<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998.
Or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______, 19__.
Commission file number : 01-14213
------------
THE INTERCEPT GROUP, INC.
(Exact name of registrant as specified in its charter)
Georgia 58 - 2237359
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3150 Holcomb Bridge Road, Suite 200, Norcross, Georgia 30071
(Address of principal executive offices)
(770) 248-9600
(Registrant's telephone number including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
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. (1) Yes X No ; (2) Yes No X
--- --- --- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 12, 1998
Common Stock, no par value 9,248,539
---------------
(No. of Shares)
================================================================================
<PAGE>
THE INTERCEPT GROUP, INC.
INDEX TO FORM 10-Q
PAGE
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997 4
Consolidated Statements of Operations
for the Three Months and Six Months
ended June 30, 1998 and 1997 5
Consolidated Statements of Cash Flows
for the Six Months ended June 30,
1998 and 1997 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 17
EXHIBIT INDEX 18
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
The InterCept Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,943 $ 2,010
Accounts receivable, less allowance for doubtful accounts of $157
both at June 30, 1998 and December 31, 1997 2,592 2,776
Inventory, prepaid expenses and other 494 230
------------ ------------
Total current assets 10,029 5,016
Property and equipment, net 4,509 2,516
Deferred tax assets 664 668
Intangible assets, net 1,888 1,683
Notes receivable 40 45
Other noncurrent assets 228 228
------------ ------------
Total assets $ 17,358 $ 10,156
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of notes payable $ 91 $ 581
Line of credit - 200
Accounts payable and accrued liabilities 2,432 2,103
Deferred revenue 1,440 1,140
------------ ------------
Total current liabilities 3,963 4,024
Notes payable, less current portion 260 4,716
Deferred compensation - 1,800
------------ ------------
Total liabilities 4,223 10,540
Minority interest 50 -
Commitments and contingencies:
Series A redeemable preferred stock 8% cumulative, no par value;
30,000 shares authorized; 0 and 4,000 shares issued and outstanding
at June 30, 1998 and December 31, 1997, respectively - 400
Shareholders' equity:
Preferred stock, no par value; 1,000,000 shares authorized; Series A
reported above - -
Common stock, no par value; 50,000,000 shares authorized;
9,000,114 and 6,750,114 shares issued and outstanding
at June 30, 1998 and December 31, 1997, respectively 15,780 2,764
Accumulated deficit (2,695) (3,548)
------------ ------------
Total shareholders' equity 13,085 (784)
------------ ------------
Total liabilities and shareholders' equity $ 17,358 $ 10,156
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
4
<PAGE>
The InterCept Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -----------------------
1998 1997 1998 1997
------------------------ -----------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Service fee income $ 4,785 $ 3,971 $ 9,358 $ 7,803
Data communications management income 909 761 1,758 1,443
Equipment product sales, services and other 955 690 1,790 1,292
---------- ---------- --------- ----------
Total revenues 6,649 5,422 12,906 10,538
Costs of services:
Cost of service fee income 1,429 1,191 2,721 2,477
Cost of data communications management income 591 600 1,220 1,145
Cost of equipment and product sales 720 588 1,433 1,031
Selling, general and administrative expenses 2,575 2,571 5,107 4,886
Depreciation and amortization 314 330 599 639
---------- ---------- --------- ----------
Total operating expenses 5,629 5,280 11,080 10,178
Operating income 1,020 142 1,826 360
Other expense, net (132) (165) (292) (328)
---------- ---------- --------- ----------
Income (loss) before provision for income taxes and minority interest 888 (23) 1,534 32
Provision for income taxes 349 77 607 121
Minority interest on (income) loss of consolidated subsidiary (46) 13 (50) 39
---------- ---------- --------- ----------
Net income (loss) before preferred dividends 493 (87) 877 (50)
Preferred dividends (8) (8) (16) (16)
---------- ---------- --------- ----------
Net income (loss) attributable to common shareholders $ 485 $ (95) $ 861 $ (66)
========== ========== ========= ==========
Net income (loss) per common share:
Basic $ 0.07 $ (0.01) $ 0.12 $ (0.01)
========== ========== ========= ==========
Diluted $ 0.07 $ (0.01) $ 0.12 $ (0.01)
========== ========== ========= ==========
Weighted average shares outstanding:
Basic 7,250 6,750 7,000 6,750
Diluted 7,371 6,750 7,119 6,750
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements of operations.
5
<PAGE>
The InterCept Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
1998 1997
------------------------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 877 $ (50)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 599 639
Minority interest in income (loss) of consolidated subsidiary 50 (39)
Deferred income tax provision (benefit) 4 (7)
Pro forma tax expense - 37
Changes in operating assets and liabilities:
Accounts receivable 183 573
Inventory, prepaid expenses, and other (273) (144)
Other assets (308) (117)
Accounts payable and accrued expenses 329 (5)
Deferred revenue 301 (8)
------------- ------------
Net cash provided by operating activities 1,762 879
------------- ------------
Cash flows from investing activities:
Increase (decrease) in note receivable 14 (611)
Purchases of property and equipment, net (2,400) (710)
------------- ------------
Net cash used in investing activities (2,386) (1,321)
------------- ------------
Cash flows from financing activities:
Payments on notes payable and line of credit (6,946) (52)
Debt issuance costs (88) -
Retirement of preferred stock (440) -
Distributions for taxes to shareholders of pass through entities (8) (52)
Payment of preferred dividends (16) (16)
Proceeds from issuance of common stock, net of related issuance costs 13,055 6
------------- ------------
Net cash provided by (used in) financing activities 5,557 (114)
Net increase (decrease) in cash and cash equivalents 4,933 (556)
Cash and cash equivalents at beginning of the period 2,010 1,398
------------- ------------
Cash and cash equivalents at end of the period $ 6,943 $ 842
============= ============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 337 $ 368
============= ============
Cash paid for income taxes $ 435 $ 132
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated cash flows.
6
<PAGE>
THE INTERCEPT GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
The InterCept Group, Inc. ("InterCept" or the "Company") designs, develops,
markets and implements a suite of fully integrated electronic commerce
products and services primarily for community financial institutions in the
United States. The Company's products and services include electronic
funds transfer ("EFT"), data communications management, client/server
enterprise software and other processing solutions.
The Company is a single source provider of a broad range of flexible
electronic commerce solutions supporting value-added products and services.
The Company provides numerous EFT products and services, including
automated teller machine ("ATM"), point-of-sale ("POS") and scrip debit
services, debit card transactions, funds transfer services and remote
banking services. The Company licenses client/server enterprise software,
which operates in a Windows NT(R) environment, to community financial
institutions on both a service bureau and an in-house basis. The Company
also supplies banking related equipment, provides related maintenance and
technical support and offers numerous ancillary products and services to
its financial institution customers.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries,
ProVesa, Inc. and InterCept Switch, Inc. Additionally, ProImage,
Inc.("ProImage"), a corporation in which ProVesa has a 33.3% ownership
interest, has been consolidated in the accompanying financial statements
since its inception, due to InterCept's control of ProImage. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
The accompanying statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, the accompanying unaudited condensed consolidated financial
statements reflect all adjustments, which are of a normal recurring nature,
to present fairly the Company's financial position, results of operations,
and cash flows at the dates and for the periods presented. Interim results
of operations are not necessarily indicative of results to be expected for
a 12-month period. The interim financial statements should be read in
conjunction with the Company's Registration Statement on Form S-1
(Registration Number 333-47197) as declared effective by the Securities and
Exchange Commission on June 9, 1998.
2. NET INCOME PER SHARE
Net income per share is calculated and presented in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128"). Basic
7
<PAGE>
earnings per share is computed based on the weighted average number of
common shares outstanding. Diluted earnings per share is computed on the
basis of the weighted average number of common shares outstanding plus the
effect of outstanding stock options using the "treasury stock" method based
on average stock price for the period. All prior periods are presented
under SFAS 128.
