UNITED STATES
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): May 5, 1999
FACTUAL DATA CORP.
(Exact name of registrant as specified in its charter)
Colorado 0-24205 84-1449911
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
5200 Hahns Peak Drive
Fort Collins, Colorado 80538
(Address of principal executive offices)
(970) 663-5700
(Registrant's telephone number, including area code)
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) The registrant is filing the required financial statements in
connection with its acquisition of F.D.D., Inc. and F.D.S.C.,
Inc. on May 5, 1999 on this amendment to Form 8-K.
(b) The registrant is also filing the required pro forma information
in connection with the acquisition described in Item 7a 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 CORP.
Date: July 15, 1999 By:/s/Jerald H. Donnan
Jerald H. Donnan
Chief Executive Officer
<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 for the year
ended December 31, 1998 and the three month period ended March 31, 1999 and the
unaudited pro forma combined balance sheet as of December 31, 1998 and March 31,
1999 give effect to the business combination of Factual Data Corp. and F.D.D.,
Inc. and F.D.S.C., Inc. The transaction between Factual Data Corp. and F.D.D.,
Inc. and F.D.S.C., Inc. has been accounted for as a combination of companies
under the purchase method. The unaudited pro forma statements of income have
been prepared as if the proposed transaction occurred on January 1, 1998. The
unaudited pro forma balance sheets have been prepared as if the proposed
transaction occurred March 31, 1999 and December 31, 1998, respectively. These
pro forma statements are not necessarily indicative of the results of operations
or the financial position as they may be in the future or as they might have
been had the transactions become effective on the above mentioned date.
The unaudited pro forma combined statements of income for the year ended
December 31, 1998 and the three month period ended March 31, 1999 includes the
results of operations of Factual Data Corp., and F.D.D., Inc. and F.D.S.C., Inc.
The unaudited pro forma combined statements of income 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
F.D.D., Inc. and F.D.S.C., Inc.
<PAGE>
Notes to Unaudited Pro Forma Combined Financial Statements
The following notes and adjustments are related to the business
combination between Factual Data Corp. (FDC) and F.D.D., Inc. and
F.D.S.C., Inc.
1. Reflects the audited balance sheet and statement of income for the year
ended December 31, 1998 of Factual Data Corp. as filed on Form 10-KSB on
March 31, 1999.
2. Reflects the March 31, 1999 unaudited balance sheet and statement of income
for the three months ended March 31, 1999 of Factual Data Corp. as filed on
Form 10-QSB on May 13, 1999.
3. Eliminates assets and liabilities not acquired by FDC in connection with
its acquisition of F.D.D., Inc. and F.D.S.C., Inc.
4. Records the acquisition of F.D.D., Inc. and F.D.S.C., Inc. for $2,680,000.
To finance the acquisition, FDC paid $2,000,000 in cash at closing and
issued a $680,000 note payable bearing interest at 8% per annum. The
purchase price has been allocated as follows:
Asset Category
Property and equipment $ 40,700
Deposits 1,472
Intangible assets 2,637,828
----------
$2,680,000
==========
5. To eliminate depreciation expense which will not continue following the
business combination.
6. To record depreciation and amortization of 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 eliminate royalty expense and fees and related system affiliate
revenues.
8. To eliminate officers salaries and bonuses who will no longer be employed
by the Company.
9. To record interest expense on acquisition debt at 8% per annum.
10. Pro forma income tax adjustment at the statutory rate of 37% for federal
and state income taxes.
