<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 4, 1998
-------------------
THE INTERCEPT GROUP, INC.
-------------------------
(Exact Name of Registrant
as Specified in its Charter)
Georgia 001-14213 58-2237359
- --------------------------------------------------------------------------------
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
3150 Holcomb Bridge Road, Suite 200, Norcross, Georgia 30071
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (770) 248-9600
--------------
N/A
-----------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
The registrant hereby amends its report on Form 8-K filed on August 19,
1998 by deleting the text under Item 7 and replacing it with the following
text.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Included as Exhibits 99.2 and incorporated herein by reference.
(B) PRO FORMA FINANCIAL INFORMATION.
Included as Exhibit 99.3 hereto and incorporated herein by reference.
(C) EXHIBITS.
2.1 Asset Purchase Agreement dated August 4, 1998 by and between The InterCept
Group, Inc., Nova Financial Corporation and BroadNet, Inc.*
99.1 Press Release dated August 5, 1998.*
99.2 The following financial statements of Nova Financial Corporation Data
Processing Business:
Balance Sheets as of December 31, 1996 and 1997 and June 30, 1998
(unaudited).
Statements of Operations for the years ended December 31, 1996 and 1997 and
the six months ended June 30, 1998 (unaudited).
Statements of Accumulated Deficit for the years ended December 31, 1996 and
1997 and the six months ended June 30, 1998 (unaudited).
Statements of Cash Flows for the years ended December 31, 1996 and 1997 and
the six months ended June 30, 1998 (unaudited).
Notes to Financial Statements.
<PAGE>
99.3 The following unaudited pro forma condensed consolidated financial
statements of The InterCept Group, Inc. and Nova Financial Corporation Data
Processing Business:
Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1998.
Pro Forma Condensed Consolidated Statement of Operations for the year ended
December 31, 1997.
Pro Forma Condensed Consolidated Statement of Operations for the six months
ended June 30, 1998.
Notes to Pro Forma Condensed Consolidated Financial Information.
- ----------------------------------
*Previously filed with the registrant's Current Report on Form 8-K filed August
19, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE INTERCEPT GROUP, INC.
By: /s/ Scott R. Meyerhoff
-----------------------------------------
Scott R. Meyerhoff
Chief Financial Officer
Dated: October 19, 1998
<PAGE>
EXHIBIT 99.2
NOVA FINANCIAL CORPORATION
DATA PROCESSING BUSINESS
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1996 AND 1997 AND JUNE 30, 1998 (UNAUDITED)
TOGETHER WITH
AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Nova Financial Corporation:
We have audited the accompanying balance sheets of NOVA FINANCIAL CORPORATION
DATA PROCESSING BUSINESS (a division of Nova Financial Corporation) as of
December 31, 1996 and 1997 and the related statements of operations, accumulated
deficit, and cash flows for the years ended December 31, 1996 and 1997. These
financial statements are the responsibility of Nova Financial Corporation Data
Processing Businesses' management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Nova Financial Corporation Data
Processing Business as of December 31, 1996 and 1997 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Atlanta, Georgia
October 16, 1998
<PAGE>
NOVA FINANCIAL CORPORATION
DATA PROCESSING BUSINESS
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
Predecessor Successor
-------------- -------------------------------
December 31, December 31, June 30,
1996 1997 1998
------------- -------------------------------
<S> <C> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash $ 0 $ 0 $ 477
Accounts receivable 84,830 203,558 142,677
Other current assets 0 20,800 17,890
----------- ---------- ----------
Total current assets 84,830 224,358 161,044
PROPERTY AND EQUIPMENT, NET 405,116 417,875 373,493
GOODWILL, NET OF ACCUMULATED AMORTIZATION OF
$11,337 AT JUNE 30, 1998 0 906,901 895,564
DUE FROM PARENT COMPANY 0 0 75,779
OTHER ASSETS, NET 600 600 600
----------- ---------- ----------
$ 490,546 $1,549,734 $1,506,480
=========== ========== ==========
LIABILITIES AND PARENT COMPANY INVESTMENT AND ACCUMULATED DEFICIT
CURRENT LIABILITIES:
Current maturities of long-term debt $ 293,332 $ 616,668 $ 631,082
Accounts payable 251,912 381,729 305,577
Related party accounts payable 6,432 188,492 680,639
Accrued liabilities 5,800 144,418 120,379
----------- ---------- ----------
Total current liabilities 557,476 1,331,307 1,737,677
LONG-TERM LIABILITIES:
Long-term debt, net of current obligations 338,556 0 0
