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As filed with the Securities and Exchange Commission on November 10, 1999
Registration No. 333-88321
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Amendment No. 1 to
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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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 Number)
Incorporation or Organization)
----------------------------
3150 Holcomb Bridge Road, Suite 200
Norcross, Georgia 30071
(770) 248-9600
(770) 242-6803 (facsimile)
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
----------------------------
John W. Collins
Chief Executive Officer
The InterCept Group, Inc.
3150 Holcomb Bridge Road, Suite 200
Norcross, Georgia 30071
(770) 248-9600
(770) 242-6803 (facsimile)
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
----------------------------
Copies to:
James Walker IV, Esq.
Susan L. Spencer, Esq.
Jonathan R. Coe, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza, Suite 1400
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
(404) 817-6000
(404) 817-6050 (facsimile)
----------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to a dividend or interest reinvestment plans, please check the
following box: [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for any offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
----------------------------
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
638,014 Shares
THE INTERCEPT GROUP, INC.
Common Stock
The shareholders of The InterCept Group, Inc. identified in this prospectus
may offer and sell these shares from time to time. See "Selling Shareholders."
The selling shareholders acquired the shares on either March 9, 1999 in
connection with our acquisition of Direct Access Interactive, Inc., or on
May 28, 1999 in connection with our acquisition of L.E. Vickers & Associates,
Inc. and Data Equipment Services, Inc.
The selling shareholders will receive all of the net proceeds from the sale
of these shares and will pay all underwriting discounts and selling commissions,
if any, applicable to the sale of these shares. We will not receive any of the
proceeds from the sale of the shares.
Our common stock is quoted on the Nasdaq National Market under the symbol
"ICPT." On November 9, 1999, the last reported sale price of our common stock
was $16.81 per share.
____________________________
INVESTING IN OUR COMMON STOCK INVOLVES MANY RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 8 FOR A DISCUSSION OF THESE RISKS.
____________________________
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
November 10, 1999
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You should rely only on the information contained in this prospectus.
Neither we nor the selling shareholders have authorized anyone to provide you
with information different from that contained in this prospectus. The selling
shareholders are offering to sell, and seeking offers to buy, shares of
InterCept common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of the shares.
____________________________
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<S> <C>
Summary.................................................................................... 3
Available Information...................................................................... 6
Information Incorporated By Reference...................................................... 6
Forward Looking Statements................................................................. 7
Risk Factors............................................................................... 8
Use of Proceeds............................................................................ 18
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................... 19
Selling Shareholders....................................................................... 29
Plan of Distribution....................................................................... 30
Legal Matters.............................................................................. 33
Experts.................................................................................... 33
</TABLE>
________________________
We were incorporated in Georgia on April 30, 1996. Our principal executive
offices are located at 3150 Holcomb Bridge Road, Suite 200, Norcross, Georgia
30071, and our telephone number is (770) 248-9600. Our corporate website address
is www.intercept.net. We are not incorporating the information on our website
into this prospectus, and we do not intend to make our website a part of this
prospectus.
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SUMMARY
This summary highlights information contained in documents that we have
incorporated by reference into this prospectus. You should carefully read and
consider all of the information included in this prospectus and in the documents
incorporated by reference in this prospectus before deciding to invest in shares
of our common stock. See "Available Information."
The InterCept Group
We are a single-source provider of a broad range of technologies, products
and services that work together to meet the electronic commerce and operating
needs of financial institutions. We focus on serving the needs of financial
institutions across the United States with assets of less than $500 million,
which we refer to as community financial institutions. Our products and
services include:
Electronic funds transfer transaction processing. Electronic funds
transfer, or EFT, transactions include ATM withdrawals, balance inquiries and
transfers and debit card transactions. We process a variety of EFT transactions
online through national and regional electronic networks, including CIRRUS(R),
PLUS(R), STAR/TM/ and PULSE/TM/. We also offer InterCept Switch/TM/, a growing
ATM network used by community financial institutions to offer their customers
access to ATMs owned by other community banks free of charge. This allows our
customers to provide ATM services that are competitive with larger ATM networks
run by regional and national financial institutions.
Core data processing systems and related services. We supply the software
systems and services needed to meet our customers' core data processing
requirements, including general ledger, loan and deposit operations, financial
accounting and reporting, and customer information file maintenance. Many of our
customers install our client/server software system, PC BancPAC/TM/, in-house to
perform these core data processing functions for themselves. Other customers
outsource their core processing needs to our service bureau operations, which
gives these customers access to our processing systems without the expense of
maintaining core processing operations in-house. We also provide item processing
services, such as statement preparation and encoding of checks, to many of our
core processing customers from our nine service centers located in five states.
Check imaging products and services. We offer check imaging products and
services on both an in-house and service bureau basis. Check imaging involves
creating computerized images of checks, deposit slips, and related paper
documents for electronic storage and retrieval. This process can help reduce the
labor and cost associated with traditional check sorting, document filing and
statement preparation. Our check imaging customers that desire to process their
own images in-house license and install our check imaging software. Other
customers outsource their check imaging to our service centers, which image the
items and electronically sort the images for easy retrieval.
Data communications management network and services. Financial
institutions rely on the ability to store, manipulate and transmit large amounts
of information electronically across various telecommunications and Internet
networks. We provide efficient, reliable and secure solutions for the data
communications needs of our customers and maintain nationwide data
communications coverage. We operate a frame relay network, which serves as the
principal conduit through which we deliver our EFT and other electronic commerce
products and services to our customers. We also provide various Internet
services, including managed firewall, web hosting and e-mail services to our
customers.
Internet banking services. Through our relationship with our affiliate
Netzee, Inc., we offer Internet and telephone banking products and services as
part of our
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strategy to provide comprehensive electronic commerce and operating capabilities
to our customers. For more information about our relationship with Netzee, see
"--Our Recent Acquisitions" below and "Risk Factors--Risks Related to Our
Ownership in Netzee."
Community financial institutions often have limited resources and are under
significant pressure to control their operating costs. By using third-party
providers like us for their electronic commerce and operating needs, we believe
community financial institutions can reduce their overhead and gain access to
advanced technologies and services they otherwise might not be able to afford.
Once a community financial institution contracts for one or more of our
products or services, we strive to develop a relationship that enables us to
cross-market our other products and services to that customer. In addition to
using our own sales force to market our products and services, we have
established marketing alliances with other companies that have community
financial institutions as customers, including 10 of the 18 bankers' banks in
the United States. A bankers' bank is a bank that itself is owned by other
financial institutions and provides depository, loan and other banking services
exclusively to financial institutions. Our relationships with the bankers' banks
provide us access to over 4,700 financial institutions nationwide.
Our Strategies
Our goal is to become one of the largest providers of electronic commerce
and other operating technologies, products and services to community financial
institutions in the United States. To achieve this goal, we plan to continue our
growth by implementing the following key strategies:
. cross-market our products and services to our existing customer base in
order to maximize our recurring revenues;
. acquire businesses with similar or complementary products or services
that will enhance and expand our solutions, increase our market share or
expand our geographic presence;
. expand our sales force and our strategic marketing relationships;
. increase the use of our data communications management services to
optimize our frame relay network; and
. continue to expand and enhance the capabilities of our technologies,
products and services.
Our Recent Acquisitions
Direct Access and Vickers acquisitions
On March 9, 1999, we purchased Direct Access Interactive, Inc., a provider
of Internet and telephone banking services to financial institutions. In this
transaction, we issued 151,229 shares of our common stock to the five
shareholders of Direct Access.
On May 28, 1999, we purchased L.E. Vickers & Associates, Inc., a core data
processing, item capture and check imaging company, and Data Equipment Services,
Inc., a supplier of specialized equipment and maintenance services to financial
institutions. In this transaction, we issued 500,481 shares of our common stock
to the shareholders of these companies.
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Acquisition of SBS Corporation and SBS Data Services, Inc.
On August 6, 1999, we acquired SBS Corp. and SBS Data Services, Inc., two
affiliated Alabama corporations which provide Internet and telephone banking,
core data processing, check imaging and optical storage products and services to
community financial institutions. We issued approximately 192,000 shares of our
common stock to the SBS Data shareholders in connection with our acquisition of
that company and its core data processing operations. At the same time, Direct
Access merged with SBS Corp. and paid approximately $16.6 million in cash and
issued 2,600,000 shares of Direct Access common stock to the former shareholders
of SBS Corp. Direct Access also repaid approximately $4.9 million in debt owed
by SBS Corp. After the merger, Direct Access sold all of the assets of SBS
Corp., other than its Internet and telephone banking assets, to us in exchange
for 450,000 shares of Direct Access common stock owned by us.
To provide the funds for the SBS Corp. transaction, we borrowed
approximately $21.6 million under our line of credit with First Union National
Bank, and then loaned the funds to Direct Access. In connection with this loan,
we revised the terms of our credit facility with First Union to increase the
amount of funds available for borrowing from $20 million to $35 million and to
extend the term of the credit facility from April 28, 2001 to June 30, 2002.
Creation of Netzee, Inc.
We further expanded our Internet banking operations by creating a wholly-
owned subsidiary, Netzee, Inc., in August 1999, and in September 1999 we
combined it with:
. Direct Access, our Internet banking subsidiary;
. the Internet banking operations of The Bankers Bank and TIB The
Independent BankersBank;
. Call Me Bill, LLC, an electronic bill payment company; and
. Dyad Corporation, a developer of automated loan origination systems.
As a result of the issuance of shares of Netzee in connection with these
transactions, our ownership in Netzee decreased to approximately 49% as of
September 3, 1999. See "Risk Factors--Risks Related to Our Ownership in Netzee."
To enable Netzee to complete these transactions, we loaned it approximately $7.3
million. This loan was in addition to the $21.6 million we loaned Netzee, as the
successor to Direct Access, in connection with the SBS Corp. merger described
above. All of our loans to Netzee accrue interest at a fluctuating annual rate
equal to the prime rate plus 2.0%, which as of October 31, 1999 equaled
10.25%.
Four of our directors also serve as directors of Netzee and one of those
directors, Glenn W. Sturm, is the Chief Executive Officer of Netzee. In
addition, we maintain a strategic relationship with Netzee to cross-market each
other's products and services, which we believe will benefit both our
businesses.
The SEC declared effective Netzee's registration statement for its initial
public offering of common stock. If the offering closes, our ownership in Netzee
will decrease to approximately 39%. We cannot assure you that Netzee's offering
will close or, if it closes, that its shares will perform favorably in the
market. See "Risk Factors--Risks Related to Our Ownership in Netzee" for a
discussion of the risks associated with our ownership of Netzee.
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AVAILABLE INFORMATION
We are subject to the information requirements of the Securities Exchange
Act of 1934, which means we are required to file annual, quarterly and special
reports, proxy statements and other information with the SEC. Our SEC filings
are available to the public over the Internet at the SEC's website at
http://www.sec.gov. You may also read and copy any document we file with the SEC
at its Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330.
INFORMATION INCORPORATED BY REFERENCE
We filed a registration statement on Form S-3 to register with the SEC the
shares of common stock to be offered and sold by this prospectus. This
prospectus is part of that registration statement. As allowed by the SEC's
rules, this prospectus does not contain all of the information you can find in
the registration statement or the exhibits to the registration statement. The
SEC allows us to "incorporate by reference" into this prospectus the information
we have filed with the SEC. The information incorporated by reference is an
important part of this prospectus and the information that we file subsequently
with the SEC will automatically update this prospectus. Absent unusual
circumstances, we will have no obligation to amend this prospectus, other than
filing subsequent information with the SEC. The historical and future
information that is incorporated by reference in this prospectus is considered
to be part of this prospectus and can be obtained at the locations described
above. We also incorporate by reference any filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the initial filing
of the registration statement until the earlier of (a) May 28, 2000, or (b) the
date the selling shareholders sell all of the shares. We incorporate by
reference the documents listed below:
1. Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
2. Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999 and June 30, 1999.
