<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
August 10, 1998
FACTUAL DATA CORP.
(Exact name of registrant as specified in its charter)
Colorado 0-24205 84-1449911
(State of (Commission File (I.R.S. Employer
Incorporation) No.) Identification No.)
5200 Hahns Peak Drive
Loveland, Colorado 80538
(Address of principal executive offices)
(970) 663-5700
(Registrant's telephone number, including area code)
ITEM 7. Financial Statements and Exhibits
(a) The registrant is filing the required financial statements in
connection with its acquisitions of Heritage Credit Reporting, Inc. on
August 11, 1998, American Credit Connection, Inc, on August 10, 1998,
and FD Northwest, Inc. on August 10, 1998 on this amendment to Form
8-K.
(b) The registrant is also filing the required pro forma information in
connection with the acquisitions described in Item 7(a) above on this
amendment to Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FACTUAL DATA CORPORATION
Date: October 9, 1998 By: /s/ Jerald H. Donnan
Jerald H. Donnan,
Chief Executive Officer
<PAGE>
HERITAGE CREDIT REPORTING, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1997
<PAGE>
HERITAGE CREDIT REPORTING, INC.
TABLE OF CONTENTS
Independent Auditors' Report......................................F - 1
Financial Statements
Balance Sheets................................................F - 2
Statements of Operations......................................F - 3
Statement of Changes in Stockholders' Equity..................F - 4
Statements of Cash Flows......................................F - 5
Notes to Financial Statements.....................................F - 7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Heritage Credit Reporting, Inc.
Palatine, Illinois
We have audited the accompanying balance sheet of Heritage Credit Reporting,
Inc. as of December 31, 1997, and the related statements of operations, changes
in stockholders' equity and cash flows for each of the years in the two year
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Heritage Credit Reporting, Inc.
as of December 31, 1997 and the results of their operations and their cash flows
for each of the years in the two year period ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
August 21, 1998
Denver, Colorado
F - 1
<PAGE>
HERITAGE CREDIT REPORTING, INC.
BALANCE SHEETS
December 31, June 30,
1997 1998
------------ ------------
(Unaudited)
ASSETS (NOTE 4)
Current assets
Cash ........................................... $ 73,188 $189,919
Accounts receivable (net of allowance for
doubtful accounts of $5,000 (1997) and ........ 383,516 536,334
$35,000 (1998)
Other current assets ........................... 1,209 270
-------- --------
Total current assets ........................ 457,913 726,523
-------- --------
Property and equipment, net (Note 2) ............. 103,458 81,363
Other assets
Intangible assets (net of accumulated
amortization of $9,188 (1997) and $9,802
(1998)......................................... 39,813 39,199
Deposits and other ............................. 8,362 8,362
-------- --------
Total other assets .......................... 48,175 47,561
-------- --------
$609,546 $855,447
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line-of-credit (Note 4) ........................ $ 23,000 $ --
Current portion of long-term debt (Note 4) ..... 101,378 70,470
Advances from stockholders (Note 3) ............ 74,037 35,542
Accounts payable ............................... 217,741 193,783
Accrued payroll and taxes ...................... 48,437 57,569
Other current liabilities ...................... 11,796 32,395
-------- --------
Total current liabilities ................... 476,389 389,759
-------- --------
Commitments (Notes 5 and 6)
Stockholders' equity
Common stock, no par value, 10,000 shares
authorized, 1,000 shares issued and ........... 25,000 25,000
outstanding in 1997 and 1998
Retained earnings .............................. 108,157 440,688
-------- --------
Total stockholders' equity .................. 133,157 465,688
-------- --------
$609,546 $855,447
======== ========
See notes to financial statements.
F - 2
<PAGE>
HERITAGE CREDIT REPORTING, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended For the Six Months Ended
December 31, June 30,
-------------------------------- ---------------------------------
1996 1997 1997 1998
----------- ----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenue ........................................ $ 2,782,592 $3,036,155 $1,398,780 $2,050,888
----------- ----------- ----------- -----------
Operating Expenses
Costs of services provided ................... 1,596,349 1,751,926 841,942 1,080,420
Sales and marketing .......................... 497,150 441,219 228,579 197,473
General and administrative .................... 802,217 668,333 335,566 440,651
----------- ----------- ----------- -----------
Total operating expenses .................. 2,895,716 2,861,478 1,406,087 1,718,544
----------- ----------- ----------- -----------
Income (loss) from operations .................. (113,124) 174,677 (7,307) 332,344
Other income (expense)
Other income (expense) ....................... (572) -- -- 1,933
Interest expense ............................. (13,769) (10,085) (5,526) (1,746)
----------- ----------- ----------- -----------
Net income (loss) .............................. (127,465) 164,592 (12,833) 332,531
Pro forma adjustment -
provision for income taxes .................... (43,338) 55,961 (4,363) 113,060
----------- ----------- ----------- -----------
(Note 1)
Pro forma net (loss) income .................... $ (84,127) $ 108,631 $ (8,470) $ 219,471
=========== =========== =========== ===========
Pro forma basic (loss) earnings ................ $ (84.13) $ (108.63) $ (8.47) $ 219.47
=========== =========== =========== ===========
per share
Weighted average number of
shares outstanding ............................ 1,000 1,000 1,000 1,000
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F - 3
<PAGE>
HERITAGE CREDIT REPORTING, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
AND THE PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Total
Retained Stockholders'
Common Earnings Equity
STOCK (Deficit) (Deficit)
---------- ----------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1995 ........... $ 25,000 $ 71,030 $ 96,030
Net loss for the year ended
December 31, 1996...................... -- (127,465) (127,465)
--------- --------- ---------
Balance at December 31, 1996 ........... 25,000 (56,435) (31,435)
Net income for the year ended
December 31, 1997...................... -- 164,592 164,592
--------- --------- ---------
Balance at December 31, 1997 ........... 25,000 108,157 133,157
Net income for the six months ended June
30, 1998 (unaudited) .................. -- 332,531 332,531
--------- --------- ---------
Balance at June 30, 1998 (unaudited) ... $ 25,000 $ 440,688 $ 465,688
========= ========= =========
</TABLE>
See notes to financial statements.
