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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarter ended: March 31, 1997 Commission File Number 000-21685
INTELIDATA TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 54-1820617
(State of incorporation) (I.R.S. Employer Identification Number)
13100 Worldgate Drive, Suite 600, Herndon, VA 20170
(Address of Principal Executive Offices)
(703) 834-8500
(Registrant's telephone number)
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.
Yes X No
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The number of shares of the registrant's Common Stock outstanding on March 31,
1997 was 31,816,693.
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<PAGE>
INTELIDATA TECHNOLOGIES CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1997 and December 31, 1996 .............................. 3
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996 ........................ 4
Condensed Consolidated Statement of Changes in Stockholders' Equity
Three Months Ended March 31, 1997.................................. 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996......................... 6
Notes to Condensed Consolidated Financial Statements .............. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ......................................... 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................................12
SIGNATURES.................................................................. 13
<PAGE>
PART I: FINANCIAL INFORMATION
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ITEM 1: FINANCIAL STATEMENTS
- -----------------------------
<TABLE>
INTELIDATA TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(in thousands, except share data)
<CAPTION>
1997 1996
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 18,596 $ 26,644
Short-term investments 9,906 12,418
Accounts receivable, net of reserves of
$1,374 in 1997 and $1,788 in 1996 22,221 12,925
Inventories 27,134 28,420
Prepaid expenses and other current assets 1,323 2,582
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Total current assets 79,180 82,989
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NONCURRENT ASSETS
Costs in excess of net assets acquired 49,327 50,061
Property, plant and equipment, net 7,412 9,143
Other assets 1,376 1,553
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TOTAL ASSETS $ 137,295 $ 143,746
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,769 $ 4,684
Accrued expenses and other liabilities 10,043 12,773
Short-term borrowings -- 2,000
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TOTAL LIABILITIES 12,812 19,457
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; authorized 5,000,000 shares in 1997
and 1996; no shares issued and outstanding in 1997 and 1996 -- --
Common stock, $0.001 par value; authorized 60,000,000 shares in 1997
and 1996; issued and outstanding 31,816,693 shares in 1997 and 1996 32 32
Additional paid-in capital 243,757 243,757
Receivable from sale of stock (2,456) (2,456)
Deferred compensation (104) (133)
Accumulated deficit (116,746) (116,911)
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TOTAL STOCKHOLDERS' EQUITY 124,483 124,289
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 137,295 $ 143,746
=========== ===========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
INTELIDATA TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(in thousands, except per share data; unaudited)
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
REVENUES
Consumer telecommunications $ 20,408 $ 777
Electronic commerce 1,148 549
Interactive services 8 --
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Total revenues 21,564 1,326
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COST OF REVENUES
Consumer telecommunications 13,027 612
Electronic commerce 795 318
Interactive services 6 --
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Total cost of revenues 13,828 930
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Gross profit 7,736 396
OPERATING EXPENSES
General and administrative 3,098 1,841
Selling and marketing 2,036 29
Research and development 2,083 559
Goodwill amortization 770 --
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Total operating expenses 7,987 2,429
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Operating loss (251) (2,033)
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OTHER INCOME
Interest, net 439 359
Equity in loss of affiliate -- (426)
Other, net -- 112
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Total other income 439 45
----------- -----------
Income (loss) before income taxes 188 (1,988)
Income taxes 23 --
----------- -----------
Net income (loss) $ 165 $ (1,988)
=========== ===========
Net income (loss) per common share $ 0.01 $ (0.13)
=========== ===========
Weighted average outstanding shares 32,223 15,783
=========== ===========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
INTELIDATA TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997
(in thousands; unaudited)
<CAPTION>
Common Stock Additional Receivable
------------------ paid-in from sale Deferred Accumulated
Shares Amount capital of stock Compensation Deficit Total
------ --------- ---------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 31,817 $ 32 $ 243,757 $ (2,456) $ (133) $ (116,911) $ 124,289
Compensation expense 29 29
Net income 165 165
------ --------- --------- --------- ------- ----------- ----------
Balance at March 31, 1997 31,817 $ 32 $ 243,757 $ (2,456) $ (104) $ (116,746) $ 124,483
====== ========= ========= ========= ======= =========== ==========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
INTELIDATA TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(in thousands; unaudited)
<CAPTION>
1997 1996
