<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period from ______ to ________
Commission File Number 0-22370
IVI CHECKMATE CORP.
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 58-275201
<S> <C>
(State of (I.R.S. Employer
Incorporation) Identification No.)
</TABLE>
1003 Mansell Road, Roswell, Georgia 30076
(Address of principal executive offices, including zip code)
(770) 594-6000
(Registrant's telephone number, including area code)
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No x
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at August 7, 1998
- - ----------------------------------- -----------------------------
<S> <C>
Common Stock, $0.01 par value 16,256,306 shares
</TABLE>
Page 1 of 14
Index of Exhibits on Page 14
1
<PAGE>
IVI CHECKMATE CORP.
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 1998
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
Number
------
PART 1. FINANCIAL INFORMATION
<S> <C>
Item 1 Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of
Cash Flows - Six Months Ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements
Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3 Quantitative and Qualitative Disclosure About Market Risk 11
PART II. OTHER INFORMATION
Item 5 Other Information 12
Item 6 Exhibits and Reports on Form 8-K 12
SIGNATURES 13
INDEX OF EXHIBITS 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
1. Financial Statements
IVI CHECKMATE CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars Except Share and Per Share Data)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,051 $ 9,372
Investments 3,572 3,572
Accounts receivable, net 26,373 19,515
Inventories 13,459 17,156
Deferred tax asset 4,427 3,777
Prepaid expenses 291 559
--- ---
Total current assets 56,173 53,951
Property and equipment, net 7,577 8,334
Investment in joint venture 137 --
Other assets 11,542 10,070
-------- --------
Total assets $ 75,429 $ 72,355
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 18,806 $ 12,393
Deferred revenue 1,971 1,397
Current portion of lease obligations 7 38
Current portion of related party debt 123 162
--- ---
Total current liabilities
20,907 13,990
Long-term lease obligations -- 23
Long-term debt to related party -- 41
Deferred tax liability 1,924 1,924
Minority interest -- 52
--
Total liabilities 22,831 16,030
------ ------
Stockholders' Equity
Common stock, $0.01 par value 163 161
Additional paid-in capital
67,028 66,052
Retained deficit (13,434) (7,153)
Foreign currency translation (1,159) (576)
------ ----
52,598 58,484
Less: shares held in treasury -- (2,159)
Total stockholders' equity
52,598 56,325
-------- --------
Total liabilities and stockholders' equity $ 75,429 $ 72,355
-------- --------
-------- --------
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
IVI CHECKMATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars Except Share and Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues $ 23,466 $ 18,306 $ 46,336 $ 38,991
Cost of sales 14,373 12,152 28,525 24,933
-------- -------- -------- --------
Gross margin 9,093 6,154 17,811 14,058
-------- -------- -------- --------
Operating expenses:
Selling, general and
administrative 5,351 5,711 10,559 10,782
Research and development 1,038 1,025 2,344 2,205
Depreciation and amortization 1,068 776 2,099 1,365
-------- -------- -------- --------
7,457 7,512 15,002 14,352
-------- -------- -------- --------
Operating income (loss)
before merger costs 1,636 (1,358) 2,809 (294)
Merger costs (9,895) -- (9,895) --
-------- --------
Operating loss (8,259) (1,358) (7,086) (294)
Interest and other (14) 254 46 484
-------- -------- -------- --------
Income (loss) before taxes (8,273) (1,104) (7,040) 190
Income tax benefit 993 595 759 255
-------- -------- -------- --------
Net income (loss) $ (7,280) $ (5 $ (6,281) $ 445
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number
of shares outstanding:
Basic 16,216 15,537 16,027 15,470
Diluted 16,216 15,537 16,027 16,214
Earnings Per Share:
Basic $ (0.45) $ (0.03) $ (0.39) $ 0.03
-------- -------- -------- --------
-------- -------- -------- --------
Diluted $ (0.45) $ (0.03) $ (0.39) $ 0.03
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
IVI CHECKMATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Net cash provided by operating activities $ 22 $ 40
-------- --------