F - 4
<PAGE>
HERITAGE CREDIT REPORTING, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended For the Six Months Ended
December 31, June 30,
------------------------- ---------------------------
1996 1997 1997 1998
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating
activities
Net income (loss) ...................... $(127,465) $ 164,592 $ (12,833) $ 332,531
---------- --------- --------- ---------
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities
Allowance for doubtful
accounts............................. -- 5,000 5,000 30,000
Depreciation and
amortization........................ 32,791 26,136 11,504 21,622
Loss on disposal of assets ........... 7,579 -- -- 1,087
Changes in operating assets
and liabilities
Accounts receivable ................ 41,846 (137,133) (127,070) (182,818)
Other assets ....................... (3,157) 291 1,501 939
Accounts payable ................... 149,002 (1,739) 129,320 (23,958)
Accrued payroll and payroll taxes... 2,088 11,074 12,009 9,132
Accrued expenses ................... (917) 10,682 -- 20,599
--------- --------- --------- ---------
229,232 (85,689) 32,264 (123,397)
--------- --------- --------- ---------
Net cash provided by
operating activities ............. 101,767 78,903 19,431 209,134
--------- --------- --------- ---------
Cash flows from investing
activities
Purchase of property and equipment...... (16,979) -- -- --
--------- --------- --------- ---------
Net cash used by
investing activities ............. (16,979) -- -- --
--------- --------- --------- ---------
Cash flows from financing
activities
Line-of-credit, net .................... 8,000 (35,000) -- (23,000)
Principal payments on
long-term debt........................ (37,114) (37,121) (18,350) (30,908)
Advances from stockholders, net......... (16,791) 25,644 26,859 (38,495)
--------- --------- --------- ---------
Net cash (used)
provided by financing activities. (45,905) (46,477) 8,509 (92,403)
--------- --------- --------- ---------
Net increase in cash ..................... 38,883 32,426 27,940 116,731
Cash, at beginning of period ............. 1,879 40,762 40,762 73,188
--------- --------- --------- ---------
Cash, at end of period ................... $ 40,762 $ 73,188 $ 68,702 $ 189,919
========= ========= ========= =========
</TABLE>
Continued on following page.
See notes to financial statements.
F - 5
<PAGE>
HERITAGE CREDIT REPORTING, INC.
COMBINED STATEMENTS OF CASH FLOWS
Continued from previous page.
Supplemental disclosure of cash flow information:
Interest paid on borrowings for the years ended December 31, 1997 and 1996
was $10,085 and $13,769, respectively.
Supplemental disclosure of non-cash investing and financing activities:
During December 1997, the Company purchased computer equipment by issuing
notes payable totaling $70,470.
See notes to financial statements.
F - 6
<PAGE>
HERITAGE CREDIT REPORTING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Heritage Credit Reporting, Inc. was incorporated in the state of Illinois in
1985. The Company was established for the purpose of providing information
services, nationally, to financial lending institutions primarily in the
mortgage lending industry.
ACCOUNTS RECEIVABLE
In the normal course of business, the Company extends unsecured credit to
virtually all of its customers related to providing information services. The
Company's customers are located primarily in the Chicago area.
Because of the credit risks involved, management has provided an allowance for
doubtful accounts of $5,000 and $35,000 at December 31, 1997 and June 30, 1998
(unaudited), respectively, which reflects its opinion of amounts which will
eventually become uncollectible. In the event of complete nonperformance by the
Company's customers, the maximum exposure to the Company is the outstanding
accounts receivable balance at the date of non-performance.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the
accelerated method based on the estimated useful lives of the assets which range
from three to fifteen years.
INTANGIBLE ASSETS
Intangible assets are stated at cost and consist of goodwill. Goodwill is
amortized using accelerated methods over forty years.
ADVERTISING COSTS
Advertising costs are expensed as incurred.
INCOME TAXES
The Company has elected to be taxed under Subchapter S of the Internal Revenue
Code. Under these provisions, the Company is not subject to income taxes as a
separate entity. Income or loss of the Company is required to be included in the
income tax returns of the stockholders.
F - 7
<PAGE>
HERITAGE CREDIT REPORTING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
INCOME TAXES (CONTINUED)
Included in the statement of operations are pro forma income tax adjustments
computed using the statutory rates in effect, which represent the federal and
state tax provisions that would have been required had the Company been taxed as
a C-corporation. The Company's effective statutory rate based on pretax income
was 34% for both the years ended December 31, 1997 and 1996 and the unaudited
six months ended June 30, 1998 and 1997.
VALUATION OF LONG-LIVED ASSETS
The Company assesses valuation of long-lived assets in accordance with Statement
of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be disposed of. The Company
periodically evaluates the carrying value of long-lived assets to be held and
used, including goodwill and other intangible assets, when events and
circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the anticipated undiscounted cash flow from such asset
is separately identifiable and is less than its carrying value. In that event, a
loss is recognized based on the amount by which the carrying value exceeds the
fair market value of the long-lived asset. Fair market value is determined
primarily using the anticipated cash flows discounted at a rate commensurate
with the risk involved.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including cash, designated cash,
receivables, prepaid expenses, accounts payable and accrued expenses approximate
their fair values as of December 31, 1997 and June 30, 1998 (unaudited) because
of the relatively short maturity of these instruments.
F - 8
<PAGE>
HERITAGE CREDIT REPORTING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts of notes payable and debt outstanding also approximate
their fair values as of December 31, 1997 because interest rates on these
instruments approximate the interest rate on debt with similar terms available
to the Company.
BASIC EARNINGS (LOSS) PER COMMON SHARE
The Company computes earnings (loss) per share in accordance with Statement of
Financial Accounting Standard No. 128. The Company has presented only basic loss
per share as the Company has no dilutive potential common shares. Basic earnings
(loss) per share has been computed based on the weighted average number of
shares outstanding.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31, June 30,
1997 1998
----------- -----------
(Unaudited)
Computer equipment and software .......... $ 193,842 $ 192,755
Furniture and fixtures ................... 67,563 67,563
Vehicles ................................. 36,422 36,422
--------- ---------
297,827 296,740
Less accumulated depreciation .......... (194,369) (215,377)
--------- ---------
$ 103,458 $ 81,363
========= =========
NOTE 3 - ADVANCES FROM STOCKHOLDERS
The advances from stockholders represent the stockholders' personal funds
advanced to Heritage to be used for working capital as needed. The balance of
the advances was $74,037 and $35,542 at December 31, 1997 and June 30, 1998
(unaudited), respectively.
F - 9
<PAGE>
HERITAGE CREDIT REPORTING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - NOTES PAYABLE
LINE-OF-CREDIT
The Company maintains a $100,000 line-of-credit with a bank of which $23,000 and
$0 was outstanding at December 31, 1997 and June 30, 1998 (unaudited),
respectively. The line-of-credit expires on May 31, 1998. The line accrues
interest at the bank's prime rate plus .75% (9.25% at December 31, 1997). The
line is collateralized by substantially all the assets of the Company's
affiliate and is personally guaranteed by officers of the Company.