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<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 165 $ (1,988)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 2,139 93
Equity in loss of affiliate -- 426
Other noncash activities 693 (72)
Changes in certain assets and liabilities, net of effects of noncash
transactions:
Accounts receivable (9,296) 51
Inventories 1,286 50
Due from affiliates -- (264)
Prepaid expenses and other current assets 1,259 7
Accounts payable (1,915) (673)
Accrued expenses and other liabilities (2,730) (334)
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Net cash used in operating activities (8,399) (2,704)
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Cash flows from investing activities
Proceeds from the sale of short-term investments 2,512 --
Purchases of property and equipment (161) (318)
Proceeds from sale of property and equipment -- 112
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Net cash provided by (used in) investing activities 2,351 (206)
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Cash flows from financing activities
Payment of short-term borrowings (2,000) --
Proceeds from issuance of common stock -- 517
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Net cash provided by (used in) financing activities (2,000) 517
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Decrease in cash and cash equivalents (8,048) (2,393)
Cash and cash equivalents, beginning of period 26,644 25,120
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Cash and cash equivalents, end of period $ 18,596 $ 22,727
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See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
INTELIDATA TECHNOLOGIES CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The condensed consolidated balance sheet as of March 31, 1997, and the
related condensed consolidated statements of operations and cash flows for
the three month periods ended March 31, 1997 and 1996 presented in this
Form 10-Q represent the results of InteliData Technologies Corporation for
1997 and the historical results of US Order, Inc. ("US Order") for 1996. On
November 7, 1996, US Order and Colonial Data Technologies Corp. ("Colonial
Data") merged with and into InteliData Technologies Corporation
("InteliData" or the "Company").
The condensed consolidated balance sheet of InteliData as of March 31,
1997, and the related condensed consolidated statements of operations and
cash flows for the three month periods ended March 31, 1997 and 1996, are
unaudited. In the opinion of management, all adjustments necessary for a
fair presentation of such financial statements have been included. Such
adjustments consist only of normal recurring items. Interim results are not
necessarily indicative of results for a full year. Certain amounts have
been reclassified to conform to the current year presentation.
The condensed consolidated financial statements and notes are
presented as required by Form 10-Q, and do not contain certain information
included in the Company's annual audited financial statements and notes.
These financial statements should be read in conjunction with the annual
audited financial statements of the Company and the notes thereto, together
with management's discussion and analysis of financial condition and
results of operations, contained in the Form 10-K for the fiscal year ended
December 31, 1996.
(2) New Accounting Standards
Statement of Financial Accounting Standards No. 128, Earnings Per
Share ("SFAS 128") was issued in February 1997 and is effective for
financial statements issued after December 15, 1997. The statement
establishes new standards for computing and presenting earnings per share
("EPS") and will require restatement of prior years' information. This
statement simplifies the standards for computing EPS previously found in
APB Opinion 15. It replaces the presentation of primary and fully diluted
EPS with a presentation of basic EPS and diluted EPS, requires a dual
presentation on the face of the financial statements, and requires a
reconciliation of basic EPS to diluted EPS. The presentation of basic EPS
and diluted EPS would have been the same as EPS actually reported for the
respective periods.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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RESULTS OF OPERATIONS
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The following represents the results of operations for InteliData for the three
months ended March 31, 1997 and 1996. Results for the three months ended March
31, 1997 represent the operations of InteliData; results for the three months
ended March 31, 1996 were based on the stand alone operations of US Order, Inc.,
the predecessor corporation to InteliData.
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Revenues
The Company's first quarter revenues were $21,564,000 in 1997 compared to
$1,326,000 in 1996 an increase of $20,238,000. Revenues generated by the
consumer telecommunications division were $20,408,000 during the first quarter
of 1997. Consumer telecommunications division revenues are generated primarily
from marketing and promotional campaigns for Caller ID units and services
conducted by telephone operating companies and the Company. Contributing to the
consumer telecommunications revenues were $16,691,000 from Caller ID and small
business product shipments on the sale of approximately 543,000 adjuncts,
telephones and small business key systems; $2,818,000 from customers within a US
West Communications leasing program; and $899,000 in the telephone repair
business.
The electronic commerce division contributed $1,148,000 in revenues in the
first quarter of 1997, a 109% increase over the same period in the prior year.