3. Amendment to Current Report on Form 8-K filed on January 13, 1999;
4. Our Current Reports on Form 8-K filed on:
- March 26, 1999;
- June 11, 1999, as amended on August 11, 1999;
- August 20, 1999, as amended on September 30, 1999 and November 8,
1999; and
- September 17, 1999, as amended on September 30, 1999 and November 8,
1999.
5. The description of our capital stock contained in our Registration
Statement on Form 8-A, as amended on October 1, 1999.
You may request a copy of these filings, at no cost, by writing or
telephoning us. Please make your request to:
The InterCept Group, Inc.
Attn: Scott R. Meyerhoff
Vice President-Finance, Chief Financial Officer & Secretary
3150 Holcomb Bridge Road, Suite 200
Norcross, GA 30071
(770) 248-9600
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FORWARD LOOKING STATEMENTS
We have made forward looking statements in this prospectus. These
statements are subject to risks and uncertainties, and we cannot guarantee you
that they will prove to be correct. Forward looking statements include
assumptions as to how we may perform in the future. When we use words like
"believe," "expect," "anticipate," "predict," "potential," "seek," "continue,"
"will," "may," "could," "intend," "plan," "estimate," "goal," "strive" and
similar expressions, we are making forward looking statements.
Forward looking statements in this prospectus include statements regarding
the following:
. our business strategies and goals;
. our future sources of revenues and potential for growth and
profitability;
. expansion and enhancement of our technologies, networks, products and
services;
. our relationship with Netzee;
. trends in activities and industry conditions;
. development and expansion of our sales and marketing efforts;
. our ability to integrate our previous and future acquisitions; and
. other statements which are not of historical fact made throughout this
prospectus, including in the "Summary," "Risk Factors," and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" sections.
For these kinds of statements we claim the protection of the safe harbor
for forward looking statements contained in the Private Securities Litigation
Reform Act of 1995. You should understand that the factors described in the
"Risk Factors" section and elsewhere in this prospectus could affect the future
results of our company and could cause those results to differ materially from
those expressed in our forward looking statements. We do not have a duty to
update any of the forward looking statements after the date of this prospectus
to conform those statements to actual results.
The unaudited pro forma financial information incorporated by reference
into this prospectus do not include any adjustments for potential savings or
other improvements and do not purport to represent what our combined results of
operations or financial position would actually have been. You should not rely
on the pro forma statements of operations as being representative of our future
results of operations.
We believe that the expectations reflected in our forward looking
statements are reasonable, but we cannot guarantee that we will actually achieve
these expectations. Projections or estimates of our future performance are
necessarily subject to a high degree of uncertainty and may vary materially from
actual results. In evaluating forward looking statements, you should consider
various factors, including the risks outlined under the "Risk Factors" section
beginning on the next page and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," as well as our financial
statements, carefully. You should also consider the cautionary statements
contained in the reports we have filed with the SEC. These factors may cause our
actual results to differ materially from any forward looking statements.
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RISK FACTORS
You should carefully consider the risks described below before purchasing
our common stock. If any of these risks actually occur, our business, financial
condition and results of operations could be adversely affected. In that case,
the trading price of our common stock could decline, and you could lose part or
all of your investment in our common stock.
Risks Related to Our Operations
Our rapid growth could strain our managerial, operational and financial
resources, and our failure to manage our growth could cause our business to
suffer
Our recent internal growth and acquisitions have placed great demands on
our business, particularly our managerial, operational and financial personnel
and systems. For example, we have grown from 167 employees on June 1, 1998 to
over 410 employees on September 30, 1999. Of these employees, approximately 200
joined us as a result of acquisitions. During the same period, we also added
eight additional facilities in four states and significantly increased our
customer base. Additional internal growth and acquisitions may further strain
our resources. We cannot guarantee that our systems, procedures, controls and
existing facilities will be adequate to support the expansion of our operations,
while maintaining adequate levels of customer service and satisfaction. Our
future operating results will depend substantially on the ability of our
officers and key employees to manage changing business conditions and to
implement and improve our technical, administrative, financial control and
reporting systems. If we are unable to respond to and manage changing business
conditions as we expand, then the quality of our products and services, our
ability to retain customers and our operating results could be materially
adversely affected.
Our acquisitions could result in integration difficulties, unexpected expenses,
diversion of management's attention and other negative consequences
A key element of our growth strategy is to acquire similar or complementary
businesses, products and services. Since our initial public offering in June
1998, we have completed a number of acquisition transactions. We must integrate
the technologies, products, services, operations, systems and personnel of the
acquired businesses with our own and attempt to grow the acquired businesses as
part of our company. The integration of these businesses is a complex process
and places significant demands on our management, financial, technical and other
resources. The successful integration of these acquisitions is critical to our
future success and, if we are unsuccessful, our future financial and operating
performance could suffer. The risks and challenges associated with the
integration of acquired businesses include, but are not limited to:
. an inability to centralize and consolidate our financial, operational
and administrative functions with those of the businesses we acquire;
. the diversion of our management's attention from other business
concerns;
. an inability to retain and motivate key employees of an acquired
company;
. the entry into markets in which we have little or no direct prior
experience;
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. the costs necessary to complete integration may exceed our expectations
or outweigh some of the intended benefits of such transactions;
. an inability to maintain the customers or goodwill of an acquired
business; and
. the costs necessary to improve or replace the operating systems,
products and services of acquired businesses may exceed our
expectations.
We cannot guarantee that we will be able to successfully integrate our
acquisitions with our operations on schedule or at all. We also cannot guarantee
that our acquisitions will not result in large accounting charges or other
expenses or that they will result in cost savings or sufficient revenues or
earnings to justify our investment in, or our expenses related to, these
acquisitions.
Competition, market conditions and other factors may affect our ability to
acquire other businesses and may inhibit our growth
A significant part of our historic growth has been generated from
acquisitions. We anticipate that a large portion of our future growth will also
be accomplished through acquisitions. The success of this plan depends upon our
ability to identify suitable acquisition candidates, reach agreements to acquire
these companies and obtain necessary financing on acceptable terms. In pursuing
acquisition and investment opportunities, we may compete with other companies
with similar growth strategies. Some of these competitors may be larger and have
greater financial and other resources than we have. Due to this competition, we
may be unable to acquire businesses that could improve our growth or expand our
operations.
The acquisitions we have completed since our initial public offering have
been financed with our common stock, cash from our operations and our line of
credit with First Union National Bank. If our stock price declines as a result
of general market conditions or otherwise, the shareholders of businesses that
we seek to acquire may be unwilling to accept our common stock in exchange for
their business. In that case, in order to continue to complete acquisitions, we
would be required to use larger portions of our line of credit or cash from
operations, which could have a material impact on our financial performance and
results of operations. In addition, our credit facility with First Union
restricts our ability to complete acquisitions without First Union's consent. We
also must be in compliance with the financial covenants of the credit facility
in order to make these acquisitions. If we are unable to raise additional
capital or borrow funds, we may be unable to make acquisitions of businesses
that could be helpful to our business.
If we do not continue to expand our sales forces and our marketing
relationships, we may not be able to continue our growth
Our ability to expand our business will depend significantly on our ability
to expand our sales and marketing forces and our strategic marketing
relationships. In order to continue our growth, we must successfully cross-
market our products and services to existing customers and enter into agreements
with new customers. This requires us to locate and hire experienced sales and
marketing personnel and to establish and maintain key marketing relationships.
Competition for experienced sales and marketing personnel is intense, and we may
not be able to retain existing personnel or locate and attract additional
qualified personnel in the future. In addition, we have relationships with
various banking-related organizations for the marketing and endorsement of our
products and services. For example, we rely upon our agreements with bankers'
banks across the country to market our products and services to community
financial institutions. These relationships are important to our sales and
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marketing efforts and our geographic expansion. If we lose any of these
marketing relationships or are unable to enter into new ones, it could delay
growth in our customer base and revenues.
The loss of our Chief Executive Officer or President could have a material
adverse effect on our business
John W. Collins, our Chief Executive Officer, and Donny R. Jackson, our
President and Chief Operating Officer, have substantial experience with our
operations and our industry and have contributed significantly to our growth. We
maintain key man life insurance on both of these individuals, and each of them
works for us under the terms of an employment agreement. However, our customer
and marketing relationships would be impaired and our business may suffer if we
lose the services of one of these senior officers for any reason.
If we do not enhance our existing products and services and continue to develop
and introduce new products and services, technological changes may reduce the
demand for our solutions or render them obsolete
The electronic commerce industry, including EFT, data communications and
data processing, has experienced rapid technological change. The introduction of
new technologies and financial products and services can render existing
technologies, products and services obsolete in a short period of time. We
expect other vendors to continually introduce new products and services, as well
as enhancements to their existing products and services, which will compete with
our products and services. To be successful, we must anticipate evolving
industry trends, continue to apply advances in electronic commerce, enhance our
existing products and services, and develop or acquire new products and services
to meet the demands of our customers. We may not be successful in developing,
acquiring or marketing new or enhanced products or services that respond to
technological change or evolving customer needs. We may also incur substantial
costs in developing and employing new technologies. If we fail to develop and
provide new and enhanced products and services, or if these products and
services do not achieve market acceptance, we could lose customers and future
revenues.
If our processing centers or communications networks suffer a system failure or
interruption, we may face customer service issues and may be liable for any
damage suffered by our customers
Our operations depend on our ability to protect our processing centers,
network infrastructure and equipment. Damage to our systems or equipment or
those of third parties that we use may be caused by natural disasters, human
error, power and telecommunications failures, intentional acts of vandalism and
similar events. While we do have data and item processing centers in several
locations that serve as backups for each other, we only maintain a single data
communications switching facility and do not maintain a backup location for our
frame relay network hardware. Interruption in our processing or communications
services could delay transfers of our customers' data or damage or destroy the
data and result in or lead to lawsuits or loss of customers and may also harm
our reputation.
We depend on third parties for products and services necessary to our business,
and if we cannot obtain these products and services on favorable terms, or at
all, our business could suffer.
We rely on third parties for ATM and debit card productions, fiber optic
communications, and other products and services that are essential to our
business. If any of these third parties terminates or changes its relationship
with us, or if for any reason we are unable to obtain its products and services
on favorable terms, we may be unable to meet our customers' needs on a timely
basis. Similarly, if
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any of these third parties is permanently or temporarily unable to provide its
products and services to us as the result of natural disasters, technical
difficulties or otherwise, we may be unable to provide our products and services
to our customers. If we are unable to meet our customers' needs, our customer
relationships could be damaged and our business reputation harmed, both of which
could result in an adverse effect on our operating results.
If our new products and services contain errors or fail to achieve market
acceptance, we may lose customers and be subject to claims for damages
New products and services that we may offer from time to time may have
undetected errors or failures or could fail to achieve market acceptance.
Despite testing by us and our current and potential customers, if we discover
errors after we have introduced a new product or release to the marketplace, we
could experience, among other things:
. delayed or lost revenues while we correct the errors;
. a loss or delay in market acceptance; and
. additional and unexpected expenses to fund further product development.