<PAGE>
Unaudited Pro Forma Combined Balance Sheet
As of March 31, 1999
<TABLE>
<CAPTION>
Pro Forma Adjustments
FDD and -------------------------------
FDC (2) FDSC Total Debit Credit Combined
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash ................... $ 10,607,214 $ 237,594 $ 10,844,808 $ -- $ (237,594)(3) $ 8,607,214
(2,000,000(4)
Prepaid expenses and
other ................. 292,821 5,260 298,081 -- (5,260)(3) 292,821
Accounts receivable, net 3,603,521 438,227 4,041,748 -- (438,227)(3) 3,603,521
Stock subscription
receivable ............ 4,500,000 -- 4,500,000 -- -- 4,500,000
------------ ------------ ------------ ------------ ------------ ------------
Total current assets .. 19,003,556 681,081 19,684,637 -- (2,681,081) 17,003,556
------------ ------------ ------------ ------------ ------------ ------------
Property and equipment,
net ................... 3,551,917 57,791 3,609,708 40,700(4) (57,791)(3) 3,592,617
Other assets ........... 12,055,224 1,472 12,056,696 2,637,828(4) -- 14,694,524
------------ ------------ ------------ ------------ ------------ ------------
$ 34,610,697 $ 740,344 $ 35,351,041 $ 2,678,528 $ (2,738,872) $ 35,290,697
============ ============ ============ ============ ============ ============
Current portion of
long-term debt ........ $ 1,879,942 $ -- $ 1,879,942 $ -- $ (226,667)(4) $ 2,106,609
Accounts payable ....... 3,704,223 145,155 3,849,378 145,155(3) -- 3,704,223
Accrued payroll and
expenses .............. 447,202 21,797 468,999 21,797(3) -- 447,202
Income taxes payable ... 179,221 -- 179,221 -- -- 179,221
Deferred income taxes .. 59,291 -- 59,291 -- -- 59,291
------------ ------------ ------------ ------------ ------------ ------------
Total current
liabilities ........ 6,269,879 166,952 6,436,831 166,952 (226,667) 6,496,546
------------ ------------ ------------ ------------ ------------ ------------
Long-term debt ......... 3,153,496 -- 3,153,496 -- (453,333)(4) 3,606,829
Deferred income taxes .. 311,749 -- 311,749 -- -- 311,749
Shareholders' equity
Common stock .......... 22,145,733 5,500 22,151,233 5,500(3) -- 22,145,733
Retained earnings ..... 2,729,840 567,892 3,297,732 567,892(3) -- 2,729,840
------------ ------------ ------------ ------------ ------------ ------------
24,875,573 573,392 25,448,965 573,392 -- 24,875,573
------------ ------------ ------------ ------------ ------------ ------------
$ 34,610,697 $ 740,344 $ 35,351,041 $ 740,344 $ (680,000) $ 35,290,697
============ ============ ============ ============ ============ ============
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Balance Sheet
As of December 31, 1998
<TABLE>
<CAPTION>
Pro Forma Adjustments
FDD and ---------------------------------
FDC (1) FDSC Total Debit Credit Combined
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash ................... $ 1,093,295 $ 307,771 $ 1,401,066 $ -- $ (307,771)(3) $ 1,093,295
Short-term investments . 2,212,386 -- 2,212,386 -- (2,000,000)(4) 212,386
Prepaid expenses and
other ................. 105,964 2,532 108,496 -- (2,532)(3) 105,964
Accounts receivable, net 2,919,578 396,825 3,316,403 -- (396,825)(3) 2,919,578
------------ ------------ ------------ ------------ ------------ ------------
Total current assets .. 6,331,223 707,128 7,038,351 -- (2,707,128) 4,331,223
------------ ------------ ------------ ------------ ------------ ------------
Property and equipment,
net ................... 2,976,419 57,518 3,033,937 40,700(4) (57,518)(3) 3,017,119
Other assets ........... 8,869,259 1,472 8,870,731 2,637,828(4) -- 11,508,559
------------ ------------ ------------ ------------ ------------ ------------
$ 18,176,901 $ 766,118 $ 18,943,019 $ 2,678,528 $(2,764,646) $ 18,856,901
============ ============ ============ ============ ============ ============
Current portion of
long-term debt ........ $ 1,304,953 $ -- $ 1,304,953 $ -- $ (226,667)(4) $ 1,531,620
Accounts payable ....... 2,225,685 120,085 2,345,770 120,085(3) -- 2,225,685
Accrued payroll and
expenses .............. 431,441 18,959 450,400 18,959(3) -- 431,441
Income taxes payable ... 524,186 -- 524,186 -- -- 524,186
Deferred income taxes .. 59,291 -- 59,291 -- -- 59,291
------------ ------------ ------------ ------------ ------------ ------------
Total current
liabilities ........ 4,545,556 139,044 4,684,600 139,044 (226,667) 4,772,223
------------ ------------ ------------ ------------ ------------ ------------
Long-term debt ......... 2,492,571 -- 2,492,571 -- (453,333)(4) 2,945,904
Deferred income taxes .. 302,762 -- 302,762 -- -- 302,762
Shareholders' equity
Common stock .......... 8,614,705 5,500 8,620,205 5,500(3) -- 8,614,705
Retained earnings ..... 2,221,307 621,574 2,842,881 621,574(3) -- 2,221,307
------------ ------------ ------------ ------------ ------------ ------------
10,836,012 627,074 11,463,086 627,074 -- 10,836,012
------------ ------------ ------------ ------------ ------------ ------------