The increase is primarily attributed to the expansion of the division's product
sales which aggregated $636,000 for the first quarter of 1997. Service fees
revenues for the first quarter of 1997 were $512,000 compared to $549,000 for
the same period in 1996, a decrease of $37,000. The Company's customer support
revenues, which are remarketed by Visa InterActive to Visa member banks,
increased 86% and aggregated $364,000 for the first quarter of 1997, compared to
$196,000 for the same period in the prior year. Monthly service fees revenues
decreased to $60,000 in 1997 from $90,000 for the same period in 1996. Monthly
service fees revenues are from customers who use the Company's previous
generation smart telephones and associated interactive applications, and the
decrease was primarily due to the Company's continuing efforts to convert these
customers to Visa member banks.
Cost of Revenues
The Company's first quarter cost of revenues increased to $13,828,000 for
1997 from $930,000 for the same period in 1996. The consumer telecommunications
division contributed $13,027,000 of the total cost of revenues, consisting of
$11,076,000 from the sale of Caller ID and small business product shipments;
$1,446,000 from leasing activities and $505,000 from telephone repair services.
<PAGE>
The electronic commerce division reported cost of revenues aggregating
$795,000 for the first quarter of 1997 or a 150% increase over the same period
in the prior year. Cost of revenues from the electronic commerce division during
the first quarter of 1997 consisted of $105,000 in software product sales,
$340,000 in customer service expenses, and $350,000 in consulting and
professional services including service cost of revenue related to generating
monthly fee revenues.
Overall gross profit margins increased to 36% for the first quarter of 1997
from 30% for the first quarter of 1996. Gross profit margins for the consumer
telecommunications, electronic commerce and interactive services divisions were
36%, 31% and 25%, respectively for the first quarter of 1997. The gross profit
margin derived from the sale of Caller ID and small business units was 34% for
the first quarter of 1997. The Company anticipates that gross profit margins may
fluctuate in the future due to changes in product mix and distribution,
competitive pricing pressure, the introduction of new products and changes in
the volume and terms of leasing activity.
General and Administrative
General and administrative expenses were $3,098,000 for the first quarter
of 1997 as compared to $1,841,000 in the first quarter of 1996. The increase of
$1,257,000 was primarily the result of additional staff obtained through the
merger with Colonial Data and the acquisition of Braun Simmons, and upgrading
systems and operations in anticipation of the potential of increased business
later in 1997. Throughout the year, the Company expects to control general and
administrative expenses and plans to continually assess its operations in
managing the continued development of infrastructure to handle the anticipated
increase in business in both the consumer telecommunications and electronic
commerce divisions.
Selling and Marketing
Selling and marketing expenses increased to $2,036,000 for the first
quarter of 1997 from $29,000 for the same period last year. The Company is
increasing its marketing efforts in promoting the residential and small business
telecommunications product lines to retail markets and to the regional Bell
operating companies and other telephone operating companies with whom the
Company generates its product, lease and service revenues. In the first quarter
of 1997, selling and marketing expenses were related primarily to the
development of innovative marketing programs, paying salaries and commissions to
the Company's sales force and working with telemarketers and other third party
vendors to sell telecommunications products.
Research and Development
Research and development costs were $2,083,000 in the first quarter of 1997
as compared to $559,000 for the same period in 1996. The increase of $1,524,000
was largely attributable to developing, designing and testing new
telecommunications products and the Company's home banking connectivity products
and support services and the Company's next generation smart telephone and its
associated interactive services. The Company has been actively engaged in
<PAGE>
research and development since its inception and expects that these activities
will be essential to the operations of the Company in the future. The Company
also expects research and development costs to increase during the remainder of
1997.
Goodwill Amortization
The Company incurred $770,000 in goodwill amortization as a result of the
Company's acquisition of Braun Simmons and merger with Colonial Data in
September and November 1996, respectively. With respect to goodwill from these
transactions, goodwill is amortized on a straight-line basis over seven years
for the acquisition of Braun Simmons or fifteen years for the merger with
Colonial Data.
Other Income
Other income was $439,000 for the first quarter of 1997 compared to $45,000
for the same period in the prior year. Interest income, net was $439,000 for the
first quarter of 1997 compared to $359,000 for the first quarter of 1996. The
increase of $80,000 was due to increased cash, equivalents and short-term
investment balances for the first quarter of 1997 compared to the first quarter
of 1996, primarily related to the merger with Colonial Data which provided
additional cash, equivalent and short-term investment balances. The Company
incurred minimal interest expense in the first quarter of 1997 and 1996. During
the first quarter of 1996, the Company incurred a loss of $426,000 in its
proportionate share of Home Financial Network, Inc. and recognized other income
from the sale of assets of $112,000.