The following tables set forth a reconciliation of basic earnings per share
to diluted earnings per share (in thousands, except earnings per share
("EPS") amounts):
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1998 June 30, 1997
------------------------------------ -------------------------------------
Income Shares EPS Income Shares EPS
------------------------------------ -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ 485 7,250 $ 0.07 $ (95) 6,750 $ (0.01)
Dilutives:
Stock options - 121 - - - -
------------------------------------ -------------------------------------
Diluted EPS $ 485 7,371 $ 0.07 $ (95) 6,750 $ (0.01)
==================================== =====================================
Six Months Ended Six Months Ended
June 30, 1998 June 30, 1997
------------------------------------ -------------------------------------
Income Shares EPS Income Shares EPS
------------------------------------ -------------------------------------
Basic EPS $ 861 7,000 $ 0.12 $ (66) 6,750 $ (0.01)
Dilutives:
Stock options - 119 - - - -
------------------------------------ -------------------------------------
Diluted EPS $ 861 7,119 $ 0.12 $ (66) 6,750 $ (0.01)
==================================== =====================================
</TABLE>
3. INITIAL PUBLIC OFFERING OF 2,387,500 SHARES OF COMMON STOCK
On June 9, 1998, the Company completed its initial public offering of
2,387,500 shares (including 137,500 shares sold by a selling shareholder)
of common stock at an offering price of $7.00 per share. Net proceeds from
the offering were approximately $13.1 million after deducting underwriters
discounts and commissions and expenses of the offering. The Company used a
portion of the proceeds to (i) pay down significantly all of its long-term
debt; (ii) pay amounts owed to an officer of the Company for prior service;
(iii) enhance and expand the InterCept Frame Relay Network; and (iv) redeem
its outstanding preferred stock. The balance of the proceeds will be used
for working capital and general corporate purposes, including possible
acquisitions. On July 10, 1998 the underwriters exercised their over-
allotment option to purchase an additional 248,425 shares at $7.00 per
share. The Company received additional net proceeds of approximately $1.6
million from such sale of shares.
4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations at June 30, 1998 and December
31, 1997 consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------------------------------------
<S> <C> <C>
Note payable to Georgia State Bank, all outstanding amounts
repaid in June, 1998. $ - $ 2,733
Note payable to FNB Commerce, all outstanding amounts repaid
in June, 1998. - 1,378
Note payable to Community Bank of Georgia, all outstanding
amounts repaid in January, 1998. - 403
Mortgage note payable to Allied Bank, all outstanding amounts
repaid in June, 1998. - 389
Note payable to First Macon Bank & Trust interest payable at
prime; monthly principal and interest payments, payable in full on
September 15, 2001; the note is collaterized by assets of
ProImage, and a corporate guarantee by ProVesa of one-third of
the balance of the debt. 280 316
Note payable to First Macon Bank & Trust, interest payable at
prime, monthly principal and interest payments, the note is
collaterized by assets of ProImage, and a corporate guarantee
by ProVesa of one-third of the balance of the debt. 71 78
----------------------------------------
351 5,297
Less current maturities (91) (581)
----------------------------------------
$ 260 $ 4,716
========================================
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
OVERVIEW
The following discussion contains statements which constitute "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements appear in a number of places in this Quarterly Report
and include all statements that are not historical statements of fact regarding
the intent, anticipation, belief or current expectations of the Company, its
directors or its officers with respect to, among other things: (i) the Company's
financing plans; (ii) trends affecting the Company's financial condition or
results of operations; (iii) the Company's growth strategy and operating
strategy and (iv) the declaration and payment of dividends. The words "may,"
"would," "could," "will," "expect," "estimate," "anticipate," "believe,"
"intends," "plans," and similar expressions and variations thereof are intended
to identify forward-looking statements. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, many of which are beyond the Company's ability to
control. Actual results may differ materially from these forward-looking
statements as a result of many factors, including: the inability to achieve and
maintain profitability; the inability to obtain, continue and manage growth or
execute agreements with new customers; the risks related to acquisitions, the
inability to attract and retain qualified sales and marketing personnel and
enter strategic marketing relationships; market acceptance of new products and
enhancements; growth in the Company's customers; rapid changes in technology;
increased competition; dependence on new products; and the other factors
discussed in the Company's registration statement on Form S-1
(SEC No. 333-47197) as declared effective on June 9, 1998, including the "Risk
Factors" section contained therein.
The Company derives revenues primarily from the following sources: (i) EFT
processing services; (ii) data communications management; (iii) client/server
enterprise software support, maintenance and related services; and (iv)
maintenance and technical support services, sales of banking related equipment
and complementary products and customer services.
The Company derives EFT revenues principally from processing ATM, POS and
debit card transactions. The Company receives a base fee for providing its ATM
processing services and an additional fee for each ATM serviced. Once the number
of transactions exceeds established levels, the Company charges additional fees
for the extra transactions processed. For its POS services, the Company
generally receives a portion of the interchange fees charged by its community
financial institution customers that issue debit cards and charges a monthly fee
if its customers do not meet a certain minimum dollar amount of transactions for
a particular month. Most charges due under the Company's EFT service agreements
are paid monthly.
The Company's data communications management service revenues are
principally derived from network management services, data packet transportation
services across The InterCept Frame Relay Network, consulting and equipment
configuration, installation and sales. The Company charges a flat monthly fee
for providing telecommunications connectivity and network management as well as
an installation charge.
The Company licenses PC BancPAC, its proprietary Windows NT(R) based
client/server software system on both an in-house and service bureau basis. The
Company recognizes service revenues as the services are provided. It is the
Company's policy to recognize revenues for licensing of PC BancPAC in accordance
with Statement of Position 97-2 on "Software Revenue Recognition" issued by the
American Institute of Certified Public Accountants. Software license fees are
recognized when a noncancellable license agreement
9
<PAGE>
has been signed, the product has been shipped, and all significant obligations
to the customer have been satisfied.
The Company's maintenance, support and equipment revenues consist primarily
of revenues from the Company's maintenance and technical support services as
well as sales of equipment. Equipment revenues are recognized at the time of
shipment while maintenance and technical support service revenues are recognized
as the service period elapses.
The Company's business and relationships with its customers depend
significantly on a number of computer software programs, internal operating
systems and connections to other networks. If any of these software programs,
systems or networks are not programmed to recognize and properly process dates
after December 31, 1999 (the "Year 2000" issue), significant system failures or
errors may result which could have a material adverse effect on the business,
financial condition, or results of operations of both the effected customers and
the Company. The Company has conducted a preliminary review of its internal
accounting and operating programs and systems and has been subject to the review
of certain federal bank regulatory agencies with respect to some of its
operations in light of the Year 2000 issue. No significant Year 2000 problems
with the Company's products and services have yet been identified during such
reviews and the Company currently believes that its programs and systems and the
network connections it maintains are adequately programmed to address the Year
2000 issue or can be modified or replaced to address the Year 2000 issue without
incurring costs or delays which would have a material adverse effect on the
Company's financial condition. The Company currently provides service bureau
processing services to certain customers using a processing solution that is not
Year 2000 compliant, and the Company is in the process of converting those
customers to its PC BancPAC software, which the Company believes is Year 2000
compliant, before the end of September 1999. The Company currently estimates
that the cost of such conversion will total approximately $200,000; however, it
is difficult to predict such costs with certainty, and there can be no assurance
that the costs necessary to convert its customers to PC BancPAC will not have a
material adverse effect on the Company's business, financial condition, or
results of operations. Further, any failure by the Company to complete the
conversion of any of its service bureau customers or address any problems that
may arise during reviews conducted by bank regulatory agencies or otherwise in a
timely manner could significantly interrupt the business operations of such
customers and the Company, which could have a material adverse effect on the
business, financial condition, or results of operations of both the effected
customers and the Company.
The Company has not completed an assessment of third party products or
systems used in its business. Other companies interact electronically with the
Company and its customers, and the Company must coordinate its EFT, data
communications and enterprise software processing with such other companies and
its customers. If these other companies or the Company's customers do not
successfully address Year 2000 issues in their operations and if the Company is
unable to successfully transfer its business operations to another provider that
has Year 2000 compliant systems, the Company's processing operations may be
interrupted, hindered or delayed, which would have a material adverse effect on
its business, financial condition and results of operations. The Company has had
to help some of its customers to implement Year 2000 changes or replace
deficient equipment related to the services the Company provides. Furthermore,
the Company believes that many financial institutions and third party vendors
and network processors (including customers, vendors and processors of the
Company) are still in the preliminary stages of analyzing their software and
network applications to address Year 2000 issues. It is impossible to estimate
the potential expenses involved or delays which may result from the failure of
these institutions and third parties to resolve their Year 2000 issues in a
timely manner and there can be no assurance that such expenses, failures or
delays will not have a material adverse effect on the Company's business,
financial condition or results of operations.
The Company's quarterly operating results have varied in the past and will
likely vary significantly in the future. Factors that may cause the Company's
future operating results to vary include, without limitation: the timing of new
product and service announcements; changes in pricing policies by the Company
and its competitors; market acceptance of new and enhanced versions of the
Company's products and services; the lengthening of sales cycles for new or
existing products or services; customer attrition; changes in operating
expenses; changes in Company strategy; personnel changes; the introduction of
alternative technologies; the Company's products becoming obsolete; failure,
delay and expenses in
10
<PAGE>
making software, systems and networks utilized in the Company's business Year
2000 compliant; the effect of acquisitions; and general economic factors.