Due to Parent Company 482,781 218,427 0
----------- ---------- ----------
Total liabilities 821,337 218,427 0
----------- ---------- ----------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
ACCUMULATED DEFICIT (888,267) 0 (231,197)
----------- ---------- ----------
$ 490,546 $1,549,734 $1,506,480
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
NOVA FINANCIAL CORPORATION
DATA PROCESSING BUSINESS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Predecessor Successor
------------------------- ------------------
Years Ended SIX MONTHS
December 31, ENDED JUNE 30,
-------------------------
1996 1997 1998
----------- ---------- ------------------
<S> <C> <C> <C>
(UNAUDITED)
REVENUES $ 825,899 $1,596,942 $ 661,134
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of services 827,606 1,008,468 567,218
Selling, general, and administrative 484,293 724,368 175,674
Depreciation and amortization 54,744 113,832 71,939
----------- ----------- -----------
OPERATING LOSS (540,744) (249,726) (153,697)
OTHER EXPENSE, NET 88,095 118,908 77,500
----------- ----------- -----------
LOSS BEFORE INCOME TAX BENEFIT (628,839) (368,634) (231,197)
INCOME TAX BENEFIT 0 0 0
----------- ----------- -----------
NET LOSS $(628,839) $ (368,634) $(231,197)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOVA FINANCIAL CORPORATION
DATA PROCESSING BUSINESS
STATEMENTS OF ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
ACCUMULATED
DEFICIT
--------------------
<S> <C>
BALANCE, DECEMBER 31, 1995 $ (259,428)
Net loss (628,839)
--------------------
BALANCE, DECEMBER 31, 1996 (888,267)
Net loss (368,634)
Effect of acquisition of Nova Financial Corporation 1,256,901
--------------------
BALANCE, DECEMBER 31, 1997 $ 0
--------------------
Net loss (unaudited) (231,197)
--------------------
BALANCE, JULY 31, 1998 (unaudited) $ (231,197)
--------------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOVA FINANCIAL CORPORATION
DATA PROCESSING BUSINESS
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Predecessor Successor
----------------- ------------------
Years Ended SIX MONTHS
December 31 ENDED JUNE 30,
-----------------
1996 1997 1998
------- ------- ------------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(628,839) $(368,634) $(231,197)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 54,744 113,832 71,939
Changes in current assets and liabilities:
Accounts receivable (84,830) (118,728) 60,881
Other current assets 4,326 (20,800) 2,910
Accounts payable 204,179 129,817 (76,152)
Related party accounts payable 6,432 182,060 492,147
Accrued liabilities (11,179) 138,618 (24,039)
---------- --------- -----------
Net cash provided by operating activities (455,167) 56,165 296,489
---------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (245,373) (126,591) (16,220)
---------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from (to) Parent Company, net 127,381 (264,354) (294,206)
Proceeds from long-term debt, net 573,159 334,780 14,414
---------- --------- -----------
Net cash used in financing activities 700,540 70,426 (279,792)
---------- --------- -----------
NET INCREASE IN CASH 0 0 477
CASH, BEGINNING OF PERIOD 0 0 0
---------- --------- -----------
CASH, END OF PERIOD $ 0 $ 0 $ 477
---------- --------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 83,200 $ 114,300 $ 71,400
---------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOVA FINANCIAL CORPORATION
DATA PROCESSING BUSINESS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997 AND JUNE 30, 1998 (UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS
Nova Financial Corporation (a Georgia Corporation) ("Nova" or "Parent
Company") was incorporated for the purpose of providing information
technology, data processing, and consulting services to financial
institutions, primarily community banks. The financial statements and
related footnotes contained herein reflect the operations of Nova Financial
Corporation Data Processing Business ("Nova Data Processing Business" or
the "Company"). On December 31, 1997, Nova was acquired by BroadNet, Inc.
in a stock for stock transaction accounted for as a purchase. The portion
of the purchase price related to the Nova Data Processing Business was
"pushed-down" in the accompanying balance sheet. As the acquisition was
accounted for as a purchase, such accounting generally results in increased
amortization and depreciation in future periods. Accordingly, the
accompanying financial statements of the predecessor and Nova Data
Processing Business are not comparable in all material respects since those
financials statements report financial position, results of operations, and
cash flows of these separate entities.