LONG-TERM OBLIGATIONS
Long-term debt obligations consist of the following:
December 31, June 30,
1997 1998
(unaudited)
Note payable to a financial institution,
monthly principal and interest payments of
$961 through December 1998. Interest at
9.5%. The note is collateralized by
virtually all assets of the Company. The
note payable was fully repaid during 1998...... $ 11,114 $ --
Note payable to a financial institution,
monthly payments of $2,250 principal plus
interest. Interest at .75% plus the
reference rate (9.25% at December 31, 1997
and June 30, 1998). The note payable was
fully repaid during 1998....................... 19,794 --
Unsecured note payable to a corporation.
Note is due on demand and carries interest
at 8%. The note was forgiven in 1998 in
conjunction with the sale of operating
assets as described in Note 6.................. 70,470 70,470
-------- --------
101,378 70,470
Less current portion (101,378) (70,470)
-------- --------
$ - $ -
======== ========
F - 10
<PAGE>
HERITAGE CREDIT REPORTING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - COMMITMENTS
OPERATING LEASES
The Company leases office space for its corporate location under an operating
lease agreements which provide for the payment of rent totaling approximately
$8,600 per month. Rent expense under these operating leases, totaled $99,496 and
$91,999 during the years ended December 31, 1997 and 1996, respectively. Rent
expense under operating leases totaled $47,287 and $42,884 for the six months
ended June 30, 1998 and 1997, respectively (unaudited).
Future minimum annual lease payments are as follows:
YEAR ENDED DECEMBER 31,
1998 $ 28,955
1999 30,083
--------
$ 59,038
========
NOTE 6 - 401(K) PLAN
The Company maintains a profit sharing plan and trust under section 401(k) of
the Internal Revenue Code. All employees of age 21 or older who complete 1,000
hours a year are eligible for the plan. Employees have an option to contribute
compensation up to the ceiling set by the Internal Revenue Service ($10,000 1997
and 1998). Employer matches $.50 on the dollar up to 2% of the employees salary.
Contributions for the year ended December 31, 1997 were $4,174 and $3,164 for
the six months ended June 30, 1998 (unaudited).
F - 11
<PAGE>
AMERICAN CREDIT
CONNECTION, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996
<PAGE>
AMERICAN CREDIT CONNECTION, INC.
TABLE OF CONTENTS
Independent Auditors' Report......................................F - 1
Financial Statements
Balance Sheets................................................F - 2
Statements of Operations......................................F - 3
Statement of Changes in Stockholders' Equity..................F - 4
Statements of Cash Flows......................................F - 5
Notes to Financial Statements.....................................F - 6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
American Credit Connection, Inc.
Rolling Meadows, Illinois
We have audited the accompanying balance sheet of American Credit Connection,
Inc. as of December 31, 1997, and the related statements of operations, changes
in stockholders' equity and cash flows for each of the years in the two year
period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Credit Connection,
Inc. as of December 31, 1997 and the results of their operations and their cash
flows for each of the years in the two year period ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
August 7, 1998
Denver, Colorado
F - 1
<PAGE>
AMERICAN CREDIT CONNECTION, INC.
BALANCE SHEETS
DECEMBER 31, JUNE 30,
1997 1998
----------- -----------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents ...................... $ -- $ 46,424
Accounts receivable ............................ 226,722 266,869
Other receivables .............................. 1,355 1,405
-------- --------
Total current assets ........................ 228,077 314,698
Property and equipment (Note 2) .................. 36,116 28,085
Other assets
Deposits ....................................... 3,146 3,146
-------- --------
Total other assets .......................... 3,146 3,146
-------- --------
$267,339 $345,929
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Checks written in excess of bank balance ....... $ 55,136 $ --
Advances from stockholders (Note 4) ............ 7,500 --
Line-of-credit (Note 3) ........................ 40,000 30,000
Accounts payable ............................... 34,096 84,497
Accrued payroll, payroll taxes and expenses .... 19,429 21,229
Income taxes payable ........................... -- 33,699
-------- --------
Total current liabilities ................... 156,161 169,425
-------- --------
Commitments (Note 5)
Stockholders' equity
Capital stock, no par value, 10,000 shares
authorized, 562.5 shares issued and
outstanding in 1997 and 1998 .................. 563 563
Retained earnings .............................. 110,615 175,941
-------- --------
Total stockholders' equity .................. 111,178 176,504
-------- --------
$267,339 $345,929
======== ========
See notes to financial statements.
F - 2
<PAGE>
AMERICAN CREDIT CONNECTION, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended For the Six Months Ended
December 31, June 30,
--------------------------- ----------------------------
1996 1997 1997 1998
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Information services ........ $ 967,214 $1,134,588 $503,801 $ 874,922
----------- ----------- ----------- -----------
Operating Expenses
Costs of services provided .. 382,390 483,462 208,199 387,786
Selling, general and
administrative.............. 568,997 685,006 325,279 385,915
----------- ----------- ----------- -----------
Total operating expenses . 951,387 1,168,468 533,478 773,701
----------- ----------- ----------- -----------
Income (loss) from operations . 15,827 (33,880) (29,677) 101,221
Other income (expense)
Other income ................ 911 5,100 130 325
Interest expense ............ (1,211) (2,482) (618) (2,521)
Other expenses .............. (7,535) (167) -- --
----------- ----------- ----------- -----------
Total other income........ (7,835) 2,451 (488) (2,196)
----------- ----------- ----------- -----------
(expense)
Income (loss) before income
taxes......................... 7,992 (31,429) (30,165) 99,025
Provision for income taxes .... 2,717 (10,686) (10,256) 33,699
----------- ----------- ----------- -----------
Net income (loss) ............. $ 5,275 $ (20,743) $ (19,909) $ 65,326
=========== =========== =========== ===========
Basic earnings (loss)
per share..................... $ 9.37 $ (36.85) $ (35.37) $ 116.04
=========== =========== =========== ===========
Weighted average number of
shares outstanding ........... 563 563 563 563
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F - 3
<PAGE>
AMERICAN CREDIT CONNECTION, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Total
---------------------------- Retained Stockholders'
Shares Amount Earnings Equity
--------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 .......................... 563 $ 563 $ 126,083 $ 126,646
Net income for the year .............................. -- -- 5,275 5,275
--------- --------- --------- ---------
Balance - December 31, 1996 .......................... 563 563 131,358 131,921
Net loss for the year ................................ -- -- (20,743) (20,743)
--------- --------- --------- ---------
Balance - December 31, 1997 .......................... 563 563 110,615 111,178
Net income for the period (unaudited) ................ -- -- 65,326 65,326
--------- --------- --------- ---------
Balance - June 30, 1998 (unaudited) .................. 563 $ 563 $ 175,941 $ 176,504
========= ========= ========= =========
</TABLE>
See notes to financial statements.