$ 18,176,901 $ 766,118 $ 18,943,019 $ 766,118 $ (680,000) $ 18,856,901
============ ============ ============ ============ ============ ============
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Statement of Operations
For the Three Months Ended March 31, 1999
<TABLE>
<CAPTION>
Pro Forma Adjustments
FDD and -------------------------------
FDC(2) FDSC Total Debit Credit Combined
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Information systems .. $ 4,391,299 $ 799,775 $ 5,191,074 $ -- $ -- $ 5,191,074
Ancillary income ..... 477,714 -- 477,714 32,665(7) -- 445,049
System affiliates .... 483,869 -- 483,869 76,139(7) -- 407,730
----------- ----------- ----------- ----------- ----------- -----------
Total revenue ....... 5,352,882 799,775 6,152,657 108,804 -- 6,043,853
----------- ----------- ----------- ----------- ----------- -----------
Operating expenses
Cost of services
provided .......... 3,199,662 427,202 3,626,864 -- (108,804)(7) 3,518,060
Selling, general and
administration .... 1,293,407 166,908 1,460,315 46,499(6) (11,100)(8) 1,484,670
-- -- -- -- (11,044)(5) --
----------- ----------- ----------- ----------- ----------- -----------
Total operating
expenses .......... 4,493,069 594,110 5,087,179 46,499 (130,948) 5,002,730
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
operations .......... 859,813 205,665 1,065,478 155,303 (130,948) 1,041,123
----------- ----------- ----------- ----------- ----------- -----------
Other income, net .... 59,797 5,653 65,450 -- -- 65,450
Interest expense ..... (85,854) -- (85,854) 13,600(9) -- (99,454)
----------- ----------- ----------- ----------- ----------- -----------
Income before taxes .. 833,756 211,318 1,045,074 168,903 (130,948) 1,007,119
Income tax expense
(benefit) ........... 325,223 78,188 403,411 -- (14,043)(10) 389,368
----------- ----------- ----------- ----------- ----------- -----------
Net income $ 508,533 $ 133,130 $ 641,663 $ 168,903 $ (144,991) $ 617,751
=========== =========== =========== =========== =========== ===========
Basic earnings per share $ .14 $ .17
=========== ===========
Weighted average pro
forma shares
outstanding - basic 3,596,663 3,596,663
=========== ===========
Diluted earnings per
share $ .13 $ .16
=========== ===========
Weighted average pro
forma shares
outstanding - diluted 3,790,037 3,790,037
=========== ===========
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Statement of Income
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Pro Forma Adjustments
FDD and ---------------------------------
FDC(2) FDSC Total Debit Credit Combined
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Information systems ... $ 6,235,604 $ 3,581,562 $ 9,817,166 $ -- $ -- $ 9,817,166
Ancillary income ...... 1,451,104 -- 1,451,104 136,343(7) -- 1,314,761
System affiliates ..... 2,198,260 -- 2,198,260 335,326(7) -- 1,862,934
Training, license and
other ................ 58,578 -- 58,578 -- -- 58,578
------------ ------------ ------------ ------------ ------------ ------------
Total revenue ........ 9,943,546 3,581,562 13,525,108 471,669 -- 13,053,439
------------ ------------ ------------ ------------ ------------ ------------
Operating expenses
Cost of services
provided ........... 4,986,064 1,907,049 6,893,113 -- (471,669)(7) 6,421,444
Selling, general and
administration ..... 2,603,589 709,575 3,313,164 185,995(6) (44,400)(8) 3,409,998
-- -- -- -- (44,761)(5) --
------------ ------------ ------------ ------------ ------------ ------------
Total operating
expenses ........... 7,589,653 2,616,624 10,206,277 185,995 (560,830) 9,831,442
------------ ------------ ------------ ------------ ------------ ------------
Income (loss) from
operations ........... 2,353,893 964,938 3,318,831 657,664 (560,830) 3,221,997
------------ ------------ ------------ ------------ ------------ ------------
Other income .......... 185,262 30,726 215,988 -- -- 215,988
Interest expense ...... (152,421) -- (152,421) 54,400(9) -- (206,821)
------------ ------------ ------------ ------------ ------------ ------------
Income (loss) before
taxes ................ 2,386,734 995,664 3,382,398 712,064 (560,830) 3,231,164
Income tax expense
(benefit) ............ 810,000 368,396 1,178,396 -- (55,957)(10) 1,122,439
------------ ------------ ------------ ------------ ------------ ------------
Net income (loss) ..... $ 1,576,734 $ 627,268 $ 2,204,002 $ 712,064 $ (616,787) $ 2,108,725
============ ============ ============ ============ ============ ============
Basic earnings per share $ .59 $ .79
============ ============
Weighted average pro
forma shares
outstanding - basic 2,680,753 2,680,753
============ ============
Diluted earnings per
share $ .57 $ .76
============ ============
Weighted average pro
forma shares
outstanding - diluted 2,769,214 2,769,214
============ ============
</TABLE>
<PAGE>
F.D.D., INC. AND F.D.S.C., INC.