Our agreements with our customers generally contain provisions designed to
limit our exposure to potential product liability claims, such as disclaimers of
warranties and limitations on liability for special, consequential and
incidental damages. It is possible, however, that these provisions may not be
effective because of existing or future federal, state or local laws or
ordinances, or unfavorable judicial decisions. Therefore, in the event our
products and services fail to function properly, we could be subject to product
liability claims which could have a material adverse effect on our business,
financial condition and results of operations, and could harm our business
reputation.
Because our business involves the electronic storage and transmission of data,
we could be adversely affected by security breaches and computer viruses
Our online transaction processing systems electronically store and transmit
sensitive business information of our customers. The difficulty of securely
storing confidential information electronically has been a significant issue in
conducting electronic commerce. We may be required to spend significant capital
and other resources to protect against the threat of security breaches, computer
viruses or to alleviate problems caused by breaches or viruses. To the extent
that our activities or the activities of our customers involve the storage and
transmission of confidential information, such as banking records or credit
information, security breaches and viruses could expose us to claims, litigation
or other possible liabilities. Our inability to prevent security breaches or
computer viruses could also cause customers to lose confidence in our systems
and terminate their agreements with us.
We may be unsuccessful in becoming a competitive local exchange or long distance
carrier which would harm our ability to control operating costs
As part of our business strategy to reduce our operating costs and enhance
services for our customers, we have sought authority from some state public
utility commissions to become both a competitive local exchange carrier, or
CLEC, and a long distance carrier, or IXC. Becoming a CLEC will allow us to
purchase all retail products and services offered by the Regional Bell Operating
Companies, or RBOCs, at wholesale prices. Similarly, becoming an IXC will allow
us to purchase at
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<PAGE>
wholesale rates the long distance services of other carriers such as AT&T Corp.
or MCI WorldCom, Inc. We recently received preliminary approvals for
certification as a CLEC and IXC in Alabama, Florida, and Georgia. We have not,
however, negotiated an interconnection/resale agreement with a RBOC or an IXC or
completed the interconnection agreement filing and approval process in any
state, and there can be no guarantee that we will be able to do so. We cannot
assure you that we will be able to become a CLEC or an IXC or develop that new
portion of our business. If we are successful in becoming a CLEC or an IXC, our
ability to succeed would be subject to a number of factors, including:
. our ability to market the new services to our customers;
. the willingness of our customers to use a non-traditional provider for
their telecommunications services;
. our ability to implement the necessary billing and collection systems
for these services;
. competition from RBOCs such as BellSouth, from IXCs such as AT&T Corp.
or MCI WorldCom, Inc., and from other CLECs; and
. our ability to obtain the services, equipment and facilities that we
need to serve as a CLEC or IXC.
If we are unsuccessful in becoming or operating as a CLEC or an IXC, our ability
to control our operating costs would be harmed and we would not receive the
benefits of the costs we have incurred in an effort to become both a CLEC and an
IXC.
As a CLEC or an IXC, we will become subject to significant government
regulation, which is subject to change
In addition to state CLEC certifications, we are also required to obtain
authorizations from the Federal Communications Commission and state public
utility commissions to offer telecommunications services as an IXC. We are also
required to file with those agencies tariffs describing the rates, terms and
conditions of our services and to comply with local license or permit
requirements relating to installation and operation of our network. We have
incurred significant costs in attempting to become a CLEC and IXC and expect to
incur significant costs in maintaining that status, if it is achieved. Any of
the following could have a material adverse effect on our operations as a CLEC
or an IXC:
. failure to maintain proper federal and state tariffs;
. failure to maintain proper state certifications;
. failure to comply with federal, state or local laws or regulations;
. failure to obtain and maintain required licenses and permits;
. changes in the laws applicable to CLECs or IXCs; and
. burdensome license or permit requirements.
12
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Unanticipated impacts of our acquisitions and other market factors may lead to
fluctuations in our operating results that may negatively affect the trading
price of our common stock
Our operating results have varied in the past and may fluctuate
significantly in the future as a result of many factors. These factors include:
. the possible negative impact of implementing our growth and acquisition
strategies, including accounting charges and other expenses associated
with our acquisitions;
. loss of customers or strategic relationships;
. competition and pricing pressures; and
. increased operating expenses due to launches of new products and
services and sales and marketing efforts.
Many factors that affect our operating results are outside of our control.
Because of these factors, it is likely that in some future period our financial
results will fall below the expectations of securities analysts or investors. In
such event, the trading price of our common stock would likely decline, perhaps
significantly.
Our limited combined operating history makes it difficult to evaluate our
business
We were incorporated in May 1996 and have made a number of acquisitions
since our incorporation. The historical and pro forma financial information
included or incorporated by reference in this prospectus is based in part on the
separate pre-acquisition financial reports of the companies we have acquired. As
a result, your evaluation of us is based on a limited combined operating
history. Our historical results of operations and pro forma financial
information may not give you an accurate indication of our future results of
operations or prospects.
Georgia law, as well as our articles of incorporation, bylaws and some of our
employment agreements contain provisions that could discourage a third party
from attempting to acquire your shares at a premium to the market price
Some provisions of our articles of incorporation, our bylaws and Georgia
law make it more difficult for a third party to acquire control of our company,
even if a change in control would be beneficial to our shareholders. Several of
our executive officers have entered into employment agreements with us that
contain change in control provisions. These provisions may discourage or
prevent a tender offer, proxy contest or other attempted takeover. In addition,
we have in the past and may in the future create and issue new classes of
preferred stock that have greater rights than our common stock. These superior
rights may include greater voting rights, entitlement to dividends and
preferential treatment in the event of a change of control, liquidation,
consolidation or other circumstances.
Risks Related to Our Ownership in Netzee
Because we have a minority interest in Netzee and Netzee is expected to continue
to have significant losses, our future financial performance may be adversely
affected
We have recently completed a series of transactions that removed Internet
and telephone banking products and services from our operations. Our historical
financial results therefore include results of operations that we no longer
have. These operations are now conducted by Netzee, a company in which we will
own approximately 39% following its anticipated initial public offering.
Although we will no longer include Netzee's operations in our financial results
on a combined basis, we will continue to record the operating income and losses
of Netzee in a single line item on our statement of operations. Because we have
agreed to fund Netzee's operations until it completes its anticipated initial
public offering, all of Netzee's losses will be included in our statement of
operations. Even if Netzee consummates its initial public offering, we may have
to loan it additional amounts to fund its operations. When the funding is
complete, we will record only our relative percentage of Netzee's losses. In
addition, Netzee has a history of losses and may never become profitable. The
impact of Netzee's results of operations on our financial condition, including
our shareholders' equity, is uncertain and we cannot guarantee we will benefit
from our ownership in Netzee.
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If Netzee does not become profitable, it may not be able to repay the loans we
have made and may in the future make to it
In connection with the business combinations involving Netzee, we loaned it
over $28 million. In addition, we continue to make loans to Netzee to fund its
operations. As of November 2, 1999, the total amount outstanding on our loans to
Netzee was approximately $33.5 million. We borrowed these funds under our credit
facility with First Union and have pledged substantially all of our assets to
secure this loan. Netzee has a history of losses and may never become
profitable. As a result, Netzee may be unable to repay our loans, which would
harm the value of our investment in Netzee and our shareholders' equity.
Netzee's initial public offering of its common stock will materially impact the
value of our ownership of Netzee in several ways
The SEC has declared effective Netzee's registration statement for its
initial public offering of common stock. We cannot assure you that Netzee's
offering will close or, if it closes, that its shares will perform favorably in
the market. Netzee plans to use a portion of the proceeds from its initial
public offering to repay the loans we have made to it. If Netzee does not
consummate the offering or receive net proceeds in the amount anticipated, it
may be unable to repay the loans and, furthermore, we may have to loan it
additional amounts to fund its operations, which would harm the value of our
investment in Netzee and our shareholders' equity.
If Netzee does complete its initial public offering, we will own
approximately 39% of its outstanding common stock. The value of our minority
interest in Netzee will be based on the fair market value of Netzee's common
stock as reported on the Nasdaq National Market. We believe that Netzee will be
valued similarly to other companies with Internet-based businesses, and the
market values of these companies generally have fluctuated significantly.
Therefore, the value of our interest in Netzee and our shareholders' equity
could fluctuate significantly, which could cause our stock price to fluctuate as
well.
Our relationship with Netzee presents potential conflicts of interest, which may
result in decisions which favor Netzee over our other shareholders
Because we and Netzee are both engaged in the sale of electronic commerce
products and services to community financial institutions, numerous potential
conflicts of interest exist between our companies. We will compete with each
other when offering some products and services to potential customers. Our
bylaws contain provisions addressing potential conflicts of interest between us
and Netzee and the allocation of transactions that, absent such allocation,
could constitute corporate opportunities of both companies. Under these
provisions, Netzee may take advantage of a corporate opportunity rather than
presenting that opportunity to us, absent a clear indication that the
opportunity was directed to us rather than to Netzee. In addition, we plan to
use and market Netzee's Internet and telephone banking products and services as
part of our electronic commerce solutions, and any failure or refusal by Netzee
to provide these products and services could negatively impact our business.
Our existing and future agreements and relationships with Netzee have not
resulted and will not necessarily result from arms-length negotiations. Our
Chairman and three of our other directors are directors and significant
shareholders of Netzee. In addition, Glenn W. Sturm, one of those directors,
serves as Chief Executive Officer of Netzee. When the interests of Netzee
diverge from our interests, Netzee's officers and directors may exercise their
influence in Netzee's best interests. Therefore, our agreements and
relationships with Netzee may be less favorable to us than those that we could
obtain from unaffiliated third parties.
14
<PAGE>
Moreover, many of the transactions between us and Netzee do not lend themselves
to precise allocations of costs and benefits. Thus, the value of these
transactions will be left to the discretion of the parties, who are subject to
potentially conflicting interests.
Other than the provisions of our bylaws relating to corporate
opportunities, there is no mechanism in place to resolve these conflicts of
interest, except that it is our policy that transactions with affiliated parties
be approved by a majority of our disinterested directors. Nevertheless, due to
the extensive relationships between Netzee and us, we may make decisions that
potentially favor Netzee or its affiliates at the expense of our shareholders.
Furthermore, Georgia law may prohibit you from successfully challenging these
decisions, if the decision received the affirmative vote of a majority, but not
less than two, of our disinterested directors who received full disclosure of
the existence and nature of the conflict.
Risks Related to Our Industry
Because many of our competitors have significantly greater resources than we do,
we may be unable to gain significant market share
Because our business includes a variety of products and services, we
generally face different competitors within each area of our business. Our
principal EFT competitors include regional ATM networks, regional and local
banks that perform processing functions, non-bank processors and other
independent electronic commerce and data communications organizations. In our
core banking and data processing business, we compete with several companies who
have national operations and significant assets. In each of these areas, our
competitors have longer operating histories, greater name recognition, and
substantially greater resources than we do. If we compete with them for the same
geographic market, their financial strength could prevent us from capturing
market share in those areas. In addition, the competitive pricing pressures that
would result from an increase in competition from these companies could have a
material adverse effect on our business, financial condition and results of
operations. Some of our competitors have established cooperative relationships
among themselves or with third parties to increase their ability to address
customer needs. Accordingly, new competitors or alliances among competitors may
emerge and rapidly acquire significant market share.
We cannot guarantee that we will be able to compete successfully with
existing or new competitors. If we fail to adapt to emerging market demands or
to compete successfully with existing and new competitors, our business,
financial condition and results of operations would be materially adversely
affected.
Because our industry relies on computers and other electronic devices, problems
related to the year 2000 date change could disrupt or damage our business
operations
Our industry depends significantly on a number of computer software
programs, internal operating systems and connections to other networks. Many
installed computer software and network processing systems currently accept only
two-digit entries in the date code field and may need to be upgraded or replaced
in order to accurately record and process information and transactions on and
after January 1, 2000, an issue commonly referred to as the year 2000 problem.