F - 4
<PAGE>
AMERICAN CREDIT CONNECTION, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Year Ended For the Six Months Ended
December 31, June 30,
------------------------ ------------------------
1996 1997 1997 1998
--------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating
activities
Net income (loss) ............ $ 5,275 $ (20,743) $ (19,909) $ 65,326
--------- --------- --------- ---------
Adjustments to reconcile net
income to net cash provided
by operating activities
Depreciation ............... 17,754 23,078 11,539 8,031
Deferred income taxes ...... 2,717 (10,686) (10,256) --
Changes in operating assets
and liabilities
Accounts receivable, net .. (55,472) (23,499) 14,267 (40,197)
Accounts payable .......... 11,252 22,844 22,278 50,401
Accrued payroll, payroll
taxes and expenses ....... 3,136 (2,338) 9,314 1,800
Income taxes payable ...... -- -- -- 33,699
--------- --------- --------- ---------
(20,613) 9,399 47,142 53,734
--------- --------- --------- ---------
Net cash provided by
operating activities .... (15,338) (11,344) 27,233 119,060
--------- --------- --------- ---------
Cash flows from investing
activities
Capital expenditures ......... (2,607) (39,832) (31,884) --
--------- --------- --------- ---------
Net cash used in
investing activities..... (2,607) (39,832) (31,884) --
--------- --------- --------- ---------
Cash flows from financing
activities
Repayment to stockholders .... (9,000) (3,500) (3,000) (7,500)
Net borrowings on
on line-of-credit............ -- 40,000 30,000 (10,000)
Change in checks written in
excess of bank balance ...... 26,945 14,676 (22,349) (55,136)
--------- --------- --------- ---------
Net cash used in
financing activities..... 17,945 51,176 4,651 (72,636)
--------- --------- --------- ---------
Net increase (decrease) in cash
and cash equivalents .......... -- -- -- 46,424
Cash and cash equivalents, at
beginning of period ........... -- -- -- --
--------- --------- --------- ---------
Cash and cash equivalents,
at end of period............... $ -- $ -- $ -- $ 46,424
========= ========= ========= =========
</TABLE>
Supplemental disclosure of cash flow information:
Interest paid during the years ended December 31, 1996 and 1997 was $10 and
$1,793, respectively.
Interest paid for the unaudited six months ended June 30, 1997 and 1998 was
$234 and $5,752, respectively.
See notes to financial statements.
F - 5
<PAGE>
AMERICAN CREDIT CONNECTION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
American Credit Connection, Inc. (ACC) was incorporated in the state of Illinois
in 1991. The Company was established for the purpose of providing information
services to financial lending institutions primarily in the mortgage lending
industry and employment screening services under the licensed name of
EMPFacts(TM) from Factual Data Corp., in the Northern Illinois area.
ACCOUNTS RECEIVABLE
In the normal course of business, the Company extends unsecured credit to
virtually all of its customers for information services. The Company's customers
are located primarily in the Northern Illinois area.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method based on the estimated useful lives of the assets which
range from five to seven years.
ADVERTISING COSTS
All advertising costs are expensed as incurred.
INCOME TAXES
Deferred income taxes result from temporary differences. Temporary differences
are differences between the tax basis of assets and liabilities and their
reported amounts in the financial statements that will result in taxable or
deductible amounts in future years.
The Company's temporary differences consist of depreciation on property and
equipment, accrual to cash adjustments and net operating loss carryforwards. At
December 31, 1997, the Company had net operating loss carryforwards available to
offset future taxable income of approximately $36,000 which expire through 2012.
BASIC EARNINGS (LOSS) PER COMMON SHARE
The company computes earnings (loss) per share in accordance with Statements of
Financial Accounting Standards No. 128. The Company has presented only basic
earnings (loss) per share as the Company has no potential dilutive securities.
Basic easy loss per share has been computed based on the weighted average
numbers of shares outstanding.
F - 6
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including receivables, accounts
payable, accrued expenses, and advances from shareholders approximate their fair
values as of December 31, 1997 and June 30, 1998, respectively, because of the
relatively short maturity of these instruments.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31, June 30,
1997 1998
---------- ----------
(Unaudited)
Furniture and fixtures $ 25,045 $ 25,045
Leasehold improvements 6,843 6,843
Computer equipment and software 114,426 114,426
---------- ---------
146,314 146,314
Less accumulated depreciation (110,198) (118,229)
---------- ---------
$ 36,116 $ 28,085
========== =========
NOTE 3 - LINE-OF-CREDIT
The Company maintains a $100,000 line-of-credit from a bank which provides for
interest at 1% over prime, payable monthly with principal due on demand. The
line-of-credit is personally guaranteed by the stockholders of the Company and
had an outstanding balance at December 31, 1997 and June 30, 1998 (unaudited) of
$40,000 and $30,000, respectively.
F - 7
<PAGE>
NOTE 4 - ADVANCES FROM STOCKHOLDERS
The advances from stockholders represent the stockholders' personal funds
advanced to ACC to be used for working capital as needed. The balance of the
advances was $7,500 at December 31, 1997, with the full balance being repaid in
1998.
NOTE 5 - COMMITMENTS
The Company renewed a lease agreement for its office space on March 14, 1997.
The lease expires November 30, 2002 and the Company is currently paying $4,448
per month. The Company also has various office equipment leases with maturities
through November 1999.
Future minimum rental payments under the lease commitments are as follows:
FISCAL YEAR
1998 $ 53,417
1999 58,392
2000 55,925
2001 57,591
2002 53,435
--------
$278,760
========
Rent expense was $24,534, $37,880, $16,744 and $24,898 for the years ended
December 31, 1996 and 1997 and the unaudited six month periods ended June 30,
1997 and 1998, respectively.
F - 8
<PAGE>
FACTUAL DATA
NORTHWEST, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1997
<PAGE>
FACTUAL DATA NORTHWEST, INC.
