER 31, 2000
(in thousands)
Pro Forma
INTD HAHI Adjustments Notes Combined
-------- ------- ----------- ----- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $27,255 $ 2 $ - $ 27,257
Restricted cash 440 - - 440
Investments 10,217 - - 10,217
Accounts receivable, net of allowances 1,569 1,682 - 3,251
Prepaid expenses and other current assets 320 222 - 542
-------- ------- -------- --------
Total current assets 39,801 1,906 - 41,707
NONCURRENT ASSETS
Property and equipment, net 3,282 1,756 - 5,038
HAN goodwill in other, net - 2,822 (2,822) {3} -
INTD goodwill in HAN, net - - 38,441 {3} 38,441
Other assets 195 19 - 214
-------- ------- --------- --------
TOTAL ASSETS $ 43,278 $ 6,503 $ 35,619 $ 85,400
======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,288 $ 2,178 $ - $ 6,466
Accrued liabilities 3,651 663 3,510 {3} 7,824
Notes payable to stockholders - 4,500 (4,500) {1} -
Accrued interest payable - 118 (118) {1} -
Deferred revenues 1,014 1,279 - 2,293
Short-term capital lease obligations - 28 - 28
Other liabilities - 83 2,946 {2} 3,029
Net liabilities of discontinued operations 755 - - 755
-------- ------- -------- --------
Total current liabilities 9,708 8,849 1,838 20,395
NONCURRENT LIABILITIES
Long-term capital lease obligations - 5 - 5
-------- ------- -------- --------
Total liabilities 9,708 8,854 1,838 20,400
-------- ------- -------- --------
COMMITMENTS AND CONTINGENCIES
PREFERRED STOCK - 48,144 (48,144) {1} -
STOCKHOLDERS' EQUITY
Common stock 39 3 4 {1} 46
Additional paid-in capital 261,552 1,835 31,061 {1,2,3} 294,448
Treasury stock, at cost (2,123) - - (2,123)
Deferred compensation (1,375) - (1,473) {2} (2,848)
Notes receivable from stockholders - (563) 563 {1} -
Unrealized gains on investments 494 - - 494
Accumulated deficit (225,017) (51,770) 51,770 {1} (225,017)
-------- ------- -------- --------
Total stockholders' equity 33,570 (50,495) 81,925 65,000
-------- ------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 43,278 $ 6,503 $ 35,619 $ 85,400
======== ======= ======== ========
See accompanying Notes to the Unaudited Pro Forma Condensed
Combining Financial Information.
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(in thousands, except per share data)
Pro Forma
INTD HAHI Adjustments Notes Combined
-------- -------- ----------- ------ --------
Revenues
Software $ 673 $ 719 $ - $ 1,392
Consulting and services 3,884 7,731 - 11,615
Royalties and other 544 - - 544
-------- -------- -------- --------
Total revenues 5,101 8,450 - 13,551
-------- -------- -------- --------
Cost of revenues -
Software - 69 - 69
Consulting and services 2,720 6,255 - 8,975
Royalties and other - - - -
-------- -------- -------- --------
Total cost of revenues 2,720 6,324 - 9,044
-------- -------- -------- --------
Gross profit 2,381 2,126 - 4,507
-
Operating expenses -
General and administrative 6,455 6,377 7,632 {4} 20,464
Selling and marketing 6,732 4,183 - 10,915
Research and development 14,512 9,261 - 23,773
-------- -------- -------- --------
Total operating expenses 27,699 19,821 7,632 55,152
-------- -------- -------- --------
-
Operating loss (25,318) (17,695) (7,632) (50,645)
Realized gains on sales of investments 48,602 - - 48,602
Other income (expense), net 1,124 (242) - 882
-------- -------- -------- --------
-
Income (loss) before income taxes 24,408 (17,937) (7,632) (1,161)
Provision for income taxes 488 - (488) {5} -
-------- -------- -------- --------
-
Income (loss) from continuing operations 23,920 (17,937) (7,144) (1,161)
Loss on discontinued operations (262) - - (262)
-------- -------- -------- --------
-
Net income (loss) $ 23,658 $(17,937) $ (7,144) $ (1,423)
======== ======== ======== ========
Basic earnings per common share
Income (loss) from continuing operations $ 0.63 $ (2.60) {6} $ (0.02)
Income (loss) from discontinued operations (0.01) - {6} (0.01)
-------- ------- --------
Net income (loss) $ 0.62 $ (2.60) {6} $ (0.03)
======== ======== ========
Diluted earnings per common share
Income (loss) from continuing operations $ 0.59 $ (2.60) {6} $ (0.02)
Income (loss) from discontinued operations (0.01) - {6} (0.01)
-------- ------- --------
Net income (loss) $ 0.58 $ (2.60) {6} $ (0.03)
======== ======== =========
Basic Weighted Average Shares 38,237 6,900 45,137
======== ======== =========
Diluted Weighted Average Shares 40,843 6,900 45,137
======== ======== =========
See accompanying Notes to the Unaudited Pro Forma Condensed Combining Financial Information.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION
On January 11, 2001, InteliData Technologies Corporation (the "Company"
or "InteliData") acquired Home Account Holdings, Inc. ("Home Account") and its
operating subsidiary, Home Account Network, Inc., pursuant to an agreement and
plan of merger whereby a wholly-owned subsidiary of the Company merged with and
into Home Account, with Home Account surviving the merger as the Company's
wholly-owned subsidiary. Home Account is an application services and software
provider to financial institutions for the delivery of financial products and
services over the Internet. Home Account provides a suite of industry leading
UNIX-based Internet banking and Electronic Bill Presentment and Payment (EBPP)
products and services in an Application Services Provider (ASP) environment.
