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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, 2000 |
Or
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ to _____, 20_____. |
Commission file number: 0-27925
Netzee, Inc.
Georgia | 58-2488883 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
6190 Powers Ferry Road, Suite 400, Atlanta, Georgia 30339
(770) 850-4000
N/A
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date. As of August 4, 2000, there were 22,028,083 shares of the Registrants Common Stock outstanding.
NETZEE, INC.
INDEX TO FORM 10-Q
PART I | FINANCIAL INFORMATION | |||||
Item 1. | Financial Statements | 2 | ||||
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations | 7 | ||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 13 | ||||
PART II | OTHER INFORMATION | |||||
Item 1. | Legal Proceedings | 14 | ||||
Item 2. | Changes in Securities and Use of Proceeds | 14 | ||||
Item 3. | Defaults upon Senior Securities | 14 | ||||
Item 4. | Submission of Matters to a Vote of Security Holders | 14 | ||||
Item 5. | Other Information | 14 | ||||
Item 6. | Exhibits and Reports on Form 8-K | 14 |
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NETZEE, INC.
CONSOLIDATED BALANCE SHEETS
December 31, | June 30, | |||||||||
1999 | 2000 | |||||||||
ASSETS | (Unaudited) | |||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 11,255,099 | $ | 5,406,720 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $242,750 and $516,998 at | ||||||||||
December 31, 1999 and June 30, 2000, respectively | 2,496,953 | 2,309,665 | ||||||||
Leases receivable, current | 330,191 | 352,425 | ||||||||
Prepaid and other current assets | 503,364 | 1,067,115 | ||||||||
Total current assets | 14,585,607 | 9,135,925 | ||||||||
Property and equipment, net | 6,938,710 | 8,813,089 | ||||||||
Intangible assets, net of accumulated amortization of $12,756,790 and $37,648,549
at December 31, 1999 and June 30, 2000, respectively |
120,611,688 | 119,269,622 | ||||||||
Leases receivable, net of current portion | 922,788 | 1,350,565 | ||||||||
Other assets | 185,463 | 144,682 | ||||||||
Total assets | $ | 143,244,256 | $ | 138,713,883 | ||||||
LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||||
Current liabilities: | ||||||||||
Accounts payable and accrued liabilities | $ | 4,234,307 | $ | 4,042,917 | ||||||
Deferred revenue | 5,425,278 | 7,512,731 | ||||||||
Note payable | 103,462 | 103,462 | ||||||||
Other current liabilities | 24,200 | 295,504 | ||||||||
Total current liabilities | 9,787,247 | 11,954,614 | ||||||||
Related-party borrowings | 10,956,930 | 14,950,508 | ||||||||
Note payable, net of current portion | 1,215,673 | 1,163,942 | ||||||||
Deferred revenue, net of current portion | 904,032 | 1,237,891 | ||||||||
Total liabilities | 22,863,882 | 29,306,955 | ||||||||
Commitments and contingencies | ||||||||||
Shareholders equity: | ||||||||||
Preferred stock, no par value, 5,000,000 shares authorized: | ||||||||||
Series A 8% convertible preferred stock, no par value, $13 stated value; 500,000 shares authorized, issued and outstanding at December 31, 1999 and June 30, 2000 |
6,500,000 | 6,500,000 | ||||||||
Common stock, no par value, 70,000,000 shares authorized, 20,395,855 shares issued and | ||||||||||
outstanding at December 31, 1999 and 21,708,083 shares issued and outstanding at June 30, 2000 | 148,056,611 | 173,577,839 | ||||||||
Notes receivable from shareholders | (3,314,799 | ) | (3,066,914 | ) | ||||||
Deferred stock compensation | (8,547,212 | ) | (6,964,890 | ) | ||||||
Warrants outstanding for the purchase of 461,876 shares and 0 shares at December 31, 1999 | ||||||||||
and June 30, 2000, respectively | 4,618,760 | 0 | ||||||||
Accumulated deficit | (26,932,986 | ) | (60,639,107 | ) | ||||||
Total shareholders equity | 120,380,374 | 109,406,928 | ||||||||
Total liabilities and shareholders equity | $ | 143,244,256 | $ | 138,713,883 | ||||||
The accompanying notes are an integral part of these balance sheets.