TABLE OF CONTENTS
Independent Auditors' Report......................................F - 1
Financial Statements
Balance Sheets................................................F - 2
Statements of Income..........................................F - 3
Statement of Changes in Stockholders' Equity..................F - 4
Statements of Cash Flows......................................F - 5
Notes to Financial Statements.....................................F - 6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Factual Data Northwest, Inc.
Seattle, Washington
We have audited the accompanying balance sheet of Factual Data Northwest, Inc.
as of December 31, 1997, and the related statements of operations, changes in
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Factual Data Northwest, Inc. as
of December 31, 1997 and the results of their operations and their cash flows
the year then ended, in conformity with generally accepted accounting
principles.
/s/ Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
August 21, 1998
Denver, Colorado
F - 1
<PAGE>
FACTUAL DATA NORTHWEST, INC.
BALANCE SHEETS
December 31, June 30,
1997 1998
----------- -----------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents .................... $ 17,696 $ 33,241
Accounts receivable .......................... 52,069 67,971
--------- ---------
Total current assets ...................... 69,765 101,212
Property and equipment, net (Note 2) ........... 43,223 37,645
Other assets
Intangible assets, net (Note 3) .............. 39,489 34,575
Deposits ..................................... 1,158 1,158
--------- ---------
Total other assets ........................ 40,647 35,733
--------- ---------
$ 153,635 $ 174,590
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Advances from stockholders (Note 4) .......... $ 104,265 $ 104,265
Accounts payable ............................. 22,922 27,819
Accrued payroll and payroll taxes ............ 7,944 11,342
Sales taxes .................................. 3,851 3,283
Royalty interests (Note 5) ................... 9,794 6,893
--------- ---------
Total current liabilities ................. 148,776 153,602
Commitments (Notes 5 and 6)
Stockholders' equity
Common stock, $1.00 par value, 25,000
shares authorized, issued and outstanding ... 25,000 25,000
Additional paid-in capital ................... 50,000 50,000
Retained (deficit) ........................... (70,141) (54,012)
--------- ---------
Total stockholders' equity ................ 4,859 20,988
--------- ---------
$ 153,635 $ 174,590
========= =========
See notes to financial statements.
F - 2
<PAGE>
FACTUAL DATA NORTHWEST, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Year For the Six Months Ended
Ended June 30,
December 31, -------------------------
1997 1997 1998
--------- --------- ---------
(Unaudited)
<S> <C> <C> <C>
Revenue
Information services .............................. $ 526,507 $ 247,422 $ 359,051
--------- --------- ---------
Operating Expenses
Costs of services ................................. 308,069 151,428 200,845
Selling, general and administrative ................ 234,449 99,031 136,460
--------- --------- ---------
Total operating expenses ....................... 542,518 250,459 337,305
--------- --------- ---------
Income (loss) from operations ....................... (16,011) (3,037) 21,746
Other income (expense)
Interest expense, net ............................. (10,953) (5,443) (5,617)
--------- --------- ---------
Net (loss) income ................................... (26,964) (8,480) 16,129
Pro forma adjustment - provision for income
taxes (Note 1)...................................... (9,168) (2,883) 5,484
--------- --------- ---------
Pro forma net (loss) income ......................... $ (17,796) $ (5,597) $ 10,645
========= ========= =========
Pro forma basic (loss) earnings per share ........... $ (.71) $ (.22) $ .43
========= ========= =========
Weighted average number of shares outstanding........ 25,000 25,000 25,000
========= ========= =========
</TABLE>
See notes to financial statements.
F - 3
<PAGE>
FACTUAL DATA NORTHWEST, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Total
------------------- Retained Stockholders'
Shares Amount (Deficit) Equity
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Balance - December 31, 1996 .... 25,000 $75,000 $(43,177) $ 31,823
Net loss for the year .......... -- -- (26,964) (26,964)
------- ------- -------- ---------
Balance - December 31, 1997 .... 25,000 75,000 (70,141) 4,859
Net income for the six months
ended June 30, 1998
(unaudited).................... -- -- 16,129 16,129
------- ------- ------- ---------
Balance - June 30, 1998
(unaudited) ................... 25,000 $75,000 $(54,012) $ 20,988
======= ======= ======= ========
</TABLE>
See notes to financial statements.
F - 4
<PAGE>
FACTUAL DATA NORTHWEST, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Year For the Six Months Ended
Ended June 30,
December 31, -------------------------
1997 1997 1998
--------- --------- ---------
(Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net (loss) income ......................................... $(26,964) $ (8,480) $ 16,129
-------- -------- --------
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities
Depreciation and amortization ............................ 40,404 22,219 16,976
Changes in operating assets and
liabilities
Accounts receivable ..................................... 1,272 (10,658) (15,902)
Accounts payable ........................................ 7,324 2,034 4,897
Accrued payroll, payroll taxes and sales tax............ 1,280 972 2,830
-------- -------- --------
50,280 14,567 8,801
-------- -------- --------
Net cash provided by operating activities.............. 23,316 6,087 24,930
-------- -------- --------
Cash flows from investing activities
Capital expenditures ...................................... (11,065) (1,684) (6,484)
-------- -------- --------
Net cash used in investing activities ................. (11,065) (1,684) (6,484)
-------- -------- --------
Cash flows from financing activities
Repayments to royalty interest holders .................... (5,520) (2,623) (2,901)
-------- -------- --------
Net cash used in financing activities ................. (5,520) (2,623) (2,901)
-------- -------- --------
Net increase in cash and cash equivalents ................... 6,731 1,780 15,545
Cash and cash equivalents, at beginning of period............ 10,965 10,965 17,696
-------- -------- --------
Cash and cash equivalents, at end of period ................. $ 17,696 $ 12,745 $ 33,241
======== ======== ========
</TABLE>
Supplemental disclosure of cash flow information:
Interest paid for the year ended December 31, 1997 was $11,031.
Interest paid for the six months ended June 30, 1997 and 1998 was $5,484
and $5,683, respectively.
See notes to financial statements.
F - 5
<PAGE>
FACTUAL DATA NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Factual Data Northwest, Inc. (the Company) was incorporated in the state of
Washington in 1990. The Company was established for the purpose of providing
information services to financial lending institutions primarily in the mortgage
lending industry in the Seattle area under the Factual Data trade name through a
license agreement.
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company considers highly
liquid short-term instruments purchased with an original maturity of three
months or less to be cash equivalents.
ACCOUNTS RECEIVABLE
In the normal course of business, the Company extends unsecured credit to
virtually all of its customers for information services. The Company's customers
are located in the Northwestern United States.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the
straight line method based on the estimated useful lives of the assets which is
currently five years for all of the Company's fixed assets.