Table of Contents
Independent Auditors' Report......................................F - 1
Financial Statements
Combined Balance Sheets.......................................F - 2
Combined Statements of Income.................................F - 3
Combined Statements of Changes in Stockholder's Equity........F - 4
Combined Statements of Cash Flows.............................F - 5
Notes to Combined Financial Statements............................F - 7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholder
F.D.D., Inc. and F.D.S.C, Inc.
Denver, Colorado
We have audited the accompanying combined balance sheet of F.D.D., Inc. and
F.D.S.C., Inc. as of December 31, 1998, and the related combined statements of
income, changes in stockholder's equity and cash flows for each of the years in
the two year period ended December 31, 1998. These combined financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of F.D.D., Inc. and
F.D.S.C., Inc. as of December 31, 1998 and the results of their operations and
their cash flows for each of the years in the two year period ended December 31,
1998, in conformity with generally accepted accounting principles.
/s/Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
May 21, 1999
Denver, Colorado
<PAGE>
F.D.D., INC. AND F.D.S.C., INC.
Combined Balance Sheets
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
-------- --------
(Unaudited)
Assets
<S> <C> <C>
Current assets
Cash and cash equivalents ............................. $307,771 $237,594
Accounts receivable - trade ........................... 399,357 443,487
-------- --------
Total current assets ............................... 707,128 681,081
Property and equipment, net (Note 2) .................... 57,518 57,791
Other assets
Deposits and other .................................... 1,472 1,472
-------- --------
$766,118 $740,344
======== ========
Liabilities and Stockholder's Equity
Current liabilities
Accounts payable ...................................... $120,085 $145,155
Accrued payroll and taxes ............................. 9,511 16,592
Accrued expenses ...................................... 9,448 5,205
-------- --------
Total current liabilities .......................... 139,044 166,952
Commitments (Notes 3 and 4)
Stockholder's equity
Common stock (Note 5) ................................. 5,500 5,500
Retained earnings ..................................... 621,574 567,892
-------- --------
Total stockholder's equity ......................... 627,074 573,392
-------- --------
$766,118 $740,344
======== ========
</TABLE>
See notes to combined financial statements.
F - 2
<PAGE>
F.D.D., INC. AND F.D.S.C., INC.
Combined Statements of Income
<TABLE>
<CAPTION>
For the Year Ended For the Three Months Ended
December 31, March 31,
---------------------------- ----------------------------
1997 1998 1998 1999
----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues ....................... $ 2,523,279 $ 3,581,562 $ 970,544 $ 799,775
----------- ----------- ----------- -----------
Operating Expenses
Costs of services provided ... 1,480,260 1,907,049 475,058 427,202
General and administrative .... 639,526 709,575 170,267 166,908
----------- ----------- ----------- -----------
Total operating expenses .. 2,119,786 2,616,624 645,325 594,110
----------- ----------- ----------- -----------
Income from operations ......... 403,493 964,938 325,219 205,665
Interest income ................ 14,354 30,726 6,641 5,653
----------- ----------- ----------- -----------
Net income ..................... 417,847 995,664 331,860 211,318
Pro forma adjustment - provision
for income taxes (Note 1) ..... (154,603) (368,396) (122,788) (78,188)
----------- ----------- ----------- -----------
Pro forma net income ........... $ 263,244 $ 627,268 $ 209,072 $ 133,130
=========== =========== =========== ===========
Pro forma basic earnings per ... $ 47.86 $ 114.05 $ 38.01 $ 24.21
=========== =========== =========== ===========
share
Weighted average number of
shares outstanding ............ 5,500 5,500 5,500 5,500
=========== =========== =========== ===========
</TABLE>
See notes to combined financial statements.