Substantially all assets and liabilities of the Nova Data Processing
Business are being acquired in a transaction accounted for as a purchase by
The InterCept Group, Inc. ("InterCept").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company is not a separate subsidiary of Nova nor has it been operated
as a separate division of Nova. The financial statements of the data
processing division have been derived from the consolidated financial
statements of Nova and have been prepared to present its financial
position, results of operations, and cash flows on a stand-alone basis.
Accordingly, the accompanying financial statements include certain costs
and expenses which have been allocated to the data processing division.
These costs have been allocated based on specific identification where
possible. Such allocated expenses may not be indicative of what such
expenses would have been had the data processing business been operated as
a separate entity.
The interim financial information as of and for the period ended June 30,
1998 is unaudited. However, in the opinion of management, the interim
financial data includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for
the interim period.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosures 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.
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost or fair market value at the
acquisition (Note 1). The Company provides for depreciation using the
straight-line method over the estimated useful lives of the assets. Repairs
and maintenance costs are expensed and major betterments are capitalized.
Property, plant, and equipment consisted of the following at December 31,
1996 and 1997 and June 30, 1998:
<TABLE>
<CAPTION>
Predecessor Successor
------------- ---------------------------------
December 31, December 31, June 30,
USEFUL LIFE 1996 1997 1998
------------- -------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C>
Leasehold improvements FIVE YEARS $ 18,360 $ 11,765 $ 11,765
Machinery and equipment FIVE YEARS 410,324 319,969 322,733
Furniture and fixtures FIVE YEARS 24,275 17,352 17,352
Software FIVE YEARS 42,910 68,809 82,894
-------------- --------------- ---------------
495,869 417,875 434,744
Less accumulated depreciation (90,753) 0 (61,251)
-------------- --------------- ---------------
$405,116 $417,875 $373,493
-------------- --------------- ---------------
</TABLE>
COMPUTER SOFTWARE
Acquired software and licensing rights are capitalized and amortized using
the straight-line method over an estimated useful life of five years.
GOODWILL
Goodwill results from the pushdown of goodwill to Nova Data Processing
Business from the acquisition of Nova on December 31, 1997 by Broadnet,
Inc. Goodwill is being amortized over 40 years. Amortization expense for
the six months ended June 30, 1998 was $11,337.
INCOME TAXES
The income tax returns of Nova include the operations of the data
processing business. For purposes of the accompanying financial statements,
income taxes related to the data processing business have been computed and
recorded on a separate basis based on the statutory rates in effect (Note
5).
Deferred income taxes are recorded using enacted tax laws and rates for the
years in which the taxes are expected to be paid. Deferred income taxes
are provided for items when there is a temporary difference in recording
such items for financial reporting and income tax reporting.
REVENUE RECOGNITION
Revenues are recognized as the services are provided.
<PAGE>
-3-
3. DUE TO FROM PARENT COMPANY
Nova either advances funds to or borrows funds from the data processing
business. Funds advanced to the data processing business are primarily
used to cover working capital requirements. The advances and borrowings
are netted and are reflected in Due to or Due from Parent Company in the
accompanying balance sheets.