ADVERTISING COSTS
All advertising costs are expensed as incurred.
INTANGIBLE ASSETS
Intangible assets are stated at cost and consist of franchise fees. The fees are
amortized using the straight line method over ten to fifteen years.
INCOME TAXES
The Company has elected to be taxed under Subchapter S of the Internal Revenue
Code. Under these provisions, the Company is not subject to income taxes as a
separate entity. Income or loss of the Company is required to be included in the
income tax returns of the shareholders.
F - 6
<PAGE>
FACTUAL DATA NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES (CONTINUED)
Included in the statement of operations are pro forma income tax adjustments
computed using the statutory rates in effect, which represent the federal and
state tax provisions that would have been required had the Company been taxed as
a C-corporation. The Company's effective statutory rate based on pretax income
was 34% for both the years ended December 31, 1997 and 1996 and the unaudited
six months ended June 30, 1998 and 1997.
BASIC EARNINGS (LOSS) PER COMMON SHARE
The Company computes earnings (loss) per share in accordance with Statement of
Financial Accounting Standards No. 128. The Company has presented only basic
earnings (loss) per share as the Company has no dilutive potential common
shares. Basic earnings (loss) per share has been computed based on the weighted
average number of shares outstanding.
VALUATION OF LONG-LIVED ASSETS
The Company assesses valuation of long-lived assets in accordance with Statement
of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be disposed of. The Company
periodically evaluates the carrying value of long-lived assets to be held and
used, including goodwill and other intangible assets, when events and
circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the anticipated undiscounted cash flow from such asset
is separately identifiable and is less than its carrying value. In that event, a
loss is recognized based on the amount by which the carrying value exceeds the
fair market value of the long-lived asset. Fair market value is determined
primarily using the anticipated cash flows discounted at a rate commensurate
with the risk involved.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including cash and cash
equivalents, receivables, accounts payable, accrued expenses, royalty interests
and advances from stockholders approximate their fair values as of December 31,
1997 and June 30, 1998 (unaudited) because of the relatively short maturity of
these instruments.
F - 7
<PAGE>
FACTUAL DATA NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31, June 30,
1997 1998
------------ ---------
Furniture and fixtures $ 5,091 $ 5,091
Computer equipment and software 269,813 276,297
--------- ---------
274,904 281,388
Less accumulated depreciation (231,681) (243,743)
--------- ---------
$ 43,223 $ 37,645
========= =========
NOTE 3 - INTANGIBLE ASSETS
Intangible assets consist of the following:
December 31, June 30,
1997 1998
------------ ----------
EMPfacts(TM)license $ 8,500 $ 8,500
Franchise costs 92,584 92,584
-------- --------
101,084 101,084
Less accumulated amortization (61,595) (66,509)
-------- --------
$ 39,489 $ 34,575
======== ========
NOTE 4 - ADVANCES FROM STOCKHOLDERS
The notes to stockholders represent the stockholder's personal funds advanced to
the Company to be used for working capital as needed. The notes are unsecured
and bear interest at 11%. Interest only payments are due monthly and the notes
are payable on demand. The balance of the advances was $104,265 at December 31,
1997 and June 30, 1998 (unaudited).
F - 8
<PAGE>
FACTUAL DATA NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - ROYALTY INTERESTS
Royalty interests reflect funds advanced by individuals, including shareholders
of the Company which were used by the Company for working capital purposes. Such
royalty interests in total accrue royalties in perpetuity at 2.5% of gross cash
collections on a quarterly basis, which are then pro rated to each individual
holder's percentage interest of the total. The royalty interests are also paid
5% of gross cash collections on a quarterly basis also pro rated to each
individual holder's percentage interest of the total, until the investors
original investment is repaid. The total 7.5% payments required on gross cash
collections are payable one month following the quarter to which they relate. In
the event that all or substantially all of the assets of the Company are sold,
the royalty interest holders are entitled to 2 1/2% of cash collections over the
preceeding twelve months multiplied by a factor of five and prorated to each
individual investors share of the total percentage.
NOTE 6 - COMMITMENTS
The Company has a lease for its office space. The lease expires June 30, 1999
and the Company is currently paying $2,088 per month.
Future minimum rental payments under the lease commitment are as follows:
FISCAL YEAR
1998 $ 25,056
1999 12,528
--------
$ 37,584
========
F - 9
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF
INCOME (LOSS) AND UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
The following unaudited pro forma combined statements of income (loss) for the
year ended December 31, 1997 and the six month period ended June 30, 1998 and
the unaudited pro forma combined balance sheet as of June 30, 1998 give effect
to the business combination of Factual Data Corp. and Heritage Credit Reporting,
Inc., American Credit Connection, Inc., and Factual Data Northwest effective
January 1, 1997, including the related pro forma adjustments described in the
notes thereto. The transactions between Factual Data Corp. and Heritage Credit
Reporting, Inc., American Credit Connection, Inc., and Factual Data Northwest,
Inc. have been accounted for as a combination of companies under the purchase
method. The unaudited pro forma statements of income (loss) have been prepared
as if the proposed transactions occurred on January 1, 1997. The unaudited pro
forma balance sheet has been prepared as if the proposed transactions occurred
June 30, 1998. These pro forma statements are not necessarily indicative of the
results of operations or the financial positions as they may be in the future or
as they might have been had the transaction become effective on the above
mentioned date.
The unaudited pro forma combined statement of income (loss) for the year ended
December 31, 1997 and the six month period ended June 30, 1998 includes the
results of operation of Factual Data Corp. and Heritage Credit Reporting, Inc.,
American Credit Connection, Inc., and Factual Data Northwest, Inc.
The unaudited pro forma combined statements of operations and the unaudited pro
forma combined balance sheets should be read in conjunction with the separate
historical financial statements and notes thereto of Factual Data Corp. and
Heritage Credit Reporting, Inc., American Credit Connection, Inc., and Factual
Data Northwest, Inc.
<PAGE>
Notes to Unaudited Pro Forma Combined Financial Statements
The following adjustments are related to the business combinations between
Factual Data Corp. (FDC) and Heritage Credit Reporting, Inc. (Heritage),
American Credit Connection, Inc. (ACC), and Factual Data Northwest, Inc. (FDNW).