Pursuant to the merger agreement, the Company purchased Home Account
for approximately $320,000 in cash and 6,900,000 shares of Company common stock
and the merger is accounted for as a purchase. The purchase price was the result
of an arm's-length negotiation between the Company and Home Account, based on
the Company's evaluation of the fair market value of Home Account's business,
including its revenues. The value of the shares issued as part of the purchase
consideration of approximately $29,011,000 was measured based on the market
price of the issued common stock a few days before and after January 11, 2001 -
the date that the merger transaction was agreed to and announced. The total
estimated purchase price was approximately $31,430,000, consisting of the
following (in thousands):
Consideration and acquisition costs:
Value of shares issued $ 29,011
Cash expense reimbursement 250
Cash paid to common stockholders 320
Acquisition costs 1,849
---------
$ 31,430
=========
The total estimated purchase price for the Home Account acquisition is
being allocated to assets and liabilities based on management's best estimate of
their fair value with the excess costs over the net assets acquired allocated to
goodwill. The allocation is subject to change pending a final analysis of the
value of the assets and liabilities acquired. The components of the purchase
price and preliminary allocation are as follows (in thousands):
Preliminary allocation of purchase price
Current assets $ 1,906
Property, plant and equipment 1,756
Non-current assets 19
Liabilities assumed and other (4,236)
Liabilities associated with the 2000 Incentive Plan {2} (2,946)
Additional liabilities assumed {3} (3,510)
Goodwill 38,441
---------
$ 31,430
=========
Pro forma adjustments for the unaudited pro forma condensed combining
balance sheet as of December 31, 2000 and the unaudited pro forma condensed
combining statement of operations for the year ended December 31, 2000 are as
follows:
{1} These adjustments reflect the purchase of all of the outstanding
common stock of $3,000 and preferred stock of $48,144,000, the payments of
$4,500,000 on notes payable to stockholders and $118,000 of related accrued
interest, the settlement of $563,000 of notes receivable from stockholders,
the elimination of $51,770,000 in accumulated deficit, and the issuance of
6,900,000 shares of InteliData common stock at $0.001 par value.
{2} In 2000, Home Account approved the 2000 Incentive Plan to retain
certain officers of Home Account through a change of control transaction,
and after such a transaction to the extent, up to one year, as desired by
the acquirer. Upon acquisition of Home Account by an acquirer, the 2000
Incentive Plan provided for the granting to plan participants of an
aggregate of 15% of the net amount of the merger consideration allocable to
Home Account's preferred stockholders after payment of the debt preference
and other expenses associated with a transaction. Two-thirds of the 2000
Incentive Plan allocation would vest on the transaction closing date and
represent a pre-acquisition expense to Home Account. The remaining
one-third would vest one year from the transaction closing date and will be
charged to expense over the vesting period. In connection with the 2000
Incentive Plan allocation, an adjustment of approximately $2,946,000 and
$1,473,000 was recorded for the two-thirds and one-third portions,
respectively.