Product and service revenues are difficult to forecast because the market for
electronic commerce products and services is rapidly evolving, and the Company's
sales cycle generally covers an extended period but varies substantially from
customer to customer. Intercept believes that quarter to quarter comparisons of
its results of operations should not be relied upon as indications of future
performance.
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenues represented by
certain line items in the Company's condensed consolidated statements of
operations for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ----------------------------
1998 1997 1998 1997
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Costs of services 41.2 43.9 41.6 44.2
Selling, general, and administrative expenses 38.7 47.4 39.6 46.4
Depreciation and amortization 4.7 6.1 4.6 6.1
-------------- ------------ ----------- ------------
Total operating expenses 84.6 97.4 85.8 96.7
-------------- ------------ ----------- ------------
Operating income 15.4 2.6 14.2 3.3
Other expense, net (2.0) (3.0) (2.3) (3.1)
-------------- ------------ ----------- ------------
Income (loss) before minority interest and
provision for income taxes 13.4 (0.4) 11.9 0.2
Minority interest (income) loss (0.8) 0.2 (0.4) 0.4
Provision for income taxes 5.2 1.4 4.7 1.1
-------------- ------------ ----------- ------------
Net income 7.4% (1.6)% 6.8% (0.5)%
============== ============ =========== ============
</TABLE>
11
<PAGE>
Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997
Revenues. Revenues increased 22.6%, or $1.2 million, to $6.6 million for
the three months ended June 30, 1998 from $5.4 million for the three months
ended June 30, 1997. The $1.2 million increase was primarily attributable to (i)
$520,000 generated by an increase in EFT processing services, (ii) $150,000
generated by an increase in data communications management services, (iii)
$260,000 generated by an increase in equipment sales and (iv) other net
increases of $300,000.
Costs of Services. Costs of services increased 15.2%, or $360,000, to $2.7
million for the three months ended June 30, 1998 from $2.4 million for the three
months ended June 30, 1997. The $360,000 increase was primarily attributable to
(i) $130,000 generated by additional equipment sales, (ii) $70,000 generated
from additional maintenance services and (iii) other increases of $160,000.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 0.2% to $2.6 million for the three months
ended June 30, 1998 from $2.6 million for the three-months ended June 30, 1997.
Depreciation and Amortization. Depreciation and amortization decreased
4.8%, or $20,000, to $310,000 for the three months ended June 30, 1998 from
$330,000 for the three months ended June 30, 1997. The decrease was primarily
attributable to a reduction of amortization for fully amortized intangibles
partially offset by additional depreciation expense related to capital
expenditures to upgrade and expand the InterCept Frame Relay Network.
Other Expense. Other expense decreased 20.1%, or $40,000, to $130,000 for
the three months ended June 30, 1998 from $170,000 for the three months ended
June 30, 1997. The decrease was primarily due to the reduction of long-term
debt.
Minority Interest Income (Loss). Minority interest income (loss) decreased
$60,000 to a loss of $50,000 for the three months ended June 30, 1998 from
$10,000 for the three months ended June 30, 1997. The decrease was attributable
to profits in ProImage's operations.
Provision for Income Taxes. Provision for income taxes increased $270,000
to $350,000 for the three months ended June 30, 1998 from $80,000 for the three
months ended June 30, 1997. The increase was attributable to increased profits
partially offset by a reduction in nondeductible amortization.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Revenues. Revenues increased 22.5%, or $2.4 million, to $12.9 million for
the six months ended June 30, 1998 from $10.5 million for the six months ended
June 30, 1997. The $2.4 million increase was primarily attributable to (i) $1.1
million generated by an increase in EFT processing services, (ii) $320,000
generated by an increase in data communications management services, (iii)
$500,000 generated by an increase in equipment and (iv) other net increases of
$440,000.
Costs of Services. Costs of services increased 15.5%, or $720,000, to $5.4
million for the six months ended June 30, 1998 from $4.7 million for the six
months ended June 30, 1997. The $720,000 increase was primarily attributable to
(i) $400,000 generated by an increase in equipment sales, (ii) $80,000 generated
by an increase in data communications management, (iii) $70,000 generated from
additional maintenance services and (iv) other increases of $170,000.
12
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 4.5%, or $220,000, to $5.1 million for the six
months ended June 30, 1998 from $4.9 million for the six months ended June 30,
1997. The increase was primarily attributable to an increase in additional sales
and administrative personnel to support the Company's growth.
Depreciation and Amortization. Depreciation and amortization decreased
6.2%, or $40,000, to $600,000 for the six months ended June 30, 1998 from
$640,000 for the six months ended June 30, 1997. The decrease was primarily
attributable to a reduction of amortization of fully amortized intangibles
partially offset by additional depreciation expense related to capital
expenditures to upgrade the InterCept Frame Relay Network.
Other Expense. Other expense decreased 11.0%, or $40,000, to $290,000 for
the six months ended June 30, 1998 from $330,000 for the six months ended June
30, 1997. The decrease was primarily due to the reduction of long term debt.
Minority Interest Income (Loss). Minority interest income (loss) decreased
$90,000, to a loss of $50,000 for the six months ended June 30, 1998 from
$40,000 for the six months ended June 30, 1997. The decrease was attributable to
profits in ProImage's operations.
Provision for Income Taxes. Provision for income taxes increased
$490,000, to $610,000 for the six months ended June 30, 1998 from $120,000 for
the six months ended June 30, 1997. The increase was attributable to increased
profits partially offset by a reduction in nondeductible amortization.
Liquidity and Capital Resources
Cash and cash equivalents were $6.9 million at June 30, 1998. Net cash
provided by operating activities was $1.8 million and $900,000 for the six
months ended June 30, 1998 and 1997, respectively. The increase in the net cash
provided by operating activities was primarily attributable to an increase in
earnings.
Net cash used in investing activities was $2.4 million and $1.3 million for
the six months ended June 30, 1998 and 1997, respectively. The increase in net
cash used in investing activities was primarily due to capital expenditures of
$1.6 million to upgrade and expand the InterCept Frame Relay Network in 1998,
partially offset by $600,000 related to the collection of a note receivable in
1997.
Net cash provided by (used in) financing activities was $5.6 million and
$(100,000) for the six months ended June 30, 1998 and 1997, respectively. The
increase in net cash provided by financing activities was primarily due to net
proceeds from the completion of the Company's initial public offering.
13
<PAGE>
On April 28, 1998, the Company entered into a loan agreement with First
Union National Bank (the "First Union Credit Facility"), under which the Company
may borrow up to $20.0 million to fund acquisitions and pay expenses related to
acquisitions. In addition, at the Company's election, $2.0 million of the First
Union Credit Facility may become available for working capital purposes. Before
making any borrowings under the loan, InterCept shall have satisfied certain
conditions set forth in the loan agreement. The First Union Credit Facility
contains provisions which require the Company to maintain certain financial
ratios and minimum net worth amounts and which restrict the Company's ability to
incur additional debt, make certain capital expenditures, enter into agreements
for mergers, acquisitions or the sale of substantial assets and pay dividends.
The First Union Credit Facility matures on April 28, 2001. Interest is payable
monthly and outstanding principal amounts accrue interest, at the Company's
option, at an annual rate equal to either (i) a floating rate equal to the
lender's prime rate minus one quarter of one percent or (ii) a fixed rate based
upon the 30-day LIBOR rate plus applicable margins.
While there can be no assurances, the Company believes that the cash on
hand, funds to be provided by operations, and funds which may be available for
working capital purposes under the First Union Credit Facility will be
sufficient to meet the Company's anticipated capital expenditure and liquidity
requirements for its operations through at least June 1999. The Company intends
to grow, in part, through strategic acquisitions and will make additional
expenditures to negotiate, and consummate acquisition transactions and integrate
the acquired companies. While there can be no assurance, management currently
believes that cash on hand and funds from the First Union Credit Facility,
together with the issuance of Common Stock and other securities, will be
sufficient to fund its acquisition needs for the next 12 months. No assurance
can be made with respect to the actual timing and the amount of the expenditures
or acqusitions. The Company's estimates are forward-looking statements that are
subject to risks and uncertainties discussed above.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property subject to, any
material legal proceedings, other than routine litigation incidental to its
business.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote by the Company's security holders during
the second quarter ended June 30, 1998.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit
No. Description
------ -----------
3.1 Amended and Restated Articles of Incorporation, as filed with the
Secretary of the State of Georgia on April 29, 1998, (incorporated
by reference to Exhibit 3.1 of the Company's Registration Statement
on Form S-1 (No. 333-47197) as declared effective by the SEC on June
9, 1998 (the "Registration Statement")).