1. Records the acquisitions of Heritage, ACC and FDCNW property and
equipment, lease deposits, non-compete agreements and customer lists
for $3,244,758. To finance the acquisitions, FDC issued 20,230 shares
of restricted common stock at $175,000 and paid $840,281 in cash at
closing. The Company also agreed to forgive a note receivable in the
amount of $68,239 on the Heritage acquisition and issued notes payable
for $2,161,238 with interest ranging from 0% to 8% to fund the
remainder of the purchase price. The purchase price has been allocated
as follows:
Asset Category Valuation
Property and equipment $ 200,000
Non-compete agreements 2,621,903
Customer lists 410,000
Lease deposits 12,855
---------
$3,244,758
=========
2. To eliminate assets, liabilities and stock not acquired by FDC in the
acquisitions.
3. To eliminate expenses which will not be incurred following the
business combinations:
Six Months
Year Ended Ended
December 31, June 30,
1997 1998
------------ ------------
Officer salaries* $ 156,890 $ 72,489
Depreciation and amortization $ 89,618 $ 46,628
------- -------
$ 246,508 $ 119,117
======= =======
* Removes previous salaries in which officers signed employment agreements
4. To eliminate royalty expenses and fees and related system affiliate revenues.
5. To record interest expense at 8% of debt incurred on the acquisitions.
6. To record depreciation and amortization on fixed assets and intangibles
acquired. Fixed assets are depreciated over a five year life, non-compete
agreements over the life of the agreements and customer lists over fifteen
years.
7. To record salary expense based upon employment agreements which were signed
in conjunction with the acquisitions. One of the employment agreements
provides for compensation on a commission basis, and accordingly no pro forma
adjustment was provided to adjust historical salary expense.
8. Proforma income tax adjustment at the statutory rate of 34%.
<PAGE>
Unaudited Pro Forma Combined Balance Sheet
<TABLE>
<CAPTION>
June 30, 1998
Factual
Data Corp. Heritage ACC FDNW Total
---------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash equivalents ............................ $3,360,149 $ 189,919 $ 46,424 $ 33,241 $3,629,733
Short-term investments ............................... 3,510,847 -- -- -- 3,510,847
Accounts receivable, net ............................. 1,282,065 536,334 266,869 67,971 2,153,239
Notes receivable ..................................... 128,616 -- -- -- 128,616
Prepaid expense and other ............................ 92,454 270 1,405 -- 94,129
Deferred tax asset ................................... 64,577 -- -- -- 64,577
----------- -------- -------- -------- ---------
Total current assets ................................ 8,438,708 726,523 314,698 101,212 9,581,141
----------- -------- -------- -------- ---------
Property and equipment, net ............................ 1,519,481 81,363 28,085 37,645 1,666,574
Intangible assets ...................................... 517,481 47,561 3,146 35,733 603,921
----------- -------- -------- -------- ---------
$10,475,670 $855,447 $345,929 $174,590 $11,851,636
=========== ======== ======== ======== ===========
Liabilities and Shareholders' Equity
Current liabilities
Line-of-credit ....................................... $ -- $ -- $ 30,000 $ -- $ 30,000
Notes payable ........................................ 21,600 -- -- 6,893 28,493
Current portion of long-term debt .................... 231,466 70,470 -- -- 301,936
Shareholder loans .................................... -- 35,542 -- 104,265 139,807
Accounts payable ..................................... 1,293,813 193,783 84,497 27,819 1,599,912
Accrued payroll and expenses ......................... 94,953 89,964 21,229 14,625 220,771
Income taxes payable ................................. 412,093 -- 33,699 -- 445,792
--------- ------- ------- ------ ---------
Total current liabilities ........................... 2,053,925 389,759 169,425 153,602 2,766,711
--------- ------- ------- ------- ---------
Long-term debt ......................................... 396,236 -- -- -- 396,236
Deferred income taxes .................................. 243,215 -- -- -- 243,215
Shareholders' equity
Common stock ......................................... 6,387,279 25,000 563 75,000 6,487,842
Retained earnings (deficit) .......................... 1,395,015 440,688 175,941 (54,012) 1,957,632
--------- ------- ------- ------- ---------
Total shareholders' equity .......................... 7,782,294 465,688 176,504 20,988 8,445,474
----------- -------- -------- -------- -----------
$10,475,670 $855,447 $345,929 $174,590 $11,851,636
=========== ======== ======== ======== ===========
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Balance Sheet
June 30, 1998
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------- Pro Forma
Debit Credit Combined
--------- ---------- ---------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents ................... $ -- $ 269,584(2) $ 2,519,868
840,281(1)
Short-term investments ...................... -- -- 3,510,847
Accounts receivable, net .................... -- 871,174(2) 1,282,065
Notes receivable ............................ -- 68,239(1) 60,377
Prepaid expense and other ................... -- 1,675(2) 92,454
Deferred tax asset .......................... -- -- 64,577
--------- --------- ----------
Total current assets ....................... -- 2,050,953 7,530,188
--------- --------- ----------
Property and equipment, net ................... 200,000(1) 147,093(2) 1,719,481
Intangible assets ............................. 3,044,758(1) 86,440(2) 3,562,239
--------- --------- ----------
$3,244,758 $2,284,486 $12,811,908
========= ========= ==========
Liabilities and Shareholders' Equity
Current liabilities
Line-of-credit .............................. $ 30,000(2) $ -- $ --
Notes payable ............................... 6,893(2) -- 21,600
Current portion of long-term debt ........... 70,470(2) 575,710(1) 807,176
Shareholder loans ........................... 139,807(2) -- --
Accounts payable ............................ 306,099(2) -- 1,293,813
Accrued payroll and expenses ................ 125,818(2) -- 94,953
Income taxes payable ........................ 33,699(2) -- 412,093
--------- --------- ---------
Total current liabilities .................. 712,786 575,710 2,629,635
--------- --------- ---------
Long-term debt ................................ -- 1,585,528(1) 1,981,764
Deferred income taxes ......................... -- -- 243,215
Shareholders' equity
Common stock ................................ 100,563(2) 175,000(1) 6,562,279
Retained earnings (deficit) ................. 562,617(2) -- 1,395,015
--------- --------- ---------
Total shareholders' equity ................. 663,180 175,000 7,957,294
--------- --------- ---------
$1,375,966 $2,336,238 $12,811,908
========== ========== ===========
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Statement of Income (Loss)
For the Six Month Period Ended June 30, 1998
<TABLE>
<CAPTION>
Factual
Data Corp. Heritage ACC FDNW Total
---------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenue
System affiliates ................. $ 1,926,933 $ -- $ -- $ -- $ 1,926,933
Information services .............. 1,044,054 2,050,888 874,922 359,051 4,328,915
Training, license and other ...... 1,005 -- -- -- 1,005