F - 3
<PAGE>
F.D.D., INC. AND F.D.S.C., INC.
Combined Statements of Changes in Stockholder's Equity
For the Years Ended December 31, 1997 and 1998
And the Period Ended March 31, 1999
<TABLE>
<CAPTION>
Common Stock (Note 5) Total
----------------------- Retained Stockholder's
Shares Amount Earnings Equity
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 5,500 $ 5,500 $ 228,666 $ 234,166
Distributions to stockholder -- -- (381,602) (381,602)
Net income for the year ended
December 31, 1997 .......... -- -- 417,847 417,847
--------- --------- --------- ---------
Balance at December 31, 1997 5,500 5,500 264,911 270,411
Distributions to stockholder -- -- (639,001) (639,001)
Net income for the year ended
December 31, 1998 .......... -- -- 995,644 995,664
--------- --------- --------- ---------
Balance at December 31, 1998 5,500 5,500 621,574 627,074
Distributions to stockholder -- -- (265,000) (265,000)
(unaudited)
Net income for the three
months ended March 31,
1999 (unaudited) ........... -- -- 211,318 211,318
--------- --------- --------- ---------
Balance at March 31,
1999 (unaudited) ........... 5,500 $ 5,500 $ 567,892 $ 573,392
========= ========= ========= =========
</TABLE>
See notes to combined financial statements.
F - 4
<PAGE>
F.D.D., INC. AND F.D.S.C., INC.
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended For the Three Months Ended
December 31, March 31,
------------------------ ------------------------
1997 1998 1998 1999
--------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating
activities
Net income ................... $ 417,847 $ 995,664 $ 331,860 $ 211,318
--------- --------- --------- ---------
Adjustments to reconcile net
income to net cash provided
by operating activities
Depreciation ............... 41,749 44,760 11,438 11,044
Loss on sale of fixed assets 7,989 -- -- --
Changes in operating assets
and liabilities
Accounts receivable ...... (91,751) (102,287) (217,112) (44,130)
Accounts payable ......... 63,176 14,746 68,730 25,070
Accrued liabilities ...... 285 (3,511) 3,822 2,838
--------- --------- --------- ---------
21,448 (46,292) (133,122) (5,178)
--------- --------- --------- ---------
Net cash provided by
operating activities ... 439,295 949,372 198,738 206,140
--------- --------- --------- ---------
Cash flows from investing
activities
Purchase of property and ..... (66,007) (39,741) (17,045) (11,317)
equipment
Proceeds from sale of fixed
assets ...................... 8,000 -- -- --
--------- --------- --------- ---------
Net cash used by
investing activities ... (58,007) (39,741) (17,045) (11,317)
--------- --------- --------- ---------
Cash flows from financing
activities
Distributions to stockholder . (381,602) (639,001) -- (265,000)
--------- --------- --------- ---------
Net cash used in
financing activities ... (381,602) (639,001) -- (265,000)
--------- --------- --------- ---------
Net (decrease) increase in cash
and cash equivalents .......... (314) 270,630 181,693 (70,177)
Cash and cash equivalents, at
beginning of period ........... 37,455 37,141 37,141 307,771
--------- --------- --------- ---------
Cash and cash equivalents,
at end of period .............. $ 37,141 $ 307,771 $ 218,834 $ 237,594
========= ========= ========= =========
</TABLE>
See notes to combined financial statements.
F - 5
<PAGE>
F.D.D., INC. AND F.D.S.C., INC.
Notes to Combined Financial Statements
Note 1 - Organization and Summary of Significant Accounting Policies
Organization
F.D.D., Inc. and F.D.S.C., Inc. (collectively, the Company) were incorporated in
the state of Colorado in January 1989 and February 1992, respectively. The
Company was established for the purpose of providing information services, to
financial lending institutions primarily in the mortgage lending industry. The
Company provides these services primarily in the state of Colorado.
Principles of Combination
The accompanying combined financial statements include the accounts of F.D.D.,
Inc. and F.D.S.C., Inc. Both companies are owned 100% by the same stockholder.