If any of these programs, systems or connections do not properly process dates
after December 31, 1999, significant system failures or errors could cause
damage or destruction to customer data and result in a material adverse effect
on our and our customers' business, financial condition and results of
operations. For our internal accounting and operating systems and network
communications, we use software and other
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<PAGE>
products provided by third parties. If these products are affected by the year
2000 problem, our ability to provide services to our customers may be materially
adversely affected.
Other companies interact electronically with us and our customers, and we
must coordinate our EFT, data communications and enterprise software processing
with such companies. We interface and exchange information with customers,
financial institutions' network processors and other participants in the
electronic commerce process. If these third parties do not successfully address
the year 2000 problem in their operations, and if we or our customers cannot
successfully transfer their processing operations to another provider that is
year 2000 compliant, our processing operations may be impeded, hindered or
delayed. We believe that many financial institutions and third party vendors and
network processors are in various stages of analyzing their software and network
applications for year 2000 compliance. It is difficult to estimate the potential
expenses involved or delays that may result as these institutions transition
their operations to resolve the year 2000 issue. The failure or delay of third
parties in addressing the year 2000 issue or the costs involved in such process
may have a material adverse effect on our business, financial condition and
operating results.
If business and consumer concerns about the year 2000 problem cause a general
economic slowdown in the latter part of 1999 or cause a reduction in financial
transactions, our business and the price of our common stock may suffer
It is difficult for us to predict what impact year 2000 issues will have on
our business and on the general economy. However, we believe that a general
business slowdown may occur during the fourth quarter of 1999 due to concerns
about year 2000 issues. These fears could result in reduced business for the
banking and financial services industry and could also negatively impact the
stock markets in general during the latter part of 1999. If this occurs, our
stock price will likely be negatively impacted.
The banking industry is highly regulated, and banking regulations could
negatively impact our business
Our banking customers are subject to the supervision of several state and
federal government regulatory agencies. If bank regulations change, or if new
regulations are adopted to regulate the products and services offered by or used
by community financial institutions, our business, financial condition and
results of operations could be materially adversely affected.
Community financial institutions are subject to industry consolidation and we
may lose customers with little notice
We market our products and services primarily to community financial
institutions. Due to merger and acquisition activity in the banking industry,
there is a risk that an existing customer may be acquired by or merged with
another financial institution. Any such purchase or merger may result in a lost
customer for us, because the acquiring financial institution may not use our
products and services. Many large financial institutions perform their own
transaction processing, data communications management, and enterprise software
services and do not use third party providers like us. Although we have included
financial penalties in most of our contracts for early termination of the
contract without cause, these financial penalties would be insufficient to
replace the monthly service fee revenues that we would receive if the financial
institution had continued as a customer.
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We are subject to government and private regulation and an increase in
regulatory requirements or tax burdens could place a strain on our business
Various federal and state regulatory agencies examine our data processing
operations from time to time. These agencies can make findings or
recommendations regarding various aspects of our operations, and we generally
must follow such recommendations to continue our data processing operations. If
we fail to comply with these regulations, our operations and our processing
revenues could be negatively impacted.
Our ATM network operations are subject to federal regulations governing
consumers' rights. Fees charged by ATM owners are currently regulated in several
states, and legislation regulating ATM fees has been proposed in several other
states. Additional legislation may be proposed and enacted in the future or
existing consumer protection laws may be expanded to apply to ATM fees. If the
number of ATMs decreases, then our EFT revenues may decline. Furthermore, we are
subject to the regulations and policies of various ATM and debit card
associations and networks. If we lose our privileges to provide transaction
processing services across these networks, our revenues from ATM and debit card
transaction processing will decrease significantly.
As a transaction processing company, we may be subject to state taxation of
certain portions of the fees charged for our services. Application of this tax
is an emerging issue in the industry, and the states have not yet adopted
uniform guidelines implementing these regulations. If we are required to bear
all or a portion of these costs, and are unable to pass these costs through to
our customers, our financial condition and results of operations would be
adversely affected.
If we face a claim of intellectual property infringement by a third party or
fail to protect our intellectual property rights, we could be liable for
significant damages or could lose our intellectual property rights
We attempt to protect our software, documentation and other written
materials under trade secret and copyright laws, confidentiality procedures and
contractual provisions, which afford only limited protection. Despite our
efforts to protect our proprietary rights, unauthorized parties may attempt to
copy aspects of our products or to obtain and use information that we regard as
proprietary. We cannot guarantee that our means of protecting our proprietary
rights will be adequate or that our competitors will not independently develop
similar technology. We do not believe that any of our products infringe the
proprietary rights of third parties. We cannot guarantee, however, that third
parties will not make infringement claims, and we have agreed to indemnify many
of our customers against such claims. We anticipate that the number of
infringement claims will increase as the number of electronic commerce products
and services increase and the functionality of products in different industry
segments overlaps. Any such claims, whether with or without merit, could be
time-consuming, result in costly litigation, and may not be resolved on terms
favorable to us.
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<PAGE>
Risks Related to this Offering
A few people control a large portion of our stock and may vote their shares in
ways contrary to your interests
Our executive officers and directors beneficially own approximately 31.4%
of our outstanding common stock as of the date of this prospectus. The sale of
the shares by the selling shareholders will not decrease the percentage of our
common stock owned by our executive officers and directors. As a result, they
can exercise control over our company and have the power to influence the
election of a majority of the directors, the appointment of management and the
approval of actions requiring a majority vote of our shareholders. Their
interests may conflict with your interest as a shareholder, and they could use
their power to delay or prevent a change in control, even if a majority of the
other shareholders desired a change.
Future sales of shares of our common stock will dilute your ownership and may
negatively affect our stock price
To carry out our growth strategies, we plan to acquire other businesses and
products using a combination of our stock and cash, and we may also sell
additional shares of our stock to raise money for expanding our operations. We
may issue more shares of stock, both common and preferred, in future
acquisitions or in sales of our stock, which would dilute your ownership
interest in our company.
If our shareholders sell substantial amounts of our common stock, including
shares issuable upon the exercise of outstanding options and shares registered
in this offering, the market price of our common stock could fall. These sales
also might make it more difficult for us to sell equity securities in the future
at a time and price that we deem appropriate. As of September 30, 1999, we had
10,115,972 shares of common stock outstanding and options outstanding to acquire
an additional 1,514,715 shares of common stock. Approximately 7,272,097 shares,
including the shares being sold by the selling shareholders, will be freely
tradable by persons who are not affiliates of our company.
We cannot predict every event and circumstance which may impact our business
and, therefore, the risks and uncertainties discussed above may not be the only
ones you should consider
The risks and uncertainties discussed above are in addition to those that
apply to most businesses generally. In addition, as we continue to grow our
business, we may encounter other risks which we are not aware of at this time.
These additional risks may cause serious damage to our business in the future,
the impact of which we cannot estimate at this time.
USE OF PROCEEDS
The selling shareholders will receive all of the proceeds from the sale of
shares offered by this prospectus. We will not receive any of the proceeds.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the
consolidated financial statements and the related notes and other financial
information included and incorporated by reference into this prospectus.
Overview
We derive revenues primarily from the following sources:
. electronic funds transfer, or EFT, processing services;
. core data processing systems, support, maintenance and related services;
. check imaging systems, support and related services;
. data communications management; and
. ancillary products and services, including maintenance and technical
support services, sales of banking related equipment and complementary
products.
We derive EFT revenues principally from processing ATM and debit card
transactions. We receive a base fee for providing our ATM processing services
and an additional fee for each ATM serviced. Once the number of transactions
by a customer exceeds established levels, typically between 2,000 and 3,000
transactions per month, we charge additional fees for the extra transactions
processed. For debit card transactions, we generally receive a portion of the
interchange fees charged by our financial institution customers, and we charge a
monthly fee if our customers do not meet a certain minimum dollar amount of
transactions for a particular month. Most charges due under our EFT service
agreements are paid monthly.
On a service bureau basis, we generate core data processing revenues from
service and processing fees based on the volume of transactions processed. These
revenues are recognized as the services are performed. We also generate core
data processing revenues by licensing PC BancPAC, our proprietary Windows NT
based client/server software system, on an in-house basis. We 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. We recognize software license fees when we have signed a
non-cancelable license agreement, shipped the product and satisfied all
significant obligations to the customer.
We license on an in-house basis Renaissance software, our proprietary check
imaging software that we acquired through SBS Corp. in August 1999. We
generate revenues from upfront license fees and recurring annual maintenance
fees charged for this system. Revenues from licensing of Renaissance are
recognized in accordance with Statement of Position 97-2, as discussed above. We
also provide check imaging in a service bureau environment. On a service bureau
basis, we generate revenues based on the volume of items processed. This revenue
is recognized as we provide the service.
We generate our data communications management service revenues principally
from network management and data traffic across our frame relay network and from
equipment configuration, installation and sales. We charge a flat monthly fee
for providing telecommunications connectivity and network management as well as
an initial installation charge.
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Our ancillary products and services generate revenues primarily from our
maintenance and technical support services as well as sales of equipment. We
recognize maintenance and technical support service revenues as the service
period elapses. We recognize equipment sales revenues at the time of shipment.
In June 1998, we completed an initial public offering of our common stock.
Since that time, we have completed a number of acquisitions. We originally
accounted for our acquisition of Direct Access in March 1999 as a pooling of
interest. As a result of the Netzee transactions described in "Summary," we have
changed the accounting for this transaction to a purchase. Therefore, all of our
acquisitions since our initial public offering have been accounted for as
purchase transactions and are reflected as such in the accompanying financial
statements. For information about our acquisitions prior to our initial public
offering, see our other SEC filings and the notes to our consolidated financial
statements.
We base our expenses to a significant extent on our expectations of future
revenues. Most of our expenses are fixed in the short term, and we may not be
able to quickly reduce spending if our revenues are lower than we expect. In an
attempt to enhance our long term competitive position, we may also make
decisions regarding pricing, marketing, services and technology that could have
an adverse near-term effect on our financial condition and operating results.
Due to the foregoing factors and other risks discussed elsewhere in this
prospectus, including in "Risk Factors," we believe that quarter to quarter
comparisons of our operating results are not a good indication of our future
performance. It is likely that our operating results will fall below the
expectations of securities analysts or investors in some future quarter. In such
event, the trading price of our common stock would likely decline, perhaps
significantly.
Results of Operations
The following table sets forth the percentage of revenues represented by
certain items in the consolidated statements of operations for the indicated
periods.
<TABLE>
<CAPTION>
Six months ended
Years ended December 31, June 30,
---------------------------------------- -------------------------
1996 1997 1998 1998 1999
------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues ............................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs of services ...................................... 54.2 44.0 41.6 41.6 38.6
Selling, general and administrative expenses ........... 47.2 43.4 38.8 39.6 38.0
Depreciation and amortization .......................... 2.4 5.7 4.7 4.6 5.9
Loss on impairment of intangibles ...................... 0 3.1 0 0 0
Writeoff of purchased research and development
costs ................................................. 5.6 0 0 0 0
----- ----- ----- ----- -----
Total operating expenses ............................... 109.4 96.2 85.1 85.9 82.5
----- ----- ----- ----- -----
Operating income (loss) ................................ (9.4) 3.8 14.9 14.2 17.5
Other income (expense), net ............................ (1.9) (2.8) (0.6) (2.3) 0.3
----- ----- ----- ----- -----
Income (loss) before minority interest and
provision for Income taxes ........................... (11.3) 1.0 14.3 11.9 17.8
Provision (benefit) for income taxes ................... (1.6) 2.9 5.4 4.7 6.8
Minority interest in (income) loss of consolidated
subsidiary ........................................... (0.1) 0.2 (0.3) (0.4) (0.3)
----- ----- ----- ----- -----
Net (loss) income ...................................... (9.8)% (1.7)% 8.6% 6.8% 10.7%
===== ===== ===== ===== =====
</TABLE>
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Six months ended June 30, 1999 compared to six months ended June 30, 1998
Revenues. Revenues increased 44.6%, or $5.8 million, to $18.7 million for
the six months ended June 30, 1999 from $12.9 million for the six months ended
June 30, 1998. The $5.8 million increase was primarily attributable to (a) $2.5
million generated by an increase in core data processing including check
imaging, (b) $2.0 million generated by an increase in EFT processing, (c)
$640,000 generated by an increase in data communications management and (d)
other increases of $660,000 generated by ancillary products and services.