3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit
3.2 of the Registration Statement).
4.1 See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated
Articles of Incorporation and Amended and Restated Bylaws defining
the rights of the holders of Common Stock of the Company.
10.1 Loan and Security Agreement dated April 28, 1998 by and among the
Company, its wholly-owned subsidiaries and First Union National Bank
(incorporated by reference to Exhibit 10.25 of the Registration
Statement).
10.2 Stock Option Agreement dated as of June 24, 1998 by and between the
Company and John W. Collins.
10.3 Stock Option Agreement dated as of June 24, 1998 by and between the
Company and Donny R. Jackson.
10.4 Stock Option Agreement dated as of June 24, 1998 by and between the
Company and Scott R. Meyerhoff.
27.1 Financial Data Schedule for the three and six months ended June 30,
1998.
27.2 Financial Data Schedule for the three and six months ended June 30,
1997.
15
<PAGE>
b) Reports on Form 8-K
None.
________________
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE INTERCEPT GROUP, INC.
August 14, 1998 /s/ John W. Collins
- --------------- ---------------------------
Date John W. Collins
Chairman of the Board
and Chief Executive Officer
(principal executive officer)
August 14, 1998 /s/ Scott R. Meyerhoff
- --------------- ---------------------------
Date Scott R. Meyerhoff
Chief Financial Officer
(principal financial and
accounting officer)
17
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
--- -----------
3.1 Amended and Restated Articles of Incorporation, as filed with the
Secretary of the State of Georgia on April 29, 1998 (incorporated by
reference to Exhibit 3.1 of the Company's Registration Statement on
Form S-1 (No. 333-47197) as declared effective by the SEC on June 9,
1998 (the "Registration Statement")).
3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2
of the Registration Statement)
4.1 See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated
Articles of Incorporation and Amended and Restated Bylaws
defining the rights of the holders of Common Stock of the Company.
10.1 Loan and Security Agreement dated April 28, 1998 by and among the
Company, its wholly-owned subsidiaries and First Union National Bank
(incorporated by reference to Exhibit 10.25 of the Registration
Statement).
10.2 Stock Option Agreement dated as of June 24, 1998 by and between the
Company and John W. Collins.
10.3 Stock Option Agreement dated as of June 24, 1998 by and between the
Company and Donny R. Jackson.
10.4 Stock Option Agreement dated as of June 24, 1998 by and between the
Company and Scott R. Meyerhoff.
27.1 Financial Data Schedule for the three and six months ended June 30,
1998.
27.2 Financial Data Schedule for the three and six months ended June 30,
1997.
_____________________
18
<PAGE>
EXHIBIT 10.2
THE INTERCEPT GROUP, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this 24th
day of June, 1998, by and between The InterCept Group, Inc., a Georgia
corporation (the "Company"), and John W. Collins (the "Optionee").
WHEREAS, effective as of November 12, 1996, the Board of Directors of the
Company adopted a stock option plan known as the "The Intercept Group, Inc.
Amended and Restated 1996 Stock Option Plan" (the "Plan"), and recommended that
the Plan be approved by the Company's shareholders; and
WHEREAS, the Committee has granted the Optionee a stock option to purchase the
number of shares of the Company's common stock as set forth below, and in
consideration of the granting of that stock option the Optionee intends to
remain in the employ of the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written agreement
with respect to such option in accordance with the Plan.
NOW, THEREFORE, as an employment incentive and to encourage stock ownership,
and also in consideration of the mutual covenants contained herein, the parties
hereto agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the
---------------------
provisions of the Plan and the terms and definitions of the Plan are
incorporated herein by reference and made a part hereof. A copy of
the Plan has been delivered to, and receipt is hereby acknowledged by,
the Optionee.
2. Grant of Option. Subject to the terms, restrictions, limitations and
---------------
conditions stated herein, the Company hereby evidences its grant to
the Optionee, not in lieu of salary or other compensation, of the
right and option (the "Option") to purchase all or any part of the
number of shares of the Company's Common Stock, no par value (the
"Stock"), set forth on Schedule A attached hereto and incorporated
herein by reference. The Option shall be exercisable in the amounts
and at the time specified on Schedule A. The Option shall expire and
shall not be exercisable on the date specified on Schedule A or on
such earlier date as determined pursuant to Section 8, 9, or 10
hereof. Schedule A states whether the Option is intended to be an
Incentive Stock Option.
3. Purchase Price. The price per share to be paid by the Optionee for
--------------
the shares subject to this Option (the "Exercise Price") shall be as
specified on Schedule A, which price shall be an amount not less than
the Fair Market Value of a share of Stock as of the Date of Grant (as
defined in Section 11 below) if the Option is an Incentive Stock
Option.
<PAGE>
4. Exercise Terms. The Optionee must exercise the Option for at least
--------------
the lesser of 100 shares or the number of shares of Purchasable Stock
as to which the Option remains unexercised. In the event this Option
is not exercised with respect to all or any part of the shares subject
to this Option prior to its expiration, the shares with respect to
which this Option was not exercised shall no longer be subject to this
Option.
5. Option Non-Transferable. No Option shall be transferable by an
-----------------------
Optionee other than by will or the laws of descent and distribution
or, in the case of non-Incentive Stock Options, pursuant to a
Qualified Domestic Relations Order, and no Option shall be
transferable by an Optionee who is a Section 16 Insider prior to
shareholder approval of the Plan. During the lifetime of an Optionee,
Options shall be exercisable only by such Optionee (or by such
Optionee's guardian or legal representative, should one be appointed).
6. Notice of Exercise of Option. This Option may be exercised by the
----------------------------
Optionee, or by the Optionee's administrators, executors or personal
representatives, by a written notice (in substantially the form of the
Notice of Exercise attached hereto as Schedule B) signed by the
Optionee, or by such administrators, executors or personal
representatives, and delivered or mailed to the Company as specified
in Section 14 hereof to the attention of the President or such other
officer as the Company may designate. Any such notice shall (a)
specify the number of shares of Stock which the Optionee or the
Optionee's administrators, executors or personal representatives, as
the case may be, then elects to purchase hereunder, (b) contain such
information as may be reasonably required pursuant to Section 12
hereof, and (c) be accompanied by (i) a certified or cashier's check
payable to the Company in payment of the total Exercise Price
applicable to such shares as provided herein, (ii) shares of Stock
owned by the Optionee and duly endorsed or accompanied by stock
transfer powers having a Fair Market Value equal to the total Exercise
Price applicable to such shares purchased hereunder, or (iii) a
certified or cashier's check accompanied by the number of shares of
Stock whose Fair Market Value when added to the amount of the check
equals the total Exercise Price applicable to such shares purchased
hereunder. Upon receipt of any such notice and accompanying payment,
and subject to the terms hereof, the Company agrees to issue to the
Optionee or the Optionee's administrators, executors or personal
representatives, as the case may be, stock certificates for the number
of shares specified in such notice registered in the name of the
person exercising this Option.
7. Adjustment in Option. The number of shares subject to this Option,
--------------------
the Exercise Price and other matters are subject to adjustment during
the term of this Option in accordance with Section 5.2 of the Plan.
2
<PAGE>
8. Termination of Employment.
-------------------------
(a) Except as otherwise specified in Schedule A hereto, in the event
of the termination of the Optionee's employment with the Company
or any of its subsidiaries, other than a termination that is
either (i) for Cause, (ii) voluntary on the part of the Optionee
and without written consent of the Company, or (iii) for reasons
of death or disability or retirement, the Optionee may exercise
this Option at any time within 90 days after such termination to
the extent of the number of shares which were Purchasable
hereunder at the date of such termination.
(b) Except as specified in Schedule A attached hereto, in the event
of a termination of the Optionee's employment that is either (i)
for Cause or (ii) voluntary on the part of the Optionee and
without the written consent of the Company, this Option, to the
extent not previously exercised, shall terminate immediately and
shall not thereafter be or become exercisable.