Investing activities:
Purchases of capital assets (912) (2,248)
Capitalized software (2,273) (1,849)
Proceeds from sales of marketable securities 6,200 6,923
Purchases of marketable securities (6,113) (5,959)
Cash translation amount (520) (85)
Investment in joint venture (123) --
Other (605) (320)
-------- --------
Net cash used in investing activities (4,346) (3,538)
Financing activities:
Issuance of common stock 3,137 1,490
Received from minority stockholder -- 175
Payment of long-term obligations (134) (43)
-------- --------
Net cash provided by financing activities 3,003 1,622
-------- --------
Net increase in cash and cash (1,321) (1,876)
Cash and cash equivalents at beginning of period 9,372 12,749
-------- --------
Cash and cash equivalents at end of period $ 8,051 $ 10,873
-------- --------
-------- --------
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
IVI CHECKMATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1998
1. Basis of Presentation
On June 25, 1998, International Verifact Inc. ("IVI") and Checkmate Electronics,
Inc. ("Checkmate") completed their combination, which was accounted for as a
pooling-of-interests. Under the terms of the Combination Agreement, IVI
shareholders received, for each IVI common share, either one share of common
stock of the Company, or one exchangeable share of IVI which can be exchanged at
any time for a share of the Company's common stock in the future. Checkmate
shareholders received 1.2775 shares of the Company's common stock for each
Checkmate common share. These condensed consolidated financial statements have
been restated to effect such share conversions, and to reflect the historical
results of both companies for all periods presented.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. These statements should be read in conjunction with the audited
financial statements of International Verifact Inc. and Checkmate Electronics,
Inc., which are included in the Company's Joint Proxy Statement/Prospectus dated
May 26, 1998. Operating results for the three and six months ended June 30, 1998
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1998 or any other interim period.
2. Inventories
Inventories are summarized by class as follows:
<TABLE>
<CAPTION>
June 30, December
1998 31, 1997
--------------------- ----------------------
<S> <C> <C>
Finished goods $ 7,367 $ 8,084
Work in process 801 874
Raw materials and 9,682 10,024
supplies
--------------------- ----------------------
Gross inventories 17,850 18,982
Reserves (4,391) (1,826)
--------------------- ----------------------
Total $13,459 $17,156
--------------------- ----------------------
--------------------- ----------------------
</TABLE>
6
<PAGE>
3. Net Income (Loss) Per Share
Net income (loss) per share on a basic and diluted basis as
required by Statement No. 128 is calculated as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
-------------------- ---------------------
1998 1997 1998 1997
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net income (loss) $ (7,280) $ (509) $ (6,281) $ 445
-------- -------- -------- ---------
-------- -------- -------- ---------
Calculation of weighted average shares
outstanding plus assumed conversions:
Weighted average basic shares outstanding 16,216 15,537 16,027 15,470
Effect of dilutive stock options -- -- -- 744
-------- -------- -------- ---------
Weight average diluted shares outstanding 16,216 15,537 16,027 16,214
-------- -------- -------- ---------
-------- -------- -------- ---------
Basic net income (loss) $ (0.45) $ (0.03) $ (0.39) $ 0.03
per share
-------- -------- -------- ---------
-------- -------- -------- ---------
Diluted net income $ (0.45) $ (0.03) $ (0.39) $ 0.03
(loss) per share
-------- -------- -------- ---------
-------- -------- -------- ---------
</TABLE>
4. Impact of Recently Issued Accounting Standards
In June 1997 the FASB issued Statement No. 130, Reporting Comprehensive Income
("Statement 130") which establishes standards for reporting and displaying
comprehensive income and its components (revenues, expenses, gains and losses)
in financial statements. Statement 130 is effective for fiscal years beginning
after December 15, 1998. The Company adopted Statement No. 130 in 1998. Amounts
in prior condensed consolidated financial statements have been reclassified to
conform to Statement 130.