Costs of services. Costs of services increased 34.0%, or $1.8 million, to
$7.2 million for the six months ended June 30, 1999 from $5.4 million for the
six months ended June 30, 1998. The $1.8 million increase was primarily
attributable to (a) $700,000 generated by our core data processing services, (b)
$440,000 generated by additional data communications sales, (c) $200,000
generated by an increase in EFT processing services and (d) $460,000 generated
by ancillary products and services. Costs of services as a percentage of sales
decreased from 41.6% for the six months ended June 30, 1998 to 38.6% for the six
months ended June 30, 1999, primarily due to additional higher margin EFT
revenues and synergies from our acquisitions.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 38.7%, or $2.0 million, to $7.1 million for
the six months ended June 30, 1999 from $5.1 million for the six months ended
June 30, 1998. The increase was primarily attributable to $1.1 million to
support our continued internal growth, including personnel costs, and $870,000
related to our acquisitions. Selling, general and administrative expenses as a
percentage of sales decreased from 39.6% for the six months ended June 30, 1998
to 38.0% for the six months ended June 30, 1999.
Depreciation and amortization. Depreciation and amortization increased
85.1%, or $510,000, to $1.1 million for the six months ended June 30, 1999 from
$600,000 for the six months ended June 30, 1998. The increase was primarily
attributable to additional property, plant and equipment obtained through
acquisitions as well as internal growth, and amortization of intangible assets
related to our acquisitions, partially offset by a decrease in amortization of
other intangibles.
Operating income (loss). For the reasons stated above, operating income
increased $1.5 million to $3.3 million for the six months ended June 30, 1999
from $1.8 million for the same period in 1998.
Other income (expense). Other income (expense) increased $350,000, to
income of $60,000 for the six months ended June 30, 1999 from an expense of
$290,000 for the six months ended June 30, 1998. The increase was primarily due
to the reduction of long term debt with proceeds from our initial public
offering in June 1998 which, in turn, reduced interest expense.
Provision (benefit) for income taxes. Provision for income taxes
increased $670,000 to $1.3 million for the six months ended June 30, 1999 from
$610,000 for the six months ended June 30, 1998. The increase was attributable
to increased profits and an increase in nondeductible amortization.
Minority interest in (income) loss of consolidated subsidiary. Minority
interest in income increased to $60,000 for the six months ended June 30, 1999
from $50,000 for the six months ended June 30, 1998. The increase was
attributable to profits in the operations of a subsidiary in which we own a 66%
interest, which had been a consolidated subsidiary in which we owned a 33%
interest during the prior period.
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Year ended December 31, 1998 compared to year ended December 31, 1997
Revenues. Revenues increased 24.1%, or $5.6 million, to $28.9 million for
the year ended December 31, 1998 from $23.3 million for the year ended December
31, 1997. The $5.6 million increase was primarily related to (a) $2.5 million
generated by an increase in EFT processing, (b) $1.3 million generated by
additional core data processing, (c) $650,000 generated by an increase in data
communications management, and (d) other increases of $1.2 million generated by
ancillary products and services, including $380,000 generated by an increase in
merchant portfolio management revenues.
Costs of services. Costs of services increased 17.7%, or $1.8 million, to
$12.0 million for the year ended December 31, 1998 from $10.2 million for the
year ended December 31, 1997. The $1.8 million increase was primarily
attributable to (a) $1.0 million in costs generated by an increase in core data
processing sales, (b) an increase of $710,000 related to equipment sales and
maintenance services and (c) other costs of $90,000.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 11.1%, or $1.1 million, to $11.2 million for
the year ended December 31, 1998 from $10.1 million for the year ended December
31, 1997. The $1.1 million increase was primarily due to additional personnel
costs incurred to support our growth.
Depreciation and amortization. Depreciation and amortization remained
constant at approximately $1.3 million for the years ended December 31, 1998 and
1997. An increase of $440,000 in depreciation expense related to fixed asset
additions was offset by reduced amortization due to fully amortized contracts
related to acquisitions which occurred in 1996 and 1997.
Loss on impairment of intangibles. There was no loss on impairment of
intangibles for the year ended December 31, 1998. The 1997 loss was due to (a)
the write off of $540,000 of goodwill assumed in our acquisition of a merchant
banking company in December 1996 and (b) the write off of $190,000 in purchased
software assumed in our acquisition of a core processing company in December
1996. These writeoffs were due to permanent impairment in the related long term
assets.
Operating income (loss). For the reasons stated above, operating income
increased $3.4 million to $4.3 million for the year ended December 31, 1998 from
$880,000 for the year ended December 31, 1997. Exclusive of the nonrecurring
loss on impairment of intangibles in 1997, operating income would have been $1.6
million in 1997.
Other income (expense). Other expense decreased $470,000 to $180,000 for
the year ended December 31, 1998 from $650,000 for the year ended December 31,
1997. The decrease was due primarily to a decrease in interest expense resulting
from the payment of long term debt with the proceeds from our initial public
offering which was completed in June 1998.
Provision (benefit) for income taxes. Provision for income taxes increased
$900,000 to $1.6 million for the year ended December 31, 1998 from $670,000 for
the year ended December 31, 1997. The increase was primarily due to increased
profits partially offset by a reduction in nondeductible amortization.
Minority interest in (income) loss of consolidated subsidiary. Minority
interest in income increased $130,000 to $90,000 for the year ended December 31,
1998 from a loss of $40,000 for the year ended December 31, 1997. The increase
was primarily due to profits in the operations of a
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<PAGE>
consolidated subsidiary in which we owned 33%, partially offset by our
acquisition of an additional 33% ownership interest in that company in August
1998.
Year ended December 31, 1997 compared to year ended December 31, 1996
Revenues. Revenues increased 60.3%, or $8.7 million, to $23.3 million for
the year ended December 31, 1997 from $14.5 million for the year ended December
31, 1996. The $8.7 million increase was primarily attributable to (a) $4.0
million generated by our acquired core data processing operations as these
operations were included for the full year in 1997 as compared to one month in
1996, (b) $1.3 million generated by an increase in EFT processing, (c) $1.3
million generated by PC BancPAC and related core data processing operations
which we acquired on December 31, 1996, (d) $1.2 million generated by equipment
sales and maintenance fees as these operations were included for a full year in
1997 and (e) $930,000 generated by additional data communications management.
Costs of services. Costs of services increased 30.0%, or $2.3 million, to
$10.2 million for the year ended December 31, 1997 from $7.9 million for the
year ended December 31, 1996. The $2.3 million increase was primarily due to (a)
an increase of $1.1 million related to the core processing operations as these
operations were included for the full year in 1997 as compared to one month in
1996, (b) an increase of $570,000 related to data communications sales, (c) an
increase of $310,000 related to PC BancPAC and related core processing services
which were included for the full year in 1997 and (d) $320,000 related to
additional equipment sales and maintenance. Costs of services as a percentage of
sales decreased to 44.0% from 54.2% in 1996, primarily due to additional higher
margin EFT revenues.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 47.5%, or $3.3 million, to $10.1 million for
the year ended December 31, 1997 from $6.8 million for the year ended December
31, 1996. The $3.3 million increase was primarily attributable to (a) $1.3
million related to acquired core data processing operations as these operations
were included in 1997 as compared to one month in 1996, (b) $980,000 related to
PC BancPAC and related core processing operations which we acquired in December
31, 1996, of which approximately $500,000 was related to research and
development activities, (c) $840,000 related to equipment and maintenance
services as a full year of these operations was included in 1997, (d) $520,000
related to merchant portfolio management services as a full year of these
operations was included in 1997 as compared to one month in 1996, (e) $1.3
million related to additional personnel and facilities to support our growth and
(f) other expenses of $120,000 partially offset by a $1.8 million nonrecurring
charge in 1996 related to a deferred compensation agreement with an officer.
Depreciation and amortization. Depreciation and amortization increased
$970,000 to $1.3 million for the year ended December 31, 1997 from $350,000 for
the year ended December 31, 1996. This increase was primarily due to (a) the
amortization of $620,000 of goodwill and contracts related to our purchase of a
core processing company in 1996 which was included for a full year in 1997 as
opposed to one month in 1996, (b) amortization of $90,000 of goodwill and
contracts related to our purchase of equipment and maintenance services, the
operations of which were included for a full year in 1997, (c) an increase in
depreciation expense of $160,000 related primarily to acquisitions and (d) other
net increases of $100,000.
Loss on impairment of intangibles. Loss on impairment of intangibles
totaled $730,000 for the year ended December 31, 1997. This was primarily due to
(a) the write off of $540,000 of goodwill assumed in our acquisition of a
merchant portfolio management company in 1996 and (b) the write off
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<PAGE>
of $190,000 in purchased software assumed in our acquisition of a core
processing company in 1996. These writeoffs were due to permanent impairment in
the related long term assets.
Writeoff of purchased research and development costs. The $810,000 in
writeoff of purchased research and development costs in 1996 was due to
allocation of a component of the purchase price of PC BancPAC and related core
processing operations to incomplete research and development costs at the time
of purchase as the development of certain projects had not yet reached
technological feasibility and the technology had no alternative use and required
substantial additional development.
Operating income (loss). For the foregoing reasons, operating income
increased $2.2 million to $880,000 for the year ended December 31, 1997 from an
operating loss of $1.4 million for the year ended December 31, 1996. Exclusive
of the nonrecurring loss on impairment of intangibles, operating income would
have been $1.6 million in 1997.
Other income (expense). Other expense increased $370,000 to $650,000 for
the year ended December 31, 1997 from $280,000 for the year ended December 31,
1996. This increase was primarily due to interest on new debt to fund our
acquisitions during 1996 which was recorded for a full year in 1997.
Provision (benefit) for income taxes. Provision for income taxes increased
$900,000 to $670,000 for the year ended December 31, 1997 from a benefit of
$230,000 for the year ended December 31, 1996. The increase was primarily due to
increased pre-tax income partially offset by deductible losses in 1996 primarily
related to a deferred compensation agreement with an officer.
Minority interest in (income) loss of consolidated subsidiary. Minority
interest in income decreased $50,000 to a loss of $40,000 for the year ended
December 31, 1997 from income of $10,000 for the year ended December 31, 1996.
The decrease was primarily due to losses in the operations of a consolidated
subsidiary in which we owned a 33% interest.
Liquidity and Capital Resources
Net cash provided by operating activities was $2.7 million for the year
ended December 31, 1998 and $2.1 million for the year ended December 31, 1997.