(c) Unless and to the extent otherwise provided in Exhibit A hereto,
in the event of the retirement of the Optionee at the normal
retirement date as prescribed from time to time by the Company or
any subsidiary, the Optionee shall continue to have the right to
exercise any Options for shares which were Purchasable at the
date of the Optionee's retirement (provided that, on the date
which is three months after the date of retirement, the Options
will become void and unexercisable unless on the date of
retirement the Optionee enters into a noncompete agreement with
The Intercept Group, Inc. and continues to comply with such
noncompete agreement). This Option does not confer upon the
Optionee any right with respect to continuance of employment by
the Company or by any of its subsidiaries. This Option shall not
be affected by any change of employment so long as the Optionee
continues to be an employee of the Company or one of its
subsidiaries.
9. Disabled Optionee. In the event of termination of employment because
-----------------
of the Optionee's becoming a Disabled Optionee, the Optionee (or his or
her personal representative) may exercise this Option, within a period
ending on the earlier of (a) the last day of the one year period
following the Optionee's death or (b) the expiration date of this Option,
to the extent of the number of shares which were Purchasable hereunder at
the date of such termination.
3
<PAGE>
10. Death of Optionee. Except as otherwise set forth in Schedule A with
-----------------
respect to the rights of the Optionee upon termination of employment
under Section 8(a) above, in the event of the Optionee's death while
employed by the Company or any of its subsidiaries or within three
months after a termination of such employment (if such termination was
neither (i) for cause nor (ii) voluntary on the part of the Optionee
and without the written consent of the Company), the appropriate
persons described in Section 6 hereof or persons to whom all or a
portion of this Option is transferred in accordance with Section 5
hereof may exercise this Option at any time within a period ending on
the earlier of (a) the last day of the one year period following the
Optionee's death or (b) the expiration date of this Option. If the
Optionee was an employee of the Company at the time of death, this
Option may be so exercised to the extent of the number of shares that
were Purchasable hereunder at the date of death. If the Optionee's
employment terminated prior to his or her death, this Option may be
exercised only to the extent of the number of shares covered by this
Option which were Purchasable hereunder at the date of such
termination.
11. Date of Grant. This Option was granted by the Board of Directors of
-------------
the Company on the date set forth in Schedule A (the "Date of Grant").
12. Compliance with Regulatory Matters. The Optionee acknowledges that
----------------------------------
the issuance of capital stock of the Company is subject to limitations
imposed by federal and state law and the Optionee hereby agrees that
the Company shall not be obligated to issue any shares of Stock upon
exercise of this Option that would cause the Company to violate law or
any rule, regulation, order or consent decree of any regulatory
authority (including without limitation the Securities and Exchange
Commission) having jurisdiction over the affairs of the Company. The
Optionee agrees that he or she will provide the Company with such
information as is reasonably requested by the Company or its counsel
to determine whether the issuance of Stock complies with the
provisions described by this Section 12.
13. Restriction on Disposition of Shares. The shares purchased pursuant
------------------------------------
to the exercise of an Incentive Stock Option shall not be transferred
by the Optionee except pursuant to the Optionee's will, or the laws of
descent and distribution, until such date which is the later of two
years after the grant of such Incentive Stock Option or one year after
the transfer of the shares to the Optionee pursuant to the exercise of
such Incentive Stock Option.
14. Miscellaneous.
-------------
(a) This Agreement shall be binding upon the parties hereto and their
representatives, successors and assigns.
4
<PAGE>
(b) This Agreement is executed and delivered in, and shall be
governed by the laws of, the State of Georgia.
(c) Any requests or notices to be given hereunder shall be deemed
given, and any elections or exercises to be made or accomplished
shall be deemed made or accomplished, upon actual delivery
thereof to the designated recipient, or three days after deposit
thereof in the United States mail, registered, return receipt
requested and postage prepaid, addressed, if to the Optionee, at
the address set forth below and, if to the Company, to the
executive offices of the Company at 3150 Holcomb Bridge Road,
Suite 200, Norcross, Georgia 30071.
(d) This Agreement may not be modified except in writing executed by
each of the parties hereto.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this
Stock Option Agreement to be executed on behalf of the Company and the Company's
seal to be affixed hereto and attested by the Secretary or an Assistant
Secretary of the Company, and the Optionee has executed this Stock Option
Agreement under seal, all as of the day and year first above written.
THE INTERCEPT GROUP, INC. OPTIONEE
By: /s/ Donny R. Jackson /s/ John W. Collins
-------------------- -------------------
Donny R. Jackson John W. Collins
Title: President and
Chief Operating Officer
ATTEST:
/s/ Scott R. Meyerhoff
- -----------------------------
Secretary/Assistant Secretary
5
<PAGE>
SCHEDULE A
TO
STOCK OPTION AGREEMENT
BETWEEN
THE INTERCEPT GROUP, INC.
AND
JOHN W. COLLINS
Dated: June 24, 1998
-------------
1. Number of Shares Subject to Option: 200,000 shares.
----------------------------------
2. This Option (Check one) [X] is [ ] is not an Incentive Stock Option.
----------- -- --------------------------------
3. Option Exercise Price: $ 7.70 per share.
---------------------
4. Date of Grant: June 24, 1998 _____________________
-------------
5. Option Vesting Schedule:
-----------------------
Check one:
( ) Options are exercisable with respect to all shares on or
after the date hereof
(X) Options are exercisable with respect to the number of shares
indicated below on or after the date indicated next to the number
of shares:
No. of Shares Vesting Date
------------- ------------
50% Date of Grant
16 2/3% First Anniversary of Date of Grant
16 2/3% Second Anniversary of Date of Grant
16 2/3% Third Anniversary of Date of Grant
6. Option Exercise Period:
----------------------
Check One:
(X) All options expire and are void unless exercised on or before
June 24, 2003.
( ) Options expire and are void unless exercised on or before the
date indicated next to the number of shares:
No. of Shares Expiration Date
------------- ---------------
7. Effect of Termination of Employment of Optionee (if different from that set
-----------------------------------------------
forth in Sections 8, 9 and 10 of the Stock Option Agreement):
<PAGE>
SCHEDULE B
NOTICE OF EXERCISE
The undersigned hereby notifies The InterCept Group, Inc. (the "Company") of
this election to exercise the undersigned's stock option to purchase
______________ shares of the Company's common stock, no par value (the "Common
Stock"), pursuant to the Stock Option Agreement (the "Agreement") between the
undersigned and the Company dated ________________. Accompanying this Notice is
(1) a certified or a cashier's check in the amount of $__________ payable to the
Company, and/or (2) __________ shares of the Company's Common Stock presently
owned by the undersigned and duly endorsed or accompanied by stock transfer
powers, having an aggregate Fair Market Value (as defined in The Intercept
Group, Inc. Amended and Restated 1996 Stock Option Plan) as of the date hereof
of $____________, such amounts being equal, in the aggregate, to the purchase
price per share set forth in Section 3 of the Agreement multiplied by the number
of shares being purchased hereby (in each instance subject to appropriate
adjustment pursuant to Section 5.2 of the Agreement).
IN WITNESS WHEREOF, the undersigned has set his hand and seal, this _____ day
of ______________, _______.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
Name:_________________________________
Position (if other than Optionee):
<PAGE>
EXHIBIT 10.3
THE INTERCEPT GROUP, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this
24th day of June, 1998, by and between The InterCept Group, Inc., a Georgia
corporation (the "Company"), and Donny R. Jackson (the "Optionee").
WHEREAS, effective as of November 12, 1996, the Board of Directors of the
Company adopted a stock option plan known as the "The Intercept Group, Inc.
Amended and Restated 1996 Stock Option Plan" (the "Plan"), and recommended that
the Plan be approved by the Company's shareholders; and
WHEREAS, the Committee has granted the Optionee a stock option to purchase
the number of shares of the Company's common stock as set forth below, and in
consideration of the granting of that stock option the Optionee intends to
remain in the employ of the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written
agreement with respect to such option in accordance with the Plan.
NOW, THEREFORE, as an employment incentive and to encourage stock
ownership, and also in consideration of the mutual covenants contained herein,
the parties hereto agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the
---------------------
provisions of the Plan and the terms and definitions of the Plan are
incorporated herein by reference and made a part hereof. A copy of
the Plan has been delivered to, and receipt is hereby acknowledged by,
the Optionee.
2. Grant of Option. Subject to the terms, restrictions, limitations and
---------------
conditions stated herein, the Company hereby evidences its grant to
the Optionee, not in lieu of salary or other compensation, of the
right and option (the "Option") to purchase all or any part of the
number of shares of the Company's Common Stock, no par value (the
"Stock"), set forth on Schedule A attached hereto and incorporated
herein by reference. The Option shall be exercisable in the amounts
and at the time specified on Schedule A. The Option shall expire and
shall not be exercisable on the date specified on Schedule A or on
such earlier date as determined pursuant to Section 8, 9, or 10
hereof. Schedule A states whether the Option is intended to be an
Incentive Stock Option.