The components of comprehensive income for the three months and six months
ended June 30, 1998 and 1997, respectively, are as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
------------------------------------- -------------------------------------
1998 1997 1998 1997
------------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) $(7,280) $ (509) $(6,281) $ 445
Foreign currency translation adjustments (1,159) 410 (1,159) 410
------------------------------------- -------------------------------------
Comprehensive income $(8,439) $ (99) $(7,440) $ 855
------------------------------------- -------------------------------------
------------------------------------- -------------------------------------
</TABLE>
In June 1997 the FASB also issued Statement No. 131, Disclosures about Segments
of an Enterprise and Related Information ("Statement 131") which establishes
standards for the way public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. Operating segments are components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Statement 131 also establishes
standards for related disclosures about products and services, geographic areas
and major customers. Statement 131 is effective for financial statements for
periods beginning after December 15, 1997. The Company will adopt Statement 131
in the fourth quarter of 1998 and does not expect the effect of adoption to be
material to its consolidated financial statements.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion contains forward-looking statements subject to
the safe harbor created by the Private Securities Litigation Reform Act of 1995.
The words "may," "would," "could," "will," "expect," "estimate," "anticipate,"
"believe," "intends," "plans" and similar expressions and variations thereof are
intended to identify forward-looking statements. Management cautions that these
statements represent projections and estimates of future performance and involve
certain risks and uncertainties. IVI Checkmate's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors including, without limitation, dependence by IVI
Checkmate on limited suppliers and manufacturers of component parts of its
products; rapid and significant technological developments that could delay the
introduction of improvements in existing products or of new products; any
dependencies on any proprietary technologies (which may be independently
developed by competitors); dependence on a small number of large retail and bank
customers; potential fluctuation in financial results as a result of any
inability to make sales to large customers as well as the volume and timing of
bookings received during a quarter and variations in sales mix; competition from
existing companies as well as new market entrants; dependence on key personnel;
integration of the companies; and other risk factors discussed from time to time
in IVI Checkmate's SEC filings and other announcements.
Results of Operations - Three and Six Months Ended June 30,
1998 Compared to Three and Six Months Ended June 30, 1997
The following table sets forth certain items derived from the Company's
statements of operations:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------------- --------------------------------------
1998 1997 1998 1997
--------------------- ------------------ --------------- ------------------
Amount % Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
EFT $14,633 62 % $13,530 74 % $30,335 65 % $27,952 72 %
Check readers 7,020 30 3,324 18 12,506 27 8,286 21
Professional services 1,913 8 1,452 8 3,495 8 2,753 7
--------------- ------ ------------- ------- ----------- ------- ----------- -------
23,466 100 18,306 100 46,336 100 38,991 100
Cost of sales 14,373 61 12,152 66 28,525 62 24,933 64
--------------- ------ ------------- ------- ----------- ------- ----------- -------
Gross margin 9,093 39 6,154 34 17,811 38 14,058 36
--------------- ------ ------------- ------- ----------- ------- ----------- -------
Operating expenses:
Selling, general and
administrative 5,351 23 5,711 31 10,559 23 10,782 28
Research and 1,038 4 1,025 6 2,344 5 2,205 6
development
Depreciation and 1,068 5 776 4 2,099 4 1,365 3
amortization
--------------- ------ ------------- ------- ----------- ------- ----------- -------
7,457 32 7,512 41 15,002 32 14,352 37
--------------- ------ ------------- ------- ----------- ------- ----------- -------
Operating income (loss)
before merger costs 1,636 7 (1,358) (7) 2,809 6 (294) (1)
Merger costs (9,895) (42) - - (9,895) (21) - -
--------------- ------ ------------- ------- ----------- ------- ----------- -------
Operating loss (8,259) (35) (1,358) (7) (7,086) (15) (294) (1)
Interest and other (14) - 254 1 46 - 484 1
--------------- ------ ------------- ------- ----------- ------- ----------- -------
Income (loss) before (8,273) (35) (1,104) (6) (7,040) (15) 190 -
taxes
Income tax benefit 993 4 595 3 759 1 255 1
--------------- ------ ------------- ------- ----------- ------- ----------- -------
Net income (loss) $(7,280) (31)% $ (509) (3)% $(6,281) (14)% $ 445 1 %
--------------- ------ ------------- ------- ----------- ------- ----------- -------
--------------- ------ ------------- ------- ----------- ------- ----------- -------
</TABLE>
Any trends that may be derived from the above tables are not
necessarily indicative of the Company's future operations.