4. LONG-TERM DEBT
Nova has entered into borrowing facilities with a bank for the acquisition
of equipment. While the data processing business does not specifically
enter into debt arrangements, the debt reflected in the accompanying table
relates to borrowings associated with equipment of the Company's data
processing center. Long term debt at December 31, 1996 and 1997 and June
30, 1998 consisted of the following:
<TABLE>
<CAPTION>
Predecessor Successor
------------ -----------------------------
December 31, December 31, June 30,
1996 1997 1998
------------ ------------ ----------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable to Mountain National,
paid in full on August 4, 1998 $ 631,888 $ 616,668 $ 586,525
Other 0 0 44,557
----------- ----------- ----------
631,888 616,688 631,082
Less current portion 293,332 616,668 631,082
----------- ----------- ----------
Long-term debt, net of current portion $ 338,556 $ 0 $ 0
=========== =========== ==========
</TABLE>
<PAGE>
-4-
5. INCOME TAXES
The differences between the income tax benefit and the amount computed by
applying the statutory federal income tax rate to the net loss for the years
ended December 31, 1996 and 1997 is due to a valuation allowance against net
operating loss carryforwards.
The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
basis, which give rise to deferred tax assets and liabilities, as of
December 31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
Predecessor Successor
------------ ---------------
December 31, December 31,
1996 1997
------------ ---------------
<S> <C> <C>
Current deferred tax asset:
Deferred tax asset:
Accrued vacation pay $ 3,800 $ 3,800
Net operating loss carryforwards 588,341 728,422
--------- ---------
Deferred tax assets 592,141 732,222
Less valuation allowance (592,141) (732,222)
--------- ---------
Net deferred tax assets $ 0 $ 0
--------- ---------
</TABLE>
6. RELATED PARTY.
The Company resells software to their financial institution customers from
Sonata Systems, Inc. and BroadNet, Inc. which are related parties through
common ownership. The Company recorded approximately $6,000 and $189,000 in
1996 and 1997, respectively which has been reflected in selling, general and
administrative expense in the accompanying statement of operations. The
Company recorded related party payables of approximately $6,000 and $189,000
at December 31, 1996 and 1997, respectively, related to payments owed to
Sonata Systems, Inc. and BroadNet, Inc. for software sold to the Company's
customers.
7. EMPLOYEE BENEFITS
The Company has a defined contribution 401(k) benefit plan which covers
substantially all employees, subject to certain minimum age and service
requirements. The plan provides for voluntary contributions by employees and
matching contributions by the Company at its discretion. For the years ended
December 31, 1996 and 1997, the Company made no matching contributions to
the plan.
<PAGE>
-5-
8. COMMITMENTS
Nova leases certain equipment and facilities under operating leases. The
leases referred to in the accompanying table refer specifically to leases
associated with the operation of the data processing function and the
building lease. Future minimum payments on these leases at December 31, 1997
are summarized as follows:
1998 $ 77,000
1999 83,000
2000 85,000
2001 1,000
--------
$246,000
--------
Rent expense for the data processing function operating leases was
approximately $77,000 and $97,000 for the years ended December 31, 1996 and
1997, respectively.
9. CUSTOMER CONCENTRATION
Certain customers made up greater than 10% of the Company's sales for the
years ended December 31, 1996 and 1997 as follows:
1996 1997
---- ----
Customer A 33.3% 19.5%
Customer B 10.5% 10.2%
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Nova Financial Corporation Data Processing Business is required to disclose
fair value information about financial instruments, whether or not
recognized on the face of the balance sheet, for which it is practicable to
estimate that value. The assumptions used in the estimation of the fair
value of the Company's financial instruments are detailed below. Where
quoted prices are not available, fair values are based on estimates using
discounted cash flows and other valuation techniques. The use of discounted
cash flows can be significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. The following
disclosures should not be considered a surrogate of the liquidation value of
the Company, but rather a good faith estimate of the increase or decrease in
value of financial instruments held by the Company since purchase,
organization, or issuance.
CASH
For cash, the carrying value amount is a reasonable estimate of fair
value.
<PAGE>
LONG-TERM DEBT
The carrying amount of the variable rate long-term debt approximates the
fair value.
LIMITATIONS
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that
could result from offering for sale at one time the Company's entire
holdings of a particular financial instrument. Because no market exists
for a significant portion of the Company's financial instruments, fair
value estimates are based on many judgments. These estimates are
subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments. Significant assets and
liabilities that are not considered financial instruments include
deferred income taxes and property and equipment. In addition, the tax
ramifications related to the realization of the unrealized gains and
losses can have a significant effect on fair value estimates and have
not been considered in the estimates.