3. Purchase Price. The price per share to be paid by the Optionee for
--------------
the shares subject to this Option (the "Exercise Price") shall be as
specified on Schedule A, which price shall be an amount not less than
the Fair Market Value of a share of Stock as of the Date of Grant (as
defined in Section 11 below) if the Option is an Incentive Stock
Option.
<PAGE>
4. Exercise Terms. The Optionee must exercise the Option for at least
--------------
the lesser of 100 shares or the number of shares of Purchasable Stock
as to which the Option remains unexercised. In the event this Option
is not exercised with respect to all or any part of the shares subject
to this Option prior to its expiration, the shares with respect to
which this Option was not exercised shall no longer be subject to this
Option.
5. Option Non-Transferable. No Option shall be transferable by an
-----------------------
Optionee other than by will or the laws of descent and distribution
or, in the case of non-Incentive Stock Options, pursuant to a
Qualified Domestic Relations Order, and no Option shall be
transferable by an Optionee who is a Section 16 Insider prior to
shareholder approval of the Plan. During the lifetime of an Optionee,
Options shall be exercisable only by such Optionee (or by such
Optionee's guardian or legal representative, should one be appointed).
6. Notice of Exercise of Option. This Option may be exercised by the
----------------------------
Optionee, or by the Optionee's administrators, executors or personal
representatives, by a written notice (in substantially the form of the
Notice of Exercise attached hereto as Schedule B) signed by the
Optionee, or by such administrators, executors or personal
representatives, and delivered or mailed to the Company as specified
in Section 14 hereof to the attention of the President or such other
officer as the Company may designate. Any such notice shall (a)
specify the number of shares of Stock which the Optionee or the
Optionee's administrators, executors or personal representatives, as
the case may be, then elects to purchase hereunder, (b) contain such
information as may be reasonably required pursuant to Section 12
hereof, and (c) be accompanied by (i) a certified or cashier's check
payable to the Company in payment of the total Exercise Price
applicable to such shares as provided herein, (ii) shares of Stock
owned by the Optionee and duly endorsed or accompanied by stock
transfer powers having a Fair Market Value equal to the total Exercise
Price applicable to such shares purchased hereunder, or (iii) a
certified or cashier's check accompanied by the number of shares of
Stock whose Fair Market Value when added to the amount of the check
equals the total Exercise Price applicable to such shares purchased
hereunder. Upon receipt of any such notice and accompanying payment,
and subject to the terms hereof, the Company agrees to issue to the
Optionee or the Optionee's administrators, executors or personal
representatives, as the case may be, stock certificates for the number
of shares specified in such notice registered in the name of the
person exercising this Option.
7. Adjustment in Option. The number of shares subject to this Option,
--------------------
the Exercise Price and other matters are subject to adjustment during
the term of this Option in accordance with Section 5.2 of the Plan.
2
<PAGE>
8. Termination of Employment.
-------------------------
(a) Except as otherwise specified in Schedule A hereto, in the event
of the termination of the Optionee's employment with the Company
or any of its subsidiaries, other than a termination that is
either (i) for Cause, (ii) voluntary on the part of the Optionee
and without written consent of the Company, or (iii) for reasons
of death or disability or retirement, the Optionee may exercise
this Option at any time within 90 days after such termination to
the extent of the number of shares which were Purchasable
hereunder at the date of such termination.
(b) Except as specified in Schedule A attached hereto, in the event
of a termination of the Optionee's employment that is either (i)
for Cause or (ii) voluntary on the part of the Optionee and
without the written consent of the Company, this Option, to the
extent not previously exercised, shall terminate immediately and
shall not thereafter be or become exercisable.
(c) Unless and to the extent otherwise provided in Exhibit A hereto,
in the event of the retirement of the Optionee at the normal
retirement date as prescribed from time to time by the Company or
any subsidiary, the Optionee shall continue to have the right to
exercise any Options for shares which were Purchasable at the
date of the Optionee's retirement (provided that, on the date
which is three months after the date of retirement, the Options
will become void and unexercisable unless on the date of
retirement the Optionee enters into a noncompete agreement with
The Intercept Group, Inc. and continues to comply with such
noncompete agreement). This Option does not confer upon the
Optionee any right with respect to continuance of employment by
the Company or by any of its subsidiaries. This Option shall not
be affected by any change of employment so long as the Optionee
continues to be an employee of the Company or one of its
subsidiaries.
9. Disabled Optionee. In the event of termination of employment because
-----------------
of the Optionee's becoming a Disabled Optionee, the Optionee (or his
or her personal representative) may exercise this Option, within a
period ending on the earlier of (a) the last day of the one year
period following the Optionee's death or (b) the expiration date of
this Option, to the extent of the number of shares which were
Purchasable hereunder at the date of such termination.
3
<PAGE>
10. Death of Optionee. Except as otherwise set forth in Schedule A with
-----------------
respect to the rights of the Optionee upon termination of employment
under Section 8(a) above, in the event of the Optionee's death while
employed by the Company or any of its subsidiaries or within three
months after a termination of such employment (if such termination was
neither (i) for cause nor (ii) voluntary on the part of the Optionee
and without the written consent of the Company), the appropriate
persons described in Section 6 hereof or persons to whom all or a
portion of this Option is transferred in accordance with Section 5
hereof may exercise this Option at any time within a period ending on
the earlier of (a) the last day of the one year period following the
Optionee's death or (b) the expiration date of this Option. If the
Optionee was an employee of the Company at the time of death, this
Option may be so exercised to the extent of the number of shares that
were Purchasable hereunder at the date of death. If the Optionee's
employment terminated prior to his or her death, this Option may be
exercised only to the extent of the number of shares covered by this
Option which were Purchasable hereunder at the date of such
termination.
11. Date of Grant. This Option was granted by the Board of Directors of
-------------
the Company on the date set forth in Schedule A (the "Date of Grant").
12. Compliance with Regulatory Matters. The Optionee acknowledges that
----------------------------------
the issuance of capital stock of the Company is subject to limitations
imposed by federal and state law and the Optionee hereby agrees that
the Company shall not be obligated to issue any shares of Stock upon
exercise of this Option that would cause the Company to violate law or
any rule, regulation, order or consent decree of any regulatory
authority (including without limitation the Securities and Exchange
Commission) having jurisdiction over the affairs of the Company. The
Optionee agrees that he or she will provide the Company with such
information as is reasonably requested by the Company or its counsel
to determine whether the issuance of Stock complies with the
provisions described by this Section 12.
13. Restriction on Disposition of Shares. The shares purchased pursuant
------------------------------------
to the exercise of an Incentive Stock Option shall not be transferred
by the Optionee except pursuant to the Optionee's will, or the laws of
descent and distribution, until such date which is the later of two
years after the grant of such Incentive Stock Option or one year after
the transfer of the shares to the Optionee pursuant to the exercise of
such Incentive Stock Option.
14. Miscellaneous.
-------------
(a) This Agreement shall be binding upon the parties hereto and their
representatives, successors and assigns.
4
<PAGE>
(b) This Agreement is executed and delivered in, and shall be
governed by the laws of, the State of Georgia.
(c) Any requests or notices to be given hereunder shall be deemed
given, and any elections or exercises to be made or accomplished
shall be deemed made or accomplished, upon actual delivery
thereof to the designated recipient, or three days after deposit
thereof in the United States mail, registered, return receipt
requested and postage prepaid, addressed, if to the Optionee, at
the address set forth below and, if to the Company, to the
executive offices of the Company at 3150 Holcomb Bridge Road,
Suite 200, Norcross, Georgia 30071.
(d) This Agreement may not be modified except in writing executed by
each of the parties hereto.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this
Stock Option Agreement to be executed on behalf of the Company and the Company's
seal to be affixed hereto and attested by the Secretary or an Assistant
Secretary of the Company, and the Optionee has executed this Stock Option
Agreement under seal, all as of the day and year first above written.
THE INTERCEPT GROUP, INC. OPTIONEE
By: /s/ John W. Collins /s/ Donny R. Jackson
------------------------------ ------------------------------
John W. Collins Donny R. Jackson
Title: Chief Executive Officer
ATTEST:
/s/ Scott R. Meyerhoff
- -----------------------------------
Secretary/Assistant Secretary
5
<PAGE>
SCHEDULE A
TO
STOCK OPTION AGREEMENT
BETWEEN
THE INTERCEPT GROUP, INC.