8
<PAGE>
Net revenues increased 28% and 19% in the three and six months ended
June 30, 1998, respectively, as compared to the same periods in 1997. The
increase in net revenues was attributable to: (1) higher sales of check readers,
which are used to detect/prevent fraud and improve banking automation; (2)
significant sales of the recently introduced customer activated touch screen
terminal, the eN-Touch 1000; and (3) increasing revenues from professional
services division.
Cost of goods sold as a percentage of net revenues was 61% in the three
months and 62% in the six months ended June 30, 1998, compared to 66% in the
three months and 64% in the six months ended June 30, 1997. The reduction in
this percentage was the result of both changes in customer mix and product mix.
In 1997, a significant portion of sales was to a large U.S. retailer at low
margins. In 1998, the Company began selling its own proprietary point-of-sale
("POS") printers and was able to realize higher margins. Also in 1997, the
Company was a reseller of similar POS printers in 1997 at low margins.
Selling, general and administrative ("SG&A") expenses, as a percentage
of net revenues, were reduced to 23% in the three and six months ended June 30,
1998 compared to 31% in the three months and 28% in the six months ended June
30, 1997. The reduction in percentages was the result of the Company's
commitment to sell more effectively and to provide a wider range of end-to-end
solutions to its customers without a corresponding increase in selling costs. In
future quarters, the Company anticipates further reduction in the SG&A
percentage to reflect savings as a result of the closure of IVI's U.S.
headquarters and operations in Boulder, Colorado.
Product development expenditures include research and development
expense and capitalized software development costs and consist primarily of
labor. A summary of product development efforts is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Gross product development expenditures $ 2,315 $ 2,218 $ 4,617 $ 4,054
Capitalized software development costs (1,277) (1,193) (2,273) (1,849)
------ ------ ------ ------
Research and development expense 1,038 1,025 2,344 2,205
Amortization of previously capitalized costs 501 225 970 428
--- --- --- ---
Total expense $ 1,539 $ 1,250 $ 3,314 $ 2,633
------- ------- ------- -------
------- ------- ------- -------
Product development as a percent of net revenues:
Gross expenditures 9.9% 12.1% 10.0% 10.4%
Research and development expense 4.4% 5.6% 5.1% 5.7%
Total expense 6.6% 6.8% 7.2% 6.8%
</TABLE>
Research and development expense for the three and six months ended
June 30, 1998 were consistent with expenditures in the same periods in 1997. The
significant amount of product development expenditures incurred each quarter
resulted from the Company's continuing efforts to remain at the forefront of
payment automation technology. IVI Checkmate announced several new products in
the first six months of 1998, and currently intends to introduce several
additional products during the remainder of 1998.
9
<PAGE>
The Company recorded in the three months ended June 30, 1998 a one-time
charge to earnings in the amount of $9.9 million to reflect costs associated
with the combination of IVI and Checkmate. The costs consisted of professional
fees, costs pertaining to the immediate closure of IVI's U.S. headquarters and
operations in Boulder, Colorado, a reserve against inventory to reflect the
rationalization of the Company's manufacturing process and product lines, and
other incidental costs.
The effective tax rate was 12% and 54% in three months ended June 30,
1998 and 1997, respectively. The decrease in the effective tax rate in 1998 was
due primarily to a combination of the loss in the quarter, combined with
recognition of IVI's tax losses of previous years. It is anticipated that the
effective tax rate for the remainder of 1998 will remain at this level.