{3} These adjustments reflect the allocation of the total estimated
purchase price and the excess cost over the fair value of net liabilities
acquired on the Home Account acquisition (as if the transaction occurred
at December 31, 2000). An adjustment of approximately $2,822,000 was also
made to reflect the elimination of the Home Account goodwill.
The Company's plans include initiatives to integrate the operations of
the Company and Home Account, and to reduce overhead. The primary
components of these plans relate to (a) the shutdown of the former Home
Account headquarters, (b) the relocation of certain personnel, (c) the
integration of the sales and marketing organization, (d) the termination of
certain functions, and (e) the termination of certain contractual
obligations. The Company expects that these actions will result in a
reduction in workforce of approximately 100 full-time equivalents, which
include employees, contractors, and open requisitions. Management is in the
process of finalizing its restructuring plans related to Home Account and
accordingly, the amounts recorded are based on management's current
estimates of those costs. The Company will finalize these plans as soon as
practicable after the acquisition date. Accordingly, an estimated cost of
approximately $3,510,000 resulting from these plans is recognized as a
liability assumed as of the consummation date and is included in the
allocation of the total estimated purchase price.
The total estimated purchase price for the Home Account acquisition
was allocated to assets and liabilities based on management's best estimate
of their fair value with the excess costs over the net assets acquired
allocated to goodwill. The allocation is
subject to change pending a final analysis of the value of the assets and
liabilities acquired. This allocation resulted in goodwill of $38,441,000,
which would be amortized on a straight-line basis over a seven-year
period.
{4} Adjustments were made to reflect the addition of amortization
expense of $5,492,000 associated with the InteliData goodwill in Home
Account (Note 3), the elimination of amortization expense of $806,000
associated with the Home Account goodwill, and the compensation expense of
$2,946,000 associated with the 2000 Incentive Plan (Note 2).
{5} The pro forma tax provision was adjusted downward to reflect the
benefit the combined group would have received from Home Account's losses.
{6} Pro forma net income (loss) reflects the impact of the adjustments
above. Pro forma basic net income (loss) per share is computed using the
weighted-average number of shares of common stock outstanding after the
issuance of InteliData's common stock to acquire the outstanding shares of
Home Account. Pro forma diluted net income (loss) per share is computed as
described above and also gives effect to any dilutive options and warrants.
Dilutive options and warrants are excluded from the computation during loss
periods, as their effect is anti-dilutive.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
The above information includes forward-looking statements, the realization
of which may be impacted by the factors discussed below. The forward-looking
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 (the "Act"). This report contains
forward looking statements that are subject to risks and uncertainties,
including, but not limited to, the ability of the Company to successfully
assimilate and retain the employees of Home Account and integrate the products
of Home Account with those of the Company, the risks of not realizing the cost
savings anticipated by eliminating personnel and facilities, the Company's
ability to retain customers and subscribers as a result of the acquisition of
Home Account, the risk of anticipated revenues following the acquisition of Home
Account not meeting the Company's expectations, the ability of the Company to
complete product implementations in required time frames and the Company's
ability to increase its recurring revenues and profits through its ASP business
model, the impact of competitive products, pricing pressure, product demand and
market acceptance risks, pace of consumer acceptance of home banking and
reliance on the Company's bank clients to increase usage of Internet banking by
their customers, mergers and acquisitions, risk of integration of the Company's
technology by large software companies, the ability of financial institution
customers to implement applications in the anticipated time frames or with the
anticipated features, functionality or benefits, reliance on key strategic
alliances and newly emerging technologies, the ability of the Company to
leverage its Spectrum relationship into new business opportunities in the EBPP
market, the on-going viability of the mainframe marketplace and demand for
traditional mainframe products, the ability to attract and retain key employees,
the availability of cash for long-term growth, product obsolescence, ability to
reduce product costs, fluctuations in
operating results, ability to continue funding operating losses, delays in
development of highly complex products and other risks detailed from time to
time in InteliData filings with the Securities and Exchange Commission,
including the risk factors disclosed in the Company's Form 10-K for the fiscal
year ended December 31, 2000. These risks could cause the Company's actual
results for 2001 and beyond to differ materially from those expressed in any
forward looking statements made by, or on behalf of, InteliData. The foregoing
list of factors should not be construed as exhaustive or as any admission
regarding the adequacy of disclosures made by the Company prior to the date
hereof or the effectiveness of said Act. InteliData is not under any obligation
(and expressly disclaims an obligation to) update or alter its forward-looking
statements, whether as a result of new information or otherwise.
* * * * * *