11. SUBSEQUENT EVENT
On August 4, 1998, InterCept entered into an asset purchase agreement with
Nova for the purchase of the data processing business for a maximum purchase
price of approximately $1,082,000. The acquired assets consisted primarily
of accounts receivable, computer equipment, and various other assets.
InterCept paid Nova $880,000 in cash at the closing of the transaction.
InterCept will pay Nova the remaining portion of the purchase price, if any,
six months following the closing date if a certain number of the Company's
customers enter into contracts with InterCept.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 99.3
Unaudited Pro Forma Balance Sheet
As of June 30, 1998
<S> <C> <C> <C> <C>
(a) (b)
Historical Nova Financial Corporation Pro Forma Pro Forma
Assets Consolidated Data Processing Business Eliminations Consolidated
------ ------------ -------------------------- ------------ ------------
Cash and cash equivalents $ 6,943,316 $ 477 (880,000)(c) $ 6,063,793
Accounts receivable, net of
allowance for uncollectible
accounts 2,592,122 142,677 -- 2,734,799
Inventory, prepaid expenses
and other 493,825 17,890 -- 511,715
Property and equipment, net 4,509,054 373,493 (220,000)(h) 4,662,547
Deferred tax assets 663,875 -- -- 663,875
Notes receivable 39,988 -- -- 39,988
Intangible assets, net 2,115,471 895,564 (895,564)(e) 2,865,413
749,942 (d)
Other noncurrent assets -- 76,379 (75,779)(h) 600
----------- ---------- ----------- -----------
Total assets $17,357,651 $1,506,480 $(1,321,401) $17,542,730
=========== ========== =========== ===========
Liabilities and Shareholders' Equity
- ------------------------------------
Current maturities of notes payable $ 90,835 $ 631,082 (631,082)(g) $ 90,835
Accounts payable and accrued
liabilities 2,031,794 1,106,595 (921,516)(g) 2,216,873
Accrued income taxes 400,394 -- -- 400,394
Deferred revenue 1,440,118 -- -- 1,440,118
Notes payable, less current portion 260,007 -- -- 260,007
Deferred compensation -- -- -- --
Minority interest 50,220 50,220
Preferred stock -- -- -- --
Common stock 15,780,033 -- -- 15,780,033
Accumulated deficit (2,695,750) (231,197) 231,197 (f) (2,695,750)
----------- ---------- ----------- -----------
Total liabilities and
shareholders' deficit $17,357,651 $1,506,480 $(1,321,401) $17,542,730
=========== ========== =========== ===========
</TABLE>
(a) Represents the historical unaudited consolidated balance sheet of the
Company as of June 30, 1998 contained in the Company's Quarterly Report on
Form 10-Q for the Quarter ended June 30, 1998.
(b) Represents the historical unaudited balance sheet of Nova Financial
Corporation Data Processing Business ("Nova") as of June 30, 1998 included
herein.
(c) Represents cash paid at closing by the Company for certain assets of Nova.
(d) Represents the excess of the purchase price paid by the Company over the net
fair market value of assets acquired and liabilities assumed.
(e) Represents the elimination of historical goodwill.
(f) Represents the elimination of historical accumulated deficit.
(g) Represents the elimination of certain liabilities not assumed.
(h) Represents the write off of assets to be disposed of by The
Intercept Group, Inc.