The increase in net cash provided by operating activities in 1998 as compared to
1997 was attributable primarily to an increase in net income partially offset by
an increase in accounts receivable and other assets. Net cash provided by
operating activities was $1.8 million for the six months ended June 30, 1999
compared to $2.1 million for the six months ended June 30, 1998. This decrease
in net cash was attributable primarily to increases in accounts receivable,
inventory, prepaid expenses and other assets, partially offset by an increase in
net income.
Net cash used in investing activities was $8.4 million for the year ended
December 31, 1998 and $630,000 for the year ended December 31, 1997. The
increase in net cash used in investing activities in 1998 as compared to 1997
was attributable to increased capital expenditures and acquisitions during 1998.
Net cash used in investing activities was $3.0 million for the six months ended
June 30, 1999 and $2.7 million for the six months ended June 30, 1998. The
increase in net cash used in investing activities was primarily due to our
acquisitions and an increase in capital expenditures.
Net cash provided by financing activities was $6.9 million for the year
ended December 31, 1998 and net cash used in financing activities was $860,000
for the year ended December 31, 1997. The increase for 1998 as compared to 1997
was due to an increase in cash from the completion of our
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<PAGE>
initial public offering, partially offset by the paydown of $5.2 million of long
term debt and $1.8 million of deferred compensation. Net cash provided by
financing activities was $450,000 for the six months ended June 30, 1999 and
$5.6 million for the six months ended June 30, 1998. The decrease in cash
provided by financing activities was primarily due to completion of our initial
public offering in the second quarter of 1998.
In June 1998, we completed our initial public offering of common stock.
Proceeds from our public offering after deducting expenses related to the
offering were approximately $14.4 million, including proceeds from the
underwriters' over-allotment option which was exercised in July 1998. Proceeds
of the initial public offering were used to pay down debt, pay obligations owed
to a former officer, enhance and expand our frame relay network, redeem shares
of preferred stock and for general working capital needs, including
acquisitions.
During 1998, we entered into a credit facility with First Union National
Bank. Under this facility, as amended, we may borrow up to $35.0 million for
working capital and to fund acquisitions and pay expenses related to
acquisitions. The First Union credit facility contains provisions which require
us to maintain certain financial ratios and minimum net worth amounts and which
restrict our 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
June 30, 2002. Interest is payable monthly and outstanding principal amounts
accrue interest, at our option, at an annual rate equal to either (a) a floating
rate equal to the lender's prime rate minus one quarter of one percent or (b) a
fixed rate based upon the 30-day LIBOR rate plus applicable margins. On
September 30, 1999, the interest rate under this facility was approximately
7.5%.
In connection with the acquisition of SBS Corp. and SBS Data, we borrowed
$21.6 million from First Union and loaned that amount to Netzee to pay a portion
of the purchase price for SBS Corp. and to pay some outstanding liabilities of
SBS Corp. On September 1, 1999, we borrowed approximately $7.3 million
additional proceeds from the First Union credit facility and loaned that amount
to Netzee to pay a portion of the purchase price for acquisitions of other
companies. Netzee has executed and delivered promissory notes to us for these
loans, which accrue interest at a fluctuating annual rate equal to the prime
rate plus 2.0%, which as of September 30, 1999 equaled 10.25%. We have also
funded working capital requirements of Netzee. Amounts due related to working
capital funding were $4.6 million at November 2, 1999.
While there can be no assurance, we believe that funds currently on hand,
funds to be provided by operations, and funds available for working capital
purposes under the First Union credit facility will be sufficient to meet our
anticipated capital expenditure and liquidity requirements for at least the next
12 months. We intend to grow, in part, through strategic acquisitions and will
make additional expenditures to negotiate and consummate acquisition
transactions and integrate the acquired companies. No assurance can be made with
respect to the actual timing and amount of the expenditures and acquisitions. In
addition, no assurance can be given that we will complete any acquisitions on
terms favorable to us, if at all, or that additional sources of financing will
not be required during these time periods or thereafter.
Possible Effects of the Year 2000
Our business and relationships with our customers depend significantly on a
number of computer software programs, internal operating systems and connections
to other regional and national telecommunications and processing networks. If
any of these software programs, systems or networks are not programmed to
recognize and properly process dates after December 31, 1999, significant system
failures or errors may result. These matters are commonly referred to as the
year 2000 issue and they could have a material adverse effect on our operations
and those of our customers.
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Our compliance program
We have conducted a review of our internal accounting and operating
programs and systems and currently believe that these programs and systems and
the network connections we maintain 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
our financial condition.
We have successfully converted all of our non-year 2000 compliant service
bureau processing customers to our PC BancPAC software, which we believe is year
2000 compliant. We have incurred costs of approximately $175,000 related to the
conversions.
We currently provide core data processing and check imaging services
through eleven centers located in Georgia, Florida, Tennessee, Arkansas and
Colorado. We have completed the upgrade of the equipment at each of these
locations to be year 2000 compliant. The total cost to make the equipment year
2000 compliant was approximately $75,000. In the event that the upgraded
equipment does not function properly, we believe that we can purchase equipment
that will allow processing to continue. It is difficult to estimate the
potential expense involved or delays which may result from a failure of the
upgraded equipment at our service bureau processing centers.
EFT processing is dependent upon coordinating the operations of other
ATM networks and our systems. In regard to our EFT operations and ATM network,
we believe the internal coding required for our products to be year 2000
complaint has been completed. We have completed the testing and certification of
our connections to other ATM networks, and we believe these connections are year
2000 compliant. If the other ATM networks do not successfully address year 2000
issues in their operations and if we are unable to route the transactions over
another network or another provider that has year 2000 compliant systems, our
operations may be affected. It is difficult to estimate the cost of our efforts
to certify these operations as the majority of expenditures relate to existing
programmers and support staff required to review the financial institutions
networks and equipment. It is difficult to estimate the potential expenses
involved or delays which may result from a failure or delay of these
institutions and third parties in resolving their year 2000 issues.
In regard to our data communications operations, we have completed a review
of our internal equipment as well as third party products and systems used in
our operations. It is our belief that our data communications equipment and
services, which are primarily provided by companies such as Motorola, BellSouth,
MCI WorldCom and Qwest Communications, are year 2000 compliant. If these
companies do not successfully address year 2000 issues in their operations and
if we are unable to successfully transfer our business operations to another
provider that has year 2000 compliant systems, our data communications
operations may be interrupted, hindered or delayed, which would have a material
adverse effect on our business, financial condition and results of operations.
Third party compliance
Other companies interact electronically with us and our customers, and we
must coordinate our EFT processing, ATM network, data communications and
enterprise software processing with these other companies and our customers. We
have completed a preliminary assessment of third party products and systems used
in our business. We believe that many financial institutions and third party
vendors and network processors, including our customers, vendors and processors,
are still in the process of analyzing their software and network applications to
address year 2000 issues. These other companies may not be successful in
identifying or resolving year 2000 issues in their operations, and our business
could suffer greatly if our customers' and vendors' operations are halted or
diminished even temporarily to address or correct these issues. It is difficult
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. We cannot assure you that such expenses, failures or
delays will not have a material adverse effect on our business, financial
condition or results of operations.
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SBS acquisition
We recently acquired SBS Data Services and the non-Internet and non-
telephone banking assets of SBS Corporation, affiliated corporations which
provide core data processing, check imaging equipment sales and services and
optical storage products to community financial institutions. SBS Data and SBS
Corp. have completed a year 2000 compliance review of their products and systems
and have made all necessary upgrades to be year 2000 compliant. We are
incorporating the SBS products and systems into our continuing year 2000 testing
and compliance program.
Contingency plans
Although we have not found any material year 2000 issues with our products,
services or operating systems, or those of third parties with whom we do
business, we have developed contingency plans for handling any year 2000
problems that may occur. Our contingency plans include:
. accelerated replacement of affected equipment or software;
. the emergency allocation of personnel and resources to analyze,
assess and direct remediation efforts;
. the use of backup systems, including those that do not rely on
computers; and
. alternative sources of power and communications.
It is difficult to estimate the potential expenses involved or delays which
may result if we are required to implement our contingency plans to address year
2000 issues.
Effects of Accounting Standards
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards requiring that every derivative instrument, including certain
derivative instruments embedded in other contracts, be recorded in the balance
sheet as either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting. SFAS No. 133 is effective for fiscal years
beginning after June 15, 2000. The adoption of SFAS No. 133 will not have a
material impact on our financial statements.
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Quantitative and Qualitative Disclosure About Market Risk
We do not use derivative financial instruments in our operations or
investments and do not have significant operations subject to fluctuations in
foreign currency exchange rates. Borrowings under the First Union credit
facility accrue interest at a fluctuating rate based either upon the lender's
prime rate or LIBOR. Prior to August 6, 1999, we had less than $1.0 million
outstanding under the First Union facility and, therefore, were not subject to
significant risks from interest rate fluctuations. As of September 30, 1999, we
had $30.3 million outstanding under this facility, which significantly increases
our risks from interest rate fluctuations. Changes in interest rates which
dramatically increase the interest rate on the credit facility would make it
more costly to borrow under that facility and may impede our acquisition and
growth strategies if we determine that the costs associated with borrowing funds
are too high to implement these strategies.
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SELLING SHAREHOLDERS
On March 9, 1999, we purchased Direct Access Interactive, Inc., a provider
of telephone and Internet banking services to financial institutions. In this
transaction, we issued 151,229 shares of our common stock to the five
shareholders of Direct Access. Of these shares, 13,696 shares were placed in
escrow to satisfy indemnity obligations of the Direct Access shareholders to
InterCept. These shares held in escrow will not be included in this offering. If
we do not make a claim against the escrow, all of the shares will be released
from escrow on March 9, 2000 and may be sold at that time by the shareholders
under Rule 144 of the Securities Act. None of the former shareholders of Direct
Access are officers or directors of InterCept.
On May 28, 1999, we purchased L.E. Vickers & Associates, Inc., a core data
processing, item capture and check imaging company, and Data Equipment Services,
Inc., a supplier of specialized equipment and maintenance services to financial
institutions. In this transaction, we issued 481,232 shares of our common stock
to Larry E. Vickers, the sole shareholder of L.E. Vickers & Associates, and
19,249 shares of our common stock to Mr. Vickers wife, Brenda J. Vickers, the
sole shareholder of Data Equipment Services. Of these shares, 25,024 shares
were placed in escrow to satisfy any indemnity obligations of the Vickers to
InterCept. The shares held in escrow are included in this offering and the
proceeds from any shares sold will continue to be held in escrow. If not sold
prior to May 28, 2000, and if we do not make a claim against the escrow, the
shares will be released from escrow on that date and may be sold at that time
under Rule 144. Mr. and Mrs. Vickers are not officers or directors of InterCept.
The following table sets forth information regarding the beneficial
ownership of our common stock held by each selling shareholder as of September
30, 1999, and as adjusted to reflect the sale of common stock offered by each
selling shareholder. The information in the table is based on information from
the named persons regarding their ownership of our common stock. Unless
otherwise indicated, each of the selling shareholders has sole voting power and
investment power over the shares beneficially owned. As of September 30, 1999,
there were 10,115,972 shares of common stock outstanding.
<TABLE>
<CAPTION>
Ownership Ownership
before after
the offering the offering
-------------------------- Number of -----------------
Name of Shareholder Shares % shares offered Shares
------------------- ------ --- -------------- ------
<S> <C> <C> <C> <C>
Janice Brown 240 * 216 24
Jack Caldwell 83,148 * 76,258 6,890
Janet Hollingsworth 3,424 * 3,082 342
Kevin Jones 64,349 * 57,915 6,434
Brenda A. Vickers (1) 19,249 * 19,249 0
Larry E. Vickers (1) 481,232 4.8 481,232 0
Steve White (2) 698 * 62 636
The Vickers Foundation (3) -- -- -- --
</TABLE>
* Less than 1% of the outstanding common stock.