Weighted Average Outstanding Shares and Net Income (Loss) Per Common Share
The primary and fully diluted weighted average shares increased to
32,223,000 for the first quarter of 1997 compared to 15,783,000 for the first
quarter of 1996. The increase resulted primarily from shares issued in
connection with the acquisition of Braun, Simmons & Co. and the merger with
Colonial Data in September and November 1996, respectively. As a result of the
foregoing, net income (loss) per common share was $0.01 for the first quarter of
1997 compared to $(0.13) for the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1997, the Company's cash, equivalents and
short-term investments decreased by $10,560,000 resulting from the payment of
outstanding liabilities at year-end and the financing of certain accounts
receivable. At March 31, 1997, the Company had $28,502,000 in cash, equivalents
and short-term investments that were invested in financial instruments that are
diversified among high credit quality securities. The investments are reported
at cost, which approximates market value, and are classified as short-term
investments and cash equivalents. Additionally, at March 31, 1997, the Company
had working capital of $66,368,000 with no long-term debt. The Company's total
assets exceeded total liabilities by $124,483,000.
<PAGE>
During the first quarter of 1997, cash used in operating activities was
$8,399,000 compared to $2,704,000 in the same period in 1996. This increase was
primarily related to financing an increase in accounts receivable of $9,296,000
and funding payments from accounts payable and accrued expenses of $4,465,000,
offset in part by decreases in inventories and prepaid expenses aggregating
$2,545,000.
Investing activities provided $2,351,000 during the first quarter of 1997
compared to using $206,000 in the same period in 1996. Cash provided by
investing activities was primarily contributed by the sale of short-term
investments offset in part by the purchase of certain property and equipment,
primarily to support an upgrade for the Company's internal networks.
Financing activities used $2,000,000 in the first quarter of 1997 compared
to providing $517,000 in the same period in 1996. This change resulted from the
repayment of short-term borrowings from December 31, 1996 offset by proceeds
received from the issuance of common stock during the first quarter of 1996.
The Company's primary needs for cash in the future are for investments in
product development, working capital, the financing of operations, strategic
ventures, potential acquisitions, capital expenditures and the upgrade of the
Company's systems and operations. In order to meet the Company's needs for cash
throughout the year, the Company will utilize cash, short-term investments and
may utilize, to the extent available, funds generated from operations in the
second half of 1997.
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, uncertainty as to future financial results,
developing marketplace, fluctuations in operating results, reliance on Caller ID
revenues, concentration of distribution of products and services, InteliData
common stock owned by WorldCorp, technological considerations, dependence on
foreign production, restrictions from the Company's agreements with Visa,
importance of strategic alliances, competition, relationship with Visa,
dependence on key employees, regulation, volatility of stock price, limited
proprietary protection, limited sources of supply and and other risks detailed
from time to time in the Company's 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, 1996. These risks could cause the Company's
actual results for 1997 and beyond to differ materially from those expressed in
any forward looking statements made by, or on behalf of, the Company. 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.
<PAGE>
PART II: OTHER INFORMATION
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
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None
(b) Reports on Form 8-K
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None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities 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: __________________________________________
John C. Backus
President and Chief Executive Officer
By: __________________________________________
John W. Hillyard
Vice President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001021810
<NAME> INTELIDATA TECHNOLOGIES CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 18,596
<SECURITIES> 9,906
<RECEIVABLES> 23,595
<ALLOWANCES> 1,374
<INVENTORY> 27,134
<CURRENT-ASSETS> 79,180
<PP&E> 10,642
<DEPRECIATION> 3,230
<TOTAL-ASSETS> 137,295
<CURRENT-LIABILITIES> 12,812
<BONDS> 0
0
0
<COMMON> 32
<OTHER-SE> 124,451
<TOTAL-LIABILITY-AND-EQUITY> 137,295
<SALES> 17,245
<TOTAL-REVENUES> 21,564
<CGS> 11,138
<TOTAL-COSTS> 13,828
<OTHER-EXPENSES> 7,987
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 188
<INCOME-TAX> 23
<INCOME-CONTINUING> 165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 165
<EPS-PRIMARY> 0.01
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</TABLE>