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Statement of Operations
For the Year Ended December 31, 1997
<S> <C> <C> <C> <C>
(a) (b)
Historical Nova Financial Corporation Pro Forma Pro Forma
Consolidated Data Processing Division Eliminations Consolidated
------------ -------------------------- ------------ ------------
Revenues $23,260,082 $1,596,942 -- $24,857,024
Cost of services 10,222,651 1,008,468 -- 11,231,119
Selling, general and administrative
expense 10,105,317 724,368 -- 10,829,658
Depreciation and amortization 1,323,771 113,832 (22,000)(e) 1,415,603
Loss on impairment of intangibles 727,500 -- -- 727,500
Writeoff of purchased research and
development cost -- -- -- --
----------- ---------- ------- -----------
Total operating expense 22,379,239 1,846,668 (22,000) 24,203,907
----------- ---------- ------- -----------
Operating income 880,843 (249,726) 22,000 653,117
Interest expense (770,175) (118,908) 118,908 (c) (770,175)
Interest and other income, net 121,535 -- (50,600)(d) 70,935
----------- ---------- ------- -----------
Income before provision for income
taxes and minority interest 232,203 (368,634) 90,308 (46,123)
Provision for income taxes 666,125 -- -- 666,125
Minority interest 38,564 -- -- 38,564
----------- ---------- ------- -----------
Net loss before preferred dividends (395,358) (368,634) 90,308 (673,684)
Preferred dividends (32,000) -- -- (32,000)
----------- ---------- ------- -----------
Net loss attributable to common
shareholders $ (427,358) $ (368,634) 90,308 (705,684)
=========== ========== ======= ===========
Pro Forma net loss attributable
to common shareholders $ (0.06) $ (0.10)
=========== ===========
Pro Forma weighted average common
and common equivalent shares
outstanding 6,750,114 6,750,114
=========== ===========
</TABLE>
(a) Represents the historical consolidated statement of operations of the
Company for the year ended December 31, 1997 contained in the Company's
(b) Represents the historical statement of operations of Nova Financial
Corporation Data Processing Business ("Nova") as of June 30, 1998
included herein.
(c) Reflects the reduction of interest expense related to Nova as the debt
was not assumed by the Company.
(d) Reflects the reduction in interest income related to the acquisition
of Nova.
(e) Reflects the adjustment of depreciation of fixed assets and amortization of
intangibles related to the acquisition of Nova as if it had occurred on
January 1, 1997.
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Statement of Operations
For the Six Months Ended June 30, 1998
<S> <C> <C> <C> <C>
(a) (b)
Historical Nova Financial Corporation Pro Forma Pro Forma
Consolidated Data Processing Division Eliminations Consolidated
------------ -------------------------- ------------ ------------
Revenues $12,905,860 $ 661,134 $ -- $13,566,994
Cost of services 5,374,554 567,218 -- 5,941,772
Selling, general and administrative
expense 5,106,898 175,674 -- 5,282,572
Depreciation and amortization 598,853 98,088 (22,000)(e) 674,941
Loss on impairment of intangibles -- -- -- --
Writeoff of purchased research and
development cost -- -- -- --
----------- --------- -------- -----------
Total operating expense 11,080,305 840,980 (22,000) 11,899,285
----------- --------- -------- -----------
Operating income 1,825,555 (179,846) 22,000 1,667,709
Interest expense (320,838) (77,500) 77,500 (c) (320,838)
Interest and other income, net 29,157 -- (25,300)(d) 3,857
----------- --------- -------- -----------
Income before provision for income
and minority interest 1,533,874 (257,346) 74,200 1,350,728
Provision for income taxes 606,944 -- -- 606,944
Minority interest (50,220) -- -- (50,220)
----------- --------- -------- -----------
Net loss before preferred dividends 876,710 (257,346) 74,200 693,564
Preferred dividends (16,000) -- -- (16,000)
----------- --------- -------- -----------
Net loss attributable to common
shareholders $ 860,710 $(257,346) 74,200 677,564
=========== ========= ======== ===========
Pro Forma net loss attributable
to common shareholders $ (0.12) $ 0.10
=========== ===========
Pro Forma weighted average common
and common equivalent shares
outstanding 7,119,343 7,119,343
=========== ===========
</TABLE>
(a) Represents the historical unaudited consolidated statement of operations of
the Company for the six months ended June 30, 1998 contained in the
Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1998.
(b) Represents the historical unaudited statement of operations of Nova
Financial Corporation Data Processing Business ("Nova") as of June 30, 1998
included herein.
(c) Reflects the reduction of interest expense related to Nova as the debt
was not assumed by the Company.
(d) Reflects the reduction in interest income related to the acquisition
of Nova.
(e) Reflects the adjustment of depreciation of fixed assets and amortization of
intangibles related to the acquisition of Nova as if it had occurred on
January 1, 1998.