AND
DONNY R. JACKSON
Dated: June 24, 1998
-------------
1. Number of Shares Subject to Option: 100,000 shares.
----------------------------------
2. This Option (Check one) [X] is [_] is not an Incentive Stock Option.
----------- -- --------------------------------
3. Option Exercise Price: $ 7.00 per share.
---------------------
4. Date of Grant: June 24, 1998 ___________
-------------
5. Option Vesting Schedule:
-----------------------
Check one:
(_) Options are exercisable with respect to all shares on or
after the date hereof
(X) Options are exercisable with respect to the number of shares
indicated below on or after the date indicated next to the number
of shares:
No. of Shares Vesting Date
------------- ------------
50% Date of Grant
16 2/3% First Anniversary of Date of Grant
16 2/3% Second Anniversary of Date of Grant
16 2/3% Third Anniversary of Date of Grant
6. Option Exercise Period:
----------------------
Check One:
(X) All options expire and are void unless exercised on or before
June 24, 2008.
(_) Options expire and are void unless exercised on or before the
date indicated next to the number of shares:
No. of Shares Expiration Date
------------- ---------------
7. Effect of Termination of Employment of Optionee (if different from that set
-----------------------------------------------
forth in Sections 8, 9 and 10 of the Stock Option Agreement):
<PAGE>
SCHEDULE B
NOTICE OF EXERCISE
The undersigned hereby notifies The InterCept Group, Inc. (the "Company")
of this election to exercise the undersigned's stock option to purchase
______________ shares of the Company's common stock, no par value (the "Common
Stock"), pursuant to the Stock Option Agreement (the "Agreement") between the
undersigned and the Company dated ________________. Accompanying this Notice is
(1) a certified or a cashier's check in the amount of $__________ payable to the
Company, and/or (2) __________ shares of the Company's Common Stock presently
owned by the undersigned and duly endorsed or accompanied by stock transfer
powers, having an aggregate Fair Market Value (as defined in The Intercept
Group, Inc. Amended and Restated 1996 Stock Option Plan) as of the date hereof
of $____________, such amounts being equal, in the aggregate, to the purchase
price per share set forth in Section 3 of the Agreement multiplied by the number
of shares being purchased hereby (in each instance subject to appropriate
adjustment pursuant to Section 5.2 of the Agreement).
IN WITNESS WHEREOF, the undersigned has set his hand and seal, this _____
day of ______________, _______.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
----------------------------------
Name:
Position (if other than Optionee):
<PAGE>
EXHIBIT 10.4
THE INTERCEPT GROUP, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this 24th
day of June, 1998, by and between The InterCept Group, Inc., a Georgia
corporation (the "Company"), and Scott R. Meyerhoff (the "Optionee").
WHEREAS, effective as of November 12, 1996, the Board of Directors of the
Company adopted a stock option plan known as the "The Intercept Group, Inc.
Amended and Restated 1996 Stock Option Plan" (the "Plan"), and recommended that
the Plan be approved by the Company's shareholders; and
WHEREAS, the Committee has granted the Optionee a stock option to purchase the
number of shares of the Company's common stock as set forth below, and in
consideration of the granting of that stock option the Optionee intends to
remain in the employ of the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written agreement
with respect to such option in accordance with the Plan.
NOW, THEREFORE, as an employment incentive and to encourage stock ownership,
and also in consideration of the mutual covenants contained herein, the parties
hereto agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the
---------------------
provisions of the Plan and the terms and definitions of the Plan are
incorporated herein by reference and made a part hereof. A copy of
the Plan has been delivered to, and receipt is hereby acknowledged by,
the Optionee.
2. Grant of Option. Subject to the terms, restrictions, limitations and
---------------
conditions stated herein, the Company hereby evidences its grant to
the Optionee, not in lieu of salary or other compensation, of the
right and option (the "Option") to purchase all or any part of the
number of shares of the Company's Common Stock, no par value (the
"Stock"), set forth on Schedule A attached hereto and incorporated
herein by reference. The Option shall be exercisable in the amounts
and at the time specified on Schedule A. The Option shall expire and
shall not be exercisable on the date specified on Schedule A or on
such earlier date as determined pursuant to Section 8, 9, or 10
hereof. Schedule A states whether the Option is intended to be an
Incentive Stock Option.
3. Purchase Price. The price per share to be paid by the Optionee for
--------------
the shares subject to this Option (the "Exercise Price") shall be as
specified on Schedule A, which price shall be an amount not less than
the Fair Market Value of a share of Stock as of the Date of Grant (as
defined in Section 11 below) if the Option is an Incentive Stock
Option.
<PAGE>
4. Exercise Terms. The Optionee must exercise the Option for at least
--------------
the lesser of 100 shares or the number of shares of Purchasable Stock
as to which the Option remains unexercised. In the event this Option
is not exercised with respect to all or any part of the shares subject
to this Option prior to its expiration, the shares with respect to
which this Option was not exercised shall no longer be subject to this
Option.
5. Option Non-Transferable. No Option shall be transferable by an
-----------------------
Optionee other than by will or the laws of descent and distribution
or, in the case of non-Incentive Stock Options, pursuant to a
Qualified Domestic Relations Order, and no Option shall be
transferable by an Optionee who is a Section 16 Insider prior to
shareholder approval of the Plan. During the lifetime of an Optionee,
Options shall be exercisable only by such Optionee (or by such
Optionee's guardian or legal representative, should one be appointed).
6. Notice of Exercise of Option. This Option may be exercised by the
----------------------------
Optionee, or by the Optionee's administrators, executors or personal
representatives, by a written notice (in substantially the form of the
Notice of Exercise attached hereto as Schedule B) signed by the
Optionee, or by such administrators, executors or personal
representatives, and delivered or mailed to the Company as specified
in Section 14 hereof to the attention of the President or such other
officer as the Company may designate. Any such notice shall (a)
specify the number of shares of Stock which the Optionee or the
Optionee's administrators, executors or personal representatives, as
the case may be, then elects to purchase hereunder, (b) contain such
information as may be reasonably required pursuant to Section 12
hereof, and (c) be accompanied by (i) a certified or cashier's check
payable to the Company in payment of the total Exercise Price
applicable to such shares as provided herein, (ii) shares of Stock
owned by the Optionee and duly endorsed or accompanied by stock
transfer powers having a Fair Market Value equal to the total Exercise
Price applicable to such shares purchased hereunder, or (iii) a
certified or cashier's check accompanied by the number of shares of
Stock whose Fair Market Value when added to the amount of the check
equals the total Exercise Price applicable to such shares purchased
hereunder. Upon receipt of any such notice and accompanying payment,
and subject to the terms hereof, the Company agrees to issue to the
Optionee or the Optionee's administrators, executors or personal
representatives, as the case may be, stock certificates for the number
of shares specified in such notice registered in the name of the
person exercising this Option.
7. Adjustment in Option. The number of shares subject to this Option,
--------------------
the Exercise Price and other matters are subject to adjustment during
the term of this Option in accordance with Section 5.2 of the Plan.
2
<PAGE>
8. Termination of Employment.
-------------------------
(a) Except as otherwise specified in Schedule A hereto, in the event
of the termination of the Optionee's employment with the Company
or any of its subsidiaries, other than a termination that is
either (i) for Cause, (ii) voluntary on the part of the Optionee
and without written consent of the Company, or (iii) for reasons
of death or disability or retirement, the Optionee may exercise
this Option at any time within 90 days after such termination to
the extent of the number of shares which were Purchasable
hereunder at the date of such termination.
(b) Except as specified in Schedule A attached hereto, in the event
of a termination of the Optionee's employment that is either (i)
for Cause or (ii) voluntary on the part of the Optionee and
without the written consent of the Company, this Option, to the
extent not previously exercised, shall terminate immediately and
shall not thereafter be or become exercisable.
(c) Unless and to the extent otherwise provided in Exhibit A hereto,
in the event of the retirement of the Optionee at the normal
retirement date as prescribed from time to time by the Company or
any subsidiary, the Optionee shall continue to have the right to
exercise any Options for shares which were Purchasable at the
date of the Optionee's retirement (provided that, on the date
which is three months after the date of retirement, the Options
will become void and unexercisable unless on the date of
retirement the Optionee enters into a noncompete agreement with
The Intercept Group, Inc. and continues to comply with such
noncompete agreement). This Option does not confer upon the
Optionee any right with respect to continuance of employment by
the Company or by any of its subsidiaries. This Option shall not
be affected by any change of employment so long as the Optionee
continues to be an employee of the Company or one of its
subsidiaries.