--------- --------- ------- ------- ---------
Total revenue .................... 2,971,992 2,050,888 874,922 359,051 6,256,853
--------- --------- ------- ------- ---------
Operating expenses
Costs of services provided ........ 984,227 1,080,420 387,786 200,845 2,653,278
Selling, general and administrative 810,991 638,124 385,915 136,460 1,971,490
--------- --------- ------- ------- ---------
Total operating expenses ......... 1,795,218 1,718,544 773,701 337,305 4,624,768
--------- --------- ------- ------- ---------
Income from operations .............. 1,176,774 332,344 101,221 21,746 1,632,085
Other income (expense)
Other income ...................... 58,476 1,933 325 66 60,800
Interest expense .................. (44,073) (1,746) (2,521) (5,683) (54,023)
--------- --------- ------- ------- ---------
Income before income taxes .......... 1,191,177 332,531 99,025 16,129 1,638,862
Income tax expense (benefit) ........ 440,735 113,060 33,699 5,484 592,978
--------- --------- ------- ------- ---------
Net income .......................... $ 750,442 $ 219,471 $ 65,326 $ 10,645 $ 1,045,884
========= ========= ======= ======= =========
Basic earnings per share............. $ .35
=========
Weighted average pro forma shares
outstanding - basic................. 2,130,000
=========
Diluted earnings per share........... $ .30
=========
Weighted average pro forma shares
outstanding - diluted............... 2,463,750
=========
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Statement of Income (Loss)
For the Six Month Period Ended June 30, 1998
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------
Debit Credit Combined
------- --------- ---------
<S> <C> <C> <C>
Revenue
System affiliates ................. $ 89,758(4) $ -- $ 1,837,175
Information services .............. -- -- 4,328,915
Training, license and other ...... -- -- 1,005
------- --------- ---------
Total revenue .................... 89,758 -- 6,167,095
Operating expenses
Costs of services provided ........ -- 89,758(4) 2,563,520
148,522(6)
Selling, general and administrative 111,500(7) 119,117(3) 2,112,395
------- --------- ---------
Total operating expenses ......... 260,022 208,875 4,675,915
------- --------- ---------
Income from operations .............. 349,780 208,875 1,491,180
Other income (expense)
Other income ...................... -- -- 60,800
Interest expense .................. 86,450(5) -- (140,473)
------- --------- ---------
Income before income taxes .......... 436,230 208,875 1,411,507
Income tax expense (benefit) ........ (148,318)(8) 71,018(8) 515,678
------- --------- ----------
Net income .......................... $ 287,912 $ 137,857 $ 895,829
======= ========= ==========
Basic earnings per share............. $ .42
==========
Weighted average pro forma shares
outstanding - basic................. 2,150,230
==========
Diluted earnings per share........... $ .36
==========
Weighted average pro forma shares
outstanding - diluted............... 2,483,980(1)
==========
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Statement of Income (Loss)
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Factual
Data Corp. Heritage ACC FDNW
---------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Revenue
System affiliates ............................................ $ 1,950,668 $ -- $ -- $ --
Information services ......................................... 734,946 3,036,155 1,134,588 526,507
Proceeds from the sale of company operated territories........ 714,365 -- -- --
Training, license and other .................................. 119,692 -- -- --
---------- ---------- ---------- ----------
Total revenue ............................................... 3,519,671 3,036,155 1,134,588 526,507
---------- ---------- ---------- ----------
Operating expenses
Costs of services provided ................................... 1,301,085 1,751,926 483,462 308,069
Costs of company operated territories ........................ 506,101 -- -- --
Selling, general and administrative .......................... 916,521 1,109,552 685,006 234,449
---------- ---------- ---------- ----------
Total operating expenses .................................... 2,723,707 2,861,478 1,168,468 542,518
---------- ---------- ---------- ----------
Income (loss) from operations .................................. 795,964 174,677 (33,880) (16,011)
Other income (expense)
Other income ................................................. 28,806 -- 4,933 78
Interest expense ............................................. (77,497) (10,085) (2,482) (11,031)
---------- ---------- ---------- ----------
Income (loss) before income taxes .............................. 747,273 164,592 (31,429) (26,964)
Income tax expense (benefit) ................................... 244,339 55,961 (10,686) (9,168)
---------- ---------- ---------- ----------
Net income (loss) .............................................. $ 502,934 $ 108,631 $ (20,743) $ (17,796)
========== ========== ========== ==========
Basic earnings per share $ .28
==========
Weighted average pro forma shares outstanding .................. 1,800,000
==========
Diluted earnings per share .28
==========
Weighted average pro forma shares outstanding-diluted........... 1,800,000
==========
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Statement of Income (Loss)
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Pro Forma Adjustments
----------------------------- Pro Forma
Total Debit Credit Combined
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenue
System affiliates ......................... $ 1,950,668 $ 82,925(4) $ -- $ 1,867,743
Information services ...................... 5,432,196 -- -- 5,432,196
Proceeds from the sale of company operated 714,365 -- -- 714,365
territories
Training, license and other ............... 119,692 -- -- 119,692
--------- ----------- --------- ---------
Total revenue ............................ 8,216,921 82,925 -- 8,133,996
--------- ----------- --------- ---------
Operating expenses
Costs of services provided ................ 3,844,542 -- 82,925(4) 3,761,617
Costs of company operated territories ..... 506,101 -- -- 506,101
297,044(6)
Selling, general and administrative ....... 2,945,528 223,000(7) 246,508(3) 3,219,064
--------- ----------- --------- ---------
Total operating expenses ................. 7,296,171 520,044 329,433 7,486,782
--------- ----------- --------- ---------
Income (loss) from operations ............... 920,750 602,969 329,433 647,214
Other income (expense)
Other income .............................. 33,817 -- -- 33,817
Interest expense .......................... (101,095) 172,899(5) -- (273,994)
--------- ----------- --------- ---------
Income (loss) before income taxes ........... 853,472 775,868 329,433 407,037
Income tax expense (benefit) ................ 280,446 (263,795)(8) 112,007(8) 128,658
--------- ----------- --------- ---------
Net income (loss) ........................... $ 573,026 $ 512,073 $ 217,426 $ 278,379
========= =========== ========= =========
Basic earnings per share..................... $ .15
=========
Weighted average pro forma shares
outstanding................................. 1,820,230
=========
Diluted earnings per share................... $ .15
=========
Weighted average pro forma shares
outstanding - diluted....................... 1,820,230(1)
=========
</TABLE>