(1) Each of Mr. and Mrs. Vickers are deemed to beneficially own the shares held
by the other. Therefore, each of them may be deemed to own and be offering
500,481 shares, which is the total shares owned by them.
(2) Mr. White owns 630 shares jointly with his spouse.
(3) Mr. Vickers has indicated to us that he plans to gift up to 15,000 shares
to The Vickers Foundation, for which he serves as trustee. If such event
occurs, the foundation will become a selling shareholder and will be able
to sell those shares under this prospectus.
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PLAN OF DISTRIBUTION
We are registering the shares offered under this prospectus on behalf of
the selling shareholders and their pledgees, donees, transferees and successors
in interest. We will not receive any proceeds from the sale of the shares. The
selling shareholders and their pledgees, donees, transferees or successors in
interest may sell or distribute these shares from time to time. These sales may
be made directly or through brokers or dealers or underwriters who may act
solely as agents, or who may acquire shares as principals. Sales may be made at
market prices prevailing at the time of sale, at prices related to the
prevailing market prices, at negotiated prices or at fixed prices, which may be
changed. The selling shareholders have the right to accept or reject, in whole
or in part, any proposed purchase of these shares, whether the purchase is to be
made directly or through agents.
The shares may be sold in one or more of the following types of
transactions, or in any combination of the following types of transactions:
(a) a cross or block trade, including a transaction in which the broker or
dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate
the transaction;
(b) purchases by a broker or dealer or underwriter as principal and resale
by such broker or dealer or underwriter for its account under this
prospectus;
(c) an exchange distribution in accordance with the rules of such
exchange;
(d) ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
(e) in transactions "at the market" to or through market makers of our
common stock or into an existing market for the common stock;
(f) in other ways not involving market makers or established trading
markets, including direct sales of the shares to purchasers or sales
of the shares effected through agents;
(g) through transactions in options, swaps or other derivatives which may
or may not be listed on an exchange;
(h) in privately negotiated transactions; or
(i) in transactions to cover short sales.
In effecting sales, brokers or dealers engaged by the selling shareholders may
arrange for other brokers or dealers to participate in the resales. In
addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
prospectus. Under Rule 144, a shareholder may sell shares held more than one
year, provided the shareholder meets various manner of sale, notice and other
requirements set forth in Rule 144.
From time to time after the date of this prospectus, the selling
shareholders may pledge or grant a security interest in some or all of the
shares offered under this prospectus. If a selling shareholder defaults in
performance of the obligations secured by these shares, the pledgees or secured
parties may offer and sell the shares from time to time by this prospectus. The
selling shareholders also may transfer and donate these shares in other
circumstances. The number of shares beneficially owned by the selling
shareholders will decrease as and when the selling shareholders transfer or
donate these shares or default in performing any obligations secured by these
shares. The plan of distribution for
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shares offered and sold under this prospectus will otherwise remain unchanged,
except that the transferees, donees, pledgees, secured parties or other
successors in interest will be selling shareholders for purposes of this
prospectus.
In connection with distributions of the shares or otherwise, the selling
shareholders may enter into hedging transactions with brokers or dealers. In
connection with such transactions, brokers or dealers may engage in short sales
of the shares registered hereunder in the course of hedging the positions they
assume, including positions assumed in connection with distributions of these
shares by such brokers or dealers. The selling shareholders may also sell shares
short and redeliver the shares to close out such short positions. The selling
shareholders may also enter into option or other transactions with brokers or
dealers which require the delivery to the brokers or dealers of the shares
registered hereunder, which the brokers or dealers may resell or otherwise
transfer under this prospectus. The selling shareholders may also loan or pledge
the shares to brokers or dealers and the brokers or dealers may sell the shares
so loaned or, upon a default, the brokers or dealers may effect sales of the
pledged shares under this prospectus.
The selling shareholders have advised us that they have not entered into
any agreements, understandings or arrangements with any underwriters, brokers or
dealers regarding the sale of these shares, nor is there an underwriter or
coordinating broker or dealer acting in connection with the proposed sale of
these shares. However, the selling shareholders may use brokers, dealers,
underwriters or agents to sell these shares, who may receive compensation in the
form of commissions, discounts or concessions. This compensation may be paid by
the selling shareholders or the purchasers of the shares for whom such persons
may act as agent, or to whom they may sell as principal, or both. The
compensation as to a particular person may be less than or in excess of
customary commissions.
Because the selling shareholders and such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales, they will be
subject to the prospectus delivery requirements of the Securities Act. In
addition, any commission, discount, concession or profit they realize with
respect to the resale of these shares while acting as principals may be deemed
to be underwriting discounts or commissions under the Securities Act. Neither
we nor the selling shareholders can presently estimate the amount of such
compensation. The aggregate proceeds to the selling shareholders from the sale
of the shares will be the purchase price of the common stock sold less the
aggregate agents' commissions, if any, and other expenses of issuance and
distribution not paid by us.
If the selling shareholders sell these shares in an underwritten offering,
the underwriters may acquire these shares for their own account and resell the
shares from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. In such event, we will set forth in a supplement to this
prospectus the names of the underwriters and the terms of the transactions,
including any underwriting discounts, concessions or commissions and other items
constituting compensation of the underwriters and brokers or dealers. The
underwriters from time to time may change any public offering price and any
discounts, concessions or commissions allowed or reallowed or paid to brokers or
dealers. Unless otherwise set forth in a supplement, the obligations of the
underwriters to purchase the shares will be subject to certain conditions, and
the underwriters will be obligated to purchase all of the shares specified in
the supplement if they purchase any of the shares.
If the selling shareholders notify us that they have entered into any
material arrangement with a broker or dealer for the sale of these shares
through a block trade, special offering, exchange
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<PAGE>
distribution or secondary distribution or a purchase by a broker or dealer, we
will file a supplement to this prospectus, if required, disclosing:
(a) the name of each selling shareholder and of the participating broker
or dealer(s);
(b) the number of shares involved;
(c) the price at which such shares were sold;
(d) the commissions paid or discounts or concessions allowed to such
broker or dealer(s), where applicable;
(e) that such broker or dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in this
prospectus; and
(f) other facts material to the transaction.
In addition, we will file a supplement to this prospectus if we are notified
that a donee or pledgee that is not already identified as a selling
shareholder intends to sell more than 500 shares.
We have advised the selling shareholders that during such time as they may
be engaged in a distribution of these shares, they are required to comply with
Regulation M under the Exchange Act. With certain exceptions, Regulation M
prohibits the selling shareholders, any affiliated purchasers and other persons
who participate in such a distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase, any security which is
the subject of the distribution until the entire distribution is complete.
We have agreed to bear certain expenses of registration of the common stock
under the federal and state securities laws and of any offering and sale
hereunder not including commissions of dealers or agents, fees attributable to
the sale of the shares and some other expenses. We have agreed to indemnify the
selling shareholders, and we may agree to indemnify any agent, dealer or broker
that participates in transactions involving sales of these shares, against
certain liabilities, including some potential liabilities under the Securities
Act. The selling shareholders may agree to indemnify any broker or dealer or
agent that participates in transactions involving sales of the shares against
certain liabilities, including liabilities arising under the Securities Act.
The registration statement for this offering was filed under the terms of
a registration rights agreement with Larry and Brenda Vickers and is subject to
the terms of that agreement. That agreement provides that in the event that we
determine that the registration of the shares will interfere with any material
financing, acquisition or other corporation transaction by us, we may terminate
or withdraw the registration statement covering these shares with the approval
of Mr. Vickers. If we do so and Mr. and Mrs. Vickers hold shares with a market
value of at least $500,000, they can require us to register the remaining shares
held by them unless we include the shares in another offering. This offering
will terminate on the earlier of (a) May 28, 2000 or (b) the date on which the
selling shareholders have sold all of the shares offered hereby.
There can be no assurance that the selling shareholders will sell any or
all of the shares of common stock offered by them under this prospectus. It is
possible that a significant number of these shares could be sold at the same
time. Such sales, or the perception that such sales could occur, may adversely
affect prevailing market prices for our common stock.
32
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered under this prospectus
has been passed upon for InterCept by Nelson Mullins Riley & Scarborough,
L.L.P., Atlanta, Georgia. Glenn W. Sturm, a partner of Nelson Mullins, is one of
our directors. As of November 1, 1999, members and employees of Nelson Mullins,
including Mr. Sturm, beneficially owned an aggregate of 425,002 shares of our
common stock.
EXPERTS
The audited financial statements incorporated by reference in this
prospectus and elsewhere in the registration statement, to the extent and for
the periods indicated in their reports, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
The audited financial statements of SBS Data Services, Inc. as of December
31, 1997 and 1998, incorporated by reference in this prospectus and elsewhere in
this registration statement have been audited by Hardman, Guess, Frost &
Cummings, P.C., independent public accountants, as stated in their reports and
are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of Item Processing of America, Inc. incorporated
by reference in this Prospectus have been audited by BDO Seidman, LLP,
independent certified public accountants, to the extent and for the periods set
forth in their report incorporated herein by reference, and are included in
reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
33
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the offering
described in the registration statement. All amounts are estimates except the
SEC Registration Fee:
SEC Registration Fee .................... $ 2,606
Printing and Engraving Expenses ........ 15,000
Legal Fees and Expenses ................. 50,000
Accounting Fees and Expenses ............ 30,000
Miscellaneous Expenses .................. 2,394
--------
Total................................ $100,000
The selling shareholders will not pay any of these expenses.
Item 15. Indemnification of Directors and Officers.
The Georgia Business Corporation Code permits a corporation to eliminate or
limit the personal liability of a director to the corporation or its
shareholders for monetary damages for any breach of duty of care or other duty
as a director, provided that no provision shall eliminate or limit the liability
of a director for:
. an appropriation, in violation of his duties, of any business
opportunity of the corporation,
. acts or omissions which involve intentional misconduct or a knowing
violation of law,
. unlawful corporate distributions, or
. any transaction from which the director received an improper personal
benefit.
The Georgia Code permits a corporation to indemnify officers to the same
extent as directors. Our amended and restated articles of incorporation
exonerate our directors from monetary liability to the extent described above,
and our amended and restated bylaws provide the same limitation of liability to
our officers.
In addition to the rights provided by law, our amended and restated
articles of incorporation and our amended and restated bylaws provide broad
indemnification rights to our directors and the officers, employees and agents
designated by our directors, with respect to various civil and criminal
liabilities and losses which may be incurred by the director, officer, agent or
employee under any pending or threatened litigation or other proceedings, except
that such indemnification does not apply in the same situations described above
with respect to the exculpation from liability of our directors. We are also
obligated to reimburse directors and other parties for expenses, including legal
fees, court costs and expert witness fees, incurred by the person in defending
against any liabilities and losses, as long as the person in good faith believes
that he or she acted in accordance with the applicable standard of conduct with
respect to the underlying accusations giving rise to such liabilities or losses
and agrees to repay to us any advances made if it is ultimately determined that
the person is not entitled to indemnification by us. Any amendment or other
modification to the applicable law, our articles of incorporation or our bylaws
which limits or otherwise adversely affects the rights to indemnification
currently provided therein shall apply only to proceedings based upon actions
and events occurring after
II-1
<PAGE>
such amendment and, in the case of amendments to our articles or bylaws,
delivery of notice thereof to the indemnified parties.