9. Disabled Optionee. In the event of termination of employment because
-----------------
of the Optionee's becoming a Disabled Optionee, the Optionee (or his
or her personal representative) may exercise this Option, within a
period ending on the earlier of (a) the last day of the one year
period following the Optionee's death or (b) the expiration date of
this Option, to the extent of the number of shares which were
Purchasable hereunder at the date of such termination.
3
<PAGE>
10. Death of Optionee. Except as otherwise set forth in Schedule A with
-----------------
respect to the rights of the Optionee upon termination of employment
under Section 8(a) above, in the event of the Optionee's death while
employed by the Company or any of its subsidiaries or within three
months after a termination of such employment (if such termination was
neither (i) for cause nor (ii) voluntary on the part of the Optionee
and without the written consent of the Company), the appropriate
persons described in Section 6 hereof or persons to whom all or a
portion of this Option is transferred in accordance with Section 5
hereof may exercise this Option at any time within a period ending on
the earlier of (a) the last day of the one year period following the
Optionee's death or (b) the expiration date of this Option. If the
Optionee was an employee of the Company at the time of death, this
Option may be so exercised to the extent of the number of shares that
were Purchasable hereunder at the date of death. If the Optionee's
employment terminated prior to his or her death, this Option may be
exercised only to the extent of the number of shares covered by this
Option which were Purchasable hereunder at the date of such
termination.
11. Date of Grant. This Option was granted by the Board of Directors of
-------------
the Company on the date set forth in Schedule A (the "Date of Grant").
12. Compliance with Regulatory Matters. The Optionee acknowledges that
----------------------------------
the issuance of capital stock of the Company is subject to limitations
imposed by federal and state law and the Optionee hereby agrees that
the Company shall not be obligated to issue any shares of Stock upon
exercise of this Option that would cause the Company to violate law or
any rule, regulation, order or consent decree of any regulatory
authority (including without limitation the Securities and Exchange
Commission) having jurisdiction over the affairs of the Company. The
Optionee agrees that he or she will provide the Company with such
information as is reasonably requested by the Company or its counsel
to determine whether the issuance of Stock complies with the
provisions described by this Section 12.
13. Restriction on Disposition of Shares. The shares purchased pursuant
------------------------------------
to the exercise of an Incentive Stock Option shall not be transferred
by the Optionee except pursuant to the Optionee's will, or the laws of
descent and distribution, until such date which is the later of two
years after the grant of such Incentive Stock Option or one year after
the transfer of the shares to the Optionee pursuant to the exercise of
such Incentive Stock Option.
14. Miscellaneous.
-------------
(a) This Agreement shall be binding upon the parties hereto and their
representatives, successors and assigns.
4
<PAGE>
(b) This Agreement is executed and delivered in, and shall be
governed by the laws of, the State of Georgia.
(c) Any requests or notices to be given hereunder shall be deemed
given, and any elections or exercises to be made or accomplished
shall be deemed made or accomplished, upon actual delivery
thereof to the designated recipient, or three days after deposit
thereof in the United States mail, registered, return receipt
requested and postage prepaid, addressed, if to the Optionee, at
the address set forth below and, if to the Company, to the
executive offices of the Company at 3150 Holcomb Bridge Road,
Suite 200, Norcross, Georgia 30071.
(d) This Agreement may not be modified except in writing executed by
each of the parties hereto.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this
Stock Option Agreement to be executed on behalf of the Company and the Company's
seal to be affixed hereto and attested by the Secretary or an Assistant
Secretary of the Company, and the Optionee has executed this Stock Option
Agreement under seal, all as of the day and year first above written.
THE INTERCEPT GROUP, INC. OPTIONEE
By: /s/ John W. Collins /s/ Scott R. Meyerhoff
---------------------- ----------------------
John W. Collins Scott R. Meyerhoff
Title: Chief Executive Officer
ATTEST:
/s/ Marie Storey
- -----------------------------
Secretary/Assistant Secretary
5
<PAGE>
SCHEDULE A
TO
STOCK OPTION AGREEMENT
BETWEEN
THE INTERCEPT GROUP, INC.
AND
SCOTT R. MEYERHOFF
Dated: June 24, 1998
-------------
1. Number of Shares Subject to Option: 50,000 shares.
----------------------------------
2. This Option (Check one) [X] is [_] is not an Incentive Stock Option.
----------- -- --------------------------------
3. Option Exercise Price: $ 7.00 per share.
---------------------
4. Date of Grant: June 24, 1998 _______________
-------------
5. Option Vesting Schedule:
-----------------------
Check one:
(_) Options are exercisable with respect to all shares on or
after the date hereof
(X) Options are exercisable with respect to the number of shares
indicated below on or after the date indicated next to the number
of shares:
No. of Shares Vesting Date
------------- ------------
50% Date of Grant
16 2/3% First Anniversary of Date of Grant
16 2/3% Second Anniversary of Date of Grant
16 2/3% Third Anniversary of Date of Grant
6. Option Exercise Period:
----------------------
Check One:
(X) All options expire and are void unless exercised on or before
June 24, 2008.
(_) Options expire and are void unless exercised on or before the
date indicated next to the number of shares:
No. of Shares Expiration Date
------------- ---------------
7. Effect of Termination of Employment of Optionee (if different from that set
-----------------------------------------------
forth in Sections 8, 9 and 10 of the Stock Option Agreement):
<PAGE>
SCHEDULE B
NOTICE OF EXERCISE
The undersigned hereby notifies The InterCept Group, Inc. (the "Company") of
this election to exercise the undersigned's stock option to purchase _________
shares of the Company's common stock, no par value (the "Common Stock"),
pursuant to the Stock Option Agreement (the "Agreement") between the undersigned
and the Company dated ________________. Accompanying this Notice is (1) a
certified or a cashier's check in the amount of $__________ payable to the
Company, and/or (2) __________ shares of the Company's Common Stock presently
owned by the undersigned and duly endorsed or accompanied by stock transfer
powers, having an aggregate Fair Market Value (as defined in The Intercept
Group, Inc. Amended and Restated 1996 Stock Option Plan) as of the date hereof
of $____________, such amounts being equal, in the aggregate, to the purchase
price per share set forth in Section 3 of the Agreement multiplied by the number
of shares being purchased hereby (in each instance subject to appropriate
adjustment pursuant to Section 5.2 of the Agreement).
IN WITNESS WHEREOF, the undersigned has set his hand and seal, this _____
day of ______________, _______.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
----------------------------------
Name:
Position (if other than Optionee):
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 6,943 6,943
<SECURITIES> 0 0
<RECEIVABLES> 2,749 2,749
<ALLOWANCES> 157 157
<INVENTORY> 86 86
<CURRENT-ASSETS> 10,029 10,029
<PP&E> 6,822 6,822
<DEPRECIATION> (2,313) (2,313)
<TOTAL-ASSETS> 17,358 17,358
<CURRENT-LIABILITIES> 3,963 3,963
<BONDS> 0 0
0 0
0 0
<COMMON> 15,780 15,780
<OTHER-SE> (2,695) (2,695)
<TOTAL-LIABILITY-AND-EQUITY> 17,358 17,358
<SALES> 6,649 12,906
<TOTAL-REVENUES> 6,649 12,906
<CGS> 2,740 5,374
<TOTAL-COSTS> 5,629 11,080
<OTHER-EXPENSES> 132 292
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 132 292
<INCOME-PRETAX> 842 1,484
<INCOME-TAX> 349 607
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 485 861
<EPS-PRIMARY> 0.07 0.12
<EPS-DILUTED> 0.07 0.12
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 842 842
<SECURITIES> 0 0
<RECEIVABLES> 2,420 2,420
<ALLOWANCES> 157 157
<INVENTORY> 167 167
<CURRENT-ASSETS> 4,542 4,542
<PP&E> 4,570 4,570
<DEPRECIATION> 2,009 2,009
<TOTAL-ASSETS> 10,762 10,762
<CURRENT-LIABILITIES> 3,605 3,605
<BONDS> 0 0
0 0
400 400
<COMMON> 0 0
<OTHER-SE> 7 7
<TOTAL-LIABILITY-AND-EQUITY> 10,762 10,762
<SALES> 5,422 10,538
<TOTAL-REVENUES> 5,422 10,538
<CGS> 2,379 4,653
<TOTAL-COSTS> 5,280 10,178
<OTHER-EXPENSES> 165 328
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 165 328
<INCOME-PRETAX> (10) 71
<INCOME-TAX> 77 121
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (95) (66)
<EPS-PRIMARY> (0.01) (0.01)
<EPS-DILUTED> (0.01) (0.01)
</TABLE>