As a result of the above factors, in particular the costs of the
combination, the Company recorded a net loss for the three and six months ended
June 30, 1998 of $7.3 million and $6.3 million, respectively, compared with a
loss of $509,000 in the three months and a profit of $445,000 in the six months
ended June 30, 1997. Basic loss per share was $0.45 and $0.39 in the three and
six months ended June 30, 1998, compared to a loss of $0.03 in the three months
and a profit of $0.03 in the six months ended June 30, 1997.
The weighted average shares outstanding for the quarter and six months increased
4.4% and 3.6%, respectively, from 1997 to 1998 due to exercises of stock options
and resale of treasury shares held at December 31, 1997.
Liquidity and Capital Resources
Net cash provided by operating activities was $22,000 in the six months
ended June 30, 1998 and $40,000 in the six months ended June 30, 1997. The net
cash provided by operating activities for the first six months of 1998 was the
result of the net loss reported for the period, increased by depreciation and
amortization, by a 35.1% increase in accounts receivable, an 11.5% decrease in
inventory and a 51.7% increase in accounts payable. The net cash used in
operating activities in 1997 was primarily the result of the net loss reported
for the period, increased by depreciation and amortization which was partially
offset by a corresponding increase in non-cash working capital, primarily in
accounts receivable and inventory. The Company experiences normal fluctuations
in its accounts receivable balance, including days outstanding, due to a variety
of factors, including the Company's overall sales performance when compared to
prior periods, the timing of shipments to its customers and individual customer
negotiated terms of sale. Inventory levels held by the Company are also
dependent upon a variety of factors, including anticipated inventory
requirements to fulfill current and future customer orders in a timely manner,
individual customer negotiated contracts of sale and the availability of key
components used in the manufacturing process. Increases in these accounts during
1998 and 1997 have been caused by anticipated increases in sales volumes and by
new product introductions. The Company anticipates that fluctuations in these
accounts will continue in the future.
Net cash used in investing activities was $4.3 million for the six
months ended June 30, 1998 and $3.5 million for the same period in 1997.
Purchases of property and equipment and additions to deferred development costs
and other noncurrent assets were $4.0 million and $4.5 million in the six months
ended June 30, 1998 and 1997, respectively. These uses of net cash were offset
by net proceeds from the sale of investments of $87,000 in 1998 and $1.0 million
in 1997, and by a translation loss of $520,000 in 1998 as a result of cash held
by the Company's Canadian operations during periods of a weakening Canadian
dollar relative to the U.S. dollar.
Net cash provided by financing activities was $3.0 million in the six
months ended June 30, 1998 and $1.6 million in the six months ended June 30,
1997. Cash continues to be provided through the issuance of capital stock for
stock option exercises in 1998 and 1997, and resale of treasury shares in March
1998. Cash was also provided in 1997 as the Company's Latin American joint
venture which received funding from Ingenico S.A., the other joint venture
partner.
10
<PAGE>
The Company's working capital position was $35.3 million at June 30,
1998, compared to $40.0 million at December 31, 1997. The Company had no
commitments for material capital expenditures as of June 30, 1998. The primary
reason for the decline in working capital is attributable to the costs of the
combination incurred by the Company in the second quarter of 1998. However, the
Company believes that its working capital position at June 30, 1998, together
with anticipated future cash flows from operations and the borrowing available
under its revolving credit agreement, are sufficient to meet the Company's
operating needs, including possible increases in accounts receivable and
inventories, along with planned capital expenditures and research and
development activities for at least the next twelve to eighteen months.
The Company's operating results have fluctuated on a quarterly basis in
the past and may vary significantly in future periods due to a variety of
factors. These factors include, but are not limited to, the timing of orders
from and shipments to major customers, the timing of new product introductions
by the Company and its competitors, variations in the Company's product mix and
component costs and competitive pricing pressures. Due primarily to the above
factors, the results of any particular quarter may not be indicative of the
results for the full year.