We have entered into separate indemnification agreements with each of our
directors and certain of our officers, whereby we agreed, among other things, to
provide for indemnification and advancement of expenses in a manner and subject
to terms and conditions similar to those set forth in the articles of
incorporation and the bylaws. These agreements may not be invalidated by action
of the shareholders. In addition, we hold an insurance policy covering directors
and officers under which the insurer agrees to pay, subject to certain
exclusions, for any claim made against our directors and officers for a wrongful
act that they may become legally obligated to pay or for which we are required
to indemnify the directors or officers.
We believe that the above protections are necessary in order to attract and
retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the SEC this indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against these liabilities (other than our
payment of expenses incurred or paid by one of our directors, officers or
controlling persons in the successful defense of any action, suit or proceeding)
is asserted by the director, officer or controlling person in connection with
the securities being registered, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Item 16. Exhibits.
(a) Exhibits
Exhibit No. Description
- ----------- -----------
2.1 Acquisition and Merger Agreement dated May 28, 1999 by and
between The InterCept Group, Inc., L.E. Vickers & Associates,
Inc., Data Equipment Services, Inc., and the shareholders of L.E.
Vickers & Associates, Inc. and Data Equipment Services, Inc.
(incorporated by reference to Exhibit 2.1 to InterCept's Current
Report on Form 8-K filed on June 11, 1999).**
2.2 Acquisition and Merger Agreement dated March 9, 1999 by and among
The InterCept Group, Inc., DAI Acquisition Corp., Direct Access
Interactive, Inc., and the shareholders of Direct Access
Interactive.**+
4.1 Amended and Restated Articles of Incorporation, as deemed filed
with the Secretary of State of Georgia on April 29, 1998
(incorporated by reference to the exhibits to Intercept's
Registration Statement on Form 8-A (as amended on October 1,
1999)).
4.2 Amended and Restated Bylaws (incorporated by reference to the
exhibits to Intercept's Registration Statement on Form 8-A (as
amended on October 1, 1999)).
4.3 Amendment to Amended and Restated Bylaws (incorporated by
reference to the exhibits to Intercept's Registration Statement
on Form 8-A (as amended on October 1, 1999)).
4.4 Specimen Common Stock Certificate (incorporated by reference to
the exhibits to Intercept's Registration Statement on Form S-1
(No. 333-47197) as declared effective by the Securities and
Exchange Commission on June 9, 1998).
II-2
<PAGE>
4.5 Registration Rights Agreement dated as of March 9, 1999, between
The InterCept Group, Inc. and the shareholders of Direct Access
Interactive, Inc.+
4.6 Registration Rights Agreement dated as of May 28, 1999, between
The InterCept Group, Inc. and Larry E. Vickers and Brenda J.
Vickers.+
4.7 Agreement to Register Shares dated as of September 30, 1999, by
and between InterCept and Jack Caldwell, Kevin Jones, Janet
Hollingsworth, Steve White and Janice Brown.+
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
23.1 Consent of Nelson Mullins Riley & Scarborough, L.L.P. (included
in Exhibit 5.1 hereto).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of BDO Seidman, LLP.
23.4 Consent of Hardman, Guess, Frost & Cummings, P.C.
24.1 Power of Attorney.+
** Pursuant to Item 601(b)(2) of Regulation S-K, InterCept agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Securities
and Exchange Commission upon request.
+ Previously filed.
Item 17. Undertakings.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price,
set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (i) and (ii) above do not
apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the SEC by the registrant
pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference into the
registration statement.
II-3
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of this offering.
B. To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual
report to security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements of
Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where interim
financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
C. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
D. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of InterCept pursuant to the foregoing provisions,
or otherwise, InterCept has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by InterCept of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, InterCept
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on this 9th day of
November, 1999.
THE INTERCEPT GROUP, INC.
By: /s/ John W. Collins
------------------------------------------
John W. Collins
Chairman and Chief Executive Officer
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ John W. Collins Chairman of the Board, Chief Executive November 9, 1999
- ------------------------------------- Officer and Director (Principal
John W. Collins Executive Officer)
* President, Chief Operating Officer and November 9, 1999
- ------------------------------------- Director
Donny R. Jackson
/s/ Scott R. Meyerhoff Vice President--Finance, Chief Financial November 9, 1999
- ------------------------------------- Officer and Secretary (Principal
Scott R. Meyerhoff Financial and Accounting Officer)
* Director November 9, 1999
- -------------------------------------
Jon R. Burke
* Director November 9, 1999
- -------------------------------------
Boone A. Knox
* Director November 9, 1999
- -------------------------------------
Glenn W. Sturm
</TABLE>
*By: /s/ Scott R. Meyerhoff
-----------------------------------------
Scott R. Meyerhoff
Attorney-in-Fact
II-6
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Acquisition and Merger Agreement dated May 28, 1999 by and
between The InterCept Group, Inc., L.E. Vickers & Associates,
Inc., Data Equipment Services, Inc., and the shareholders of L.E.
Vickers & Associates, Inc. and Data Equipment Services, Inc.
(incorporated by reference to Exhibit 2.1 to InterCept's Current
Report on Form 8-K filed on June 11, 1999).**
2.2 Acquisition and Merger Agreement dated March 9, 1999 by and among
The InterCept Group, Inc., DAI Acquisition Corp., Direct Access
Interactive, Inc., and the shareholders of Direct Access
Interactive.**+
4.1 Amended and Restated Articles of Incorporation, as deemed filed
with the Secretary of State of Georgia on April 29, 1998
(incorporated by reference to the exhibits to Intercept's
Registration Statement on Form 8-A (as amended on October 1,
1999)).
4.2 Amended and Restated Bylaws (incorporated by reference to the
exhibits to Intercept's Registration Statement on Form 8-A (as
amended on October 1, 1999)).
4.3 Amendment to Amended and Restated Bylaws (incorporated by
reference to the exhibits to Intercept's Registration Statement
on Form 8-A (as amended on October 1, 1999)).
4.4 Specimen Common Stock Certificate (incorporated by reference to
the exhibits to Intercept's Registration Statement on Form S-1
(No. 333-47197) as declared effective by the Securities and
Exchange Commission on June 9, 1998).
4.5 Registration Rights Agreement dated as of March 9, 1999, between
The InterCept Group, Inc. and the shareholders of Direct Access
Interactive, Inc.+
4.6 Registration Rights Agreement dated as of May 28, 1999, between
The InterCept Group, Inc. and Larry E. Vickers and Brenda J.
Vickers.+
4.7 Agreement to Register Shares dated as of September 30, 1999, by
and between InterCept and Jack Caldwell, Kevin Jones, Janet
Hollingsworth, Steve White and Janice Brown.+
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
23.1 Consent of Nelson Mullins Riley & Scarborough, L.L.P. (included
in Exhibit 5.1 hereto).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of BDO Seidman, LLP.
23.4 Consent of Hardman, Guess, Frost & Cummings, P.C.
24.1 Power of Attorney.+
- ---------
** Pursuant to Item 601(b)(2) of Regulation S-K, InterCept agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Securities
and Exchange Commission upon request.
+ Previously filed.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF NELSON MULLINS RILEY & SCARBOROUGH, LLP]
November 9, 1999
Board of Directors
The InterCept Group, Inc.
3150 Holcomb Bridge Road
Suite 200
Norcross, Georgia 30071
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
This firm has acted as counsel to The InterCept Group, Inc., a Georgia
corporation (the "Company"), in connection with its registration, pursuant to a
registration statement on Form S-3 filed with the Securities and Exchange
Commission on October 1, 1999, as amended (the "Registration Statement"), for
resale of 638,014 shares of the Company's common stock, no par value per share
(the "Shares"). The Shares were previously issued by the Company in connection
with its acquisitions of Direct Access Interactive, Inc. on March 9, 1999 and
L.E. Vickers & Associates, Inc. and Data Equipment Services, Inc. on May 28,
1999. This opinion letter is furnished to you at your request to enable you to
fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. Section
229.601(b)(5), in connection with the Registration Statement.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. A copy of the Registration Statement.
2. An executed copy of the Acquisition and Merger Agreement dated
March 9, 1999 by and among the Company, DAI Acquisition Corp.,
Direct Access Interactive, Inc., and the shareholders of Direct
Access Interactive.
3. An executed copy of the Acquisition and Merger Agreement dated May
28, 1999 by and between the Company, L.E. Vickers & Associates,
Inc., Data Equipment Services, Inc., and the shareholders of L.E.
Vickers & Associates, Inc. and Data Equipment Services, Inc.
4. The Amended and Restated Articles of Incorporation of the Company,
as certified by the Secretary of the Company as being complete,
accurate and in effect as of the date hereof.
<PAGE>
5. The Amended and Restated Bylaws of the Company, as amended, as
certified by the Secretary of the Company as being complete,
accurate and in effect as of the date hereof.
6. Resolutions of the Board of Directors of the Company adopted on
March 9, 1999, May 27, 1999 and October 1, 1999, as certified by
the Secretary of the Company as being complete, accurate and in
effect as of the date hereof.
In our examination of the aforesaid documents, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
authenticity, accuracy and completeness of all documents submitted to us, and
the conformity with the original documents of all documents submitted to us as
certified, telecopied, photostatic, or reproduced copies. We have also assumed
the accuracy, completeness and authenticity of the foregoing certifications of
public officials, governmental agencies and departments, and corporate
officials. This opinion letter is given, and all statements herein are made, in
the context of the foregoing.
This opinion letter is based as to matters of law solely on the Georgia
Business Corporation Code. We express no opinion herein as to any other laws,
statutes, regulations or ordinances.
Based upon, subject to and limited by the foregoing, we are of the opinion
that the Shares are validly issued, fully paid and non-assessable under the
Georgia Business Corporation Code.
We assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion letter. This opinion letter has been
prepared solely for your use in connection with the filing of the Registration
Statement with the Securities and Exchange Commission and should not be quoted
in whole or in part or otherwise be referred to, or filed with or furnished to
any other governmental agency or other person or entity, without the prior
written consent of this firm.
We hereby consent to the filing of this opinion letter as Exhibit 5.1 to
the Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus constituting a part of the Registration
Statement. In giving this consent, we do not hereby admit that we are an
"expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Nelson Mullins Riley & Scarborough, L.L.P.
----------------------------------------------
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated September 3, 1999
for Dyad Corporation and Subsidiaries, The Internet Banking Division of the
Bankers Bank, the Internet Banking Division of the Independent BankersBank, and
our report dated September 6, 1999 for SBS Corporation included in The InterCept
Group Inc.'s Form 8-K/A's filed on September 30, 1999, our report dated February
19, 1999 for The InterCept Group, Inc. included in The InterCept Group, Inc.'s
Form 10-K for the year ended December 31, 1998, our report dated June 30, 1999
for L.E. Vickers & Associates and Data Equipment Services included in The
InterCept Group, Inc.'s Form 8-K/A dated August 11, 1999 and to all references
to our Firm included in or made a part of this registration statement.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
November 8, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Intercept Group, Inc.
Norcross, Georgia
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated January
22, 1998, relating to the financial statements of Item Processing of America,
Inc. appearing in The Intercept Group, Inc.'s Report on Form 8-K/A dated January
13, 1999.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
Miami, Florida
November 9, 1999
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 to be filed on November 9, 1999) and related
Prospectus of The InterCept Group for the registration of shares of its common
stock and to the incorporation by reference therein of our report dated January
27, 1999, with respect to the financial statements of SBS Data Services, Inc.
included in the Current Reports on Form 8-K/A filed on September 30, 1999, as
amended, both filed with the Securities and Exchange Commission.
/s/ Hardman, Guess, Frost & Cummings, P.C.
Birmingham, Alabama
November 9, 1999