The Company's financial statements have been presented on a combined basis to
provide a more meaningful presentation due to common ownership, both companies
operating in the same line of business, and both entities being subsequently
sold under one asset purchase agreement. All intercompany accounts and
transactions have been eliminated in combination.
Interim Financial Statements (Unaudited)
In the opinion of the Company, the accompanying unaudited combined interim
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position of the
Company at March 31, 1999 and the results of their operations, changes in
stockholder's equity and cash flows for the three months ended March 31, 1999
and 1998. The results of operations for the three months ended March 31, 1999
and 1998 are not necessarily indicative of the results to be expected for the
full year.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid instruments with original maturities of three months or less to be cash
equivalents.
Concentration of Credit Risk
In the normal course of business, the Company extends unsecured credit to
virtually all of their customers related to providing information services.
Additionally, at times, the Company maintains cash balances in excess of FDIC
limits.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the
straight-line methods based on the estimated useful lives of the assets which
range from five to seven years and 39 years for leasehold improvements.
<PAGE>
Note 1 - Organization and Summary of Significant Accounting Policies (continued)
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
separate entities. Income or loss of the Company is required to be included in
the income tax return of the stockholder.
Included in the statement of operations are pro forma income tax adjustments
computed using the statutory rates in effect, which represent the estimated
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 37% for all periods presented.
Revenue Recognition
The Company recognizes revenue generated from mortgage credit reports and other
information services when the information has been provided to the customer, as
substantially all required services have been performed.
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, receivables,
accounts payable and accrued liabilities approximate their fair values as of
December 31, 1998 and March 31, 1999 (unaudited) because of the relatively short
maturity of these instruments.
Basic Earnings Per Common Share
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standard No. 128. The Company has presented only basic
earnings per share as the Company has no dilutive potential common shares. Basic
earnings per share has been computed based on the weighted average number of
shares outstanding.
<PAGE>
Note 2 - Property and Equipment
Property and equipment consist of the following:
December 31, March 31,
1998 1999
------------ ------------
(Unaudited)
Automobiles $ 37,720 $ 37,720
Equipment 137,007 148,202
Furniture and fixtures 53,483 53,483
Leasehold improvements 14,439 14,439
--------- ---------
242,649 253,844
Less accumulated depreciation (185,131) (196,053)
--------- ---------
$ 57,518 $ 57,791
========= =========
Note 3 - Commitments
Operating Leases
Each company leases office space under operating leases. F.D.D., Inc. maintains
an office lease which calls for monthly rental payments of $1,917 which increase
annually based on the "Consumer Price Index", however, the increase cannot
exceed 6% per year. The lease expires in February 2001. F.D.S.C., Inc. maintains
an office lease which calls for monthly payments of $2,500 and expires December
31, 2018. The monthly lease payments increase 5% annually.
The Company maintains various other operating leases for equipment and an
automobile. These leases expire between March 1999 and May 2002. Monthly expense
for all operating leases total $83,266, $71,983, $21,454 and $21,759 for the
years ended December 31, 1998 and 1997 and the three months ended March 31, 1999
and 1998 (unaudited), respectively.
Future minimum annual lease payments are as follows:
Year Ended December 31,
1999 $ 94,047
2000 91,424
2001 55,677
2002 43,319
2003 36,465
Thereafter 826,210
----------
$1,147,142
==========
<PAGE>
Note 4 - 401(k) Plan
The Company adopted a 401(k) plan effective April 1, 1994, as amended April 12,
1997. All employees of age 21 or older who complete one year of service are
eligible for the plan. Employees have an option to contribute compensation up to
15% of their to the plan (as defined). The Company makes discretionary
contributions to the plan based on set percentages decided prior to the plan
year end. The Company's contributions for the years ended December 31, 1998 and
1997 and the three months ended March 31, 1999 and 1998 (unaudited) were $5,260,
$5,423, $1,465 and $1,306, respectively.
Note 5 - Common Stock
Common stock for each entity in the combined group is as follows:
December 31, March 31,
1998 1999
---------- ----------
(Unaudited)
F.D.D., Inc.: No par value; 1,000,000
shares authorized, 5,000 shares issued
and outstanding at December 31, 1998 and
March 31, 1999 (unaudited) $ 5,000 $ 5,000
F.D.S.C., Inc.: No par value; 1,000,000
shares authorized, 500 shares issued and
outstanding at December 31, 1998 and
March 31, 1999 (unaudited). 500 500
---------- ----------
$ 5,500 $ 5,500
========== ==========