Impact of Year 2000
IVI Checkmate's business and relationships with its customers depend
significantly on a number of computer software programs, internal operating
systems and connections to other networks, and the failure of any of these
programs, systems or networks to successfully address the Year 2000 data
rollover problem could have a material adverse effect on IVI Checkmate's
business, financial condition and results of operations. Many installed computer
software and network processing systems currently accept only two-digit entries
in the date code field and may need to be upgraded or replaced in order to
accurately record and process information and transactions on and after January
1, 2000. IVI Checkmate believes that it has completed substantially all
modifications of its affected software programs and has minimal additional work
required to finalize these modifications. However, IVI Checkmate is not certain
as to whether the computer software and business systems of its customers and
suppliers are Year 2000 compliant. There can be no assurance that the failure or
delay of IVI Checkmate's customers and suppliers in successfully addressing the
Year 2000 issue or the costs involved in such process will not have a material
adverse effect on IVI Checkmate's business, financial condition and results of
operations.
Risks Associated with the Combination between International Verifact Inc. and
Checkmate Electronics, Inc.
The completed transaction has resulted in the combination of IVI and
Checkmate, which have previously operated independently. The consolidation of
functions, the integration of departments, systems and procedures, and the
relocation of staff present significant management challenges. There can be no
assurance that such actions will be successfully accomplished as rapidly as
currently expected. Moreover, although one of the primary purposes of the
transaction is to realize direct cost savings and other operating efficiencies,
there can be no assurance of the extent to which any such cost savings and
efficiencies will be achieved. Failure to successfully integrate the operations
of IVI and Checkmate in a timely manner and to realize cost savings and other
operating efficiencies could have a material adverse effect on the financial
condition and results of operations of the Company. In addition, such
integration may require the licensing or other transfer of proprietary or
currently licensed rights as well as the assumption of certain obligations by
and between the various parties. While management does not believe that, in the
circumstances, these requirements will give rise to tax consequences, it is
possible that they may give rise to tax consequences both immediately and on an
ongoing basis.
11
<PAGE>
PART II. OTHER INFORMATION
Item 5. Shareholder Proposals
The proxy statement solicited by management of the Company with respect
to the 1999 Annual Meeting of Shareholders will confer discretionary authority
to vote on any proposals of shareholders of the Company intended to be presented
for consideration at such Annual Meeting that are submitted to the Company by
April 12, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed as part of
this report:
Exhibit No. Description
- - ----------- -----------
1 Financial Data Schedule
Reports on Form 8-K. No Current Reports on Form 8-K were filed by the Company
during the quarter ended June 30, 1998.
12
<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 thereunto duly authorized.
IVI CHECKMATE CORP.
(Registrant)
Date: August 11, 1998 /s/ L. Barry Thomson
-------------------------------------
L. Barry Thomson
President and Chief Executive Officer
(Duly Authorized Officer)
Date: August 11, 1998 /s/ John J. Neubert
-------------------------------------
John J. Neubert
Chief Financial Officer and
Senior Vice President
(Principal Financial Officer)
14
<PAGE>
INDEX OF EXHIBITS
EXHIBIT NO. DESCRIPTION
- - ----------- -----------
27 Financial Data Schedule
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,051
<SECURITIES> 3,572
<RECEIVABLES> 26,373
<ALLOWANCES> 0
<INVENTORY> 13,459
<CURRENT-ASSETS> 56,173
<PP&E> 7,577
<DEPRECIATION> 0
<TOTAL-ASSETS> 75,429
<CURRENT-LIABILITIES> 20,907
<BONDS> 0
0
0
<COMMON> 163
<OTHER-SE> 52,435
<TOTAL-LIABILITY-AND-EQUITY> 75,429
<SALES> 42,841
<TOTAL-REVENUES> 46,336
<CGS> 0
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<NET-INCOME> (6,821)
<EPS-PRIMARY> $(0.39)
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</TABLE>