2
The six month period ended June 30, 1999 is presented in two columns below due to the acquisition of Direct Access Interactive, Inc. (the Predecessor) on March 9, 1999, which established a new basis of accounting for certain assets and liabilities of Netzee, Inc. The purchase method of accounting was used to record assets acquired and liabilities assumed by Netzee, Inc. Such accounting generally results in increased amortization reported in future periods. Accordingly, the accompanying financial statements of the Predecessor and Netzee, Inc. are not comparable in all material respects, since those financial statements report results of operations and cash flows on a different basis of accounting.
NETZEE, INC.
(FORMERLY DIRECT ACCESS INTERACTIVE, INC. (PREDECESSOR))
CONSOLIDATED STATEMENTS OF OPERATIONS
Netzee, Inc. | Netzee, Inc. | Predecessor | Netzee, Inc. | |||||||||||||||||||
For the Period | ||||||||||||||||||||||
from January 1, | For the Period | |||||||||||||||||||||
Three Months | Three Months | 1999 to | from March 1, | Six Months | ||||||||||||||||||
Ended June 30, | Ended June 30, | February 28, | 1999 to June 30, | Ended June 30, | ||||||||||||||||||
1999 | 2000 | 1999 | 1999 | 2000 | ||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||
Monthly maintenance and service | $ | 68,741 | $ | 4,001,173 | $ | 33,082 | $ | 86,063 | $ | 6,781,490 | ||||||||||||
License, hardware and implementation | 106,872 | 312,767 | 57,080 | 164,472 | 390,494 | |||||||||||||||||
Total revenues | 175,613 | 4,313,940 | 90,162 | 250,535 | 7,171,984 | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||||
Costs of service, license, hardware, implementation and maintenance |
83,919 | 2,121,606 | 44,358 | 126,454 | 3,712,508 | |||||||||||||||||
Selling and marketing | 120,922 | 2,773,335 | 12,350 | 127,591 | 5,015,410 | |||||||||||||||||
General and administrative | 110,042 | 2,595,255 | 49,399 | 136,719 | 4,424,077 | |||||||||||||||||
Depreciation | 40,750 | 414,278 | 667 | 54,334 | 689,556 | |||||||||||||||||
Stock-based compensation | 0 | 789,563 | 0 | 0 | 1,582,322 | |||||||||||||||||
Amortization | 104,204 | 13,163,594 | 1,809 | 138,938 | 24,897,392 | |||||||||||||||||
Total operating expenses | 459,837 | 21,857,631 | 108,583 | 584,036 | 40,321,265 | |||||||||||||||||
Operating loss | (284,224 | ) | (17,543,691 | ) | (18,421 | ) | (333,501 | ) | (33,149,281 | ) | ||||||||||||
Interest expense, net | 0 | 228,113 | 3,469 | 428 | 296,840 | |||||||||||||||||
Net loss before preferred dividends | (284,224 | ) | (17,771,804 | ) | (21,890 | ) | (333,929 | ) | (33,446,121 | ) | ||||||||||||
Preferred dividends | 0 | 130,000 | 0 | 0 | 260,000 | |||||||||||||||||
Net loss attributable to common shareholders | $ | (284,224 | ) | $ | (17,901,804 | ) | $ | (21,890 | ) | $ | (333,929 | ) | $ | (33,706,121 | ) | |||||||
Basic and diluted loss per share | $ | (0.04 | ) | $ | (0.82 | ) | $ | (0.04 | ) | $ | (1.59 | ) | ||||||||||
Weighted average common shares outstanding | 8,000,000 | 21,705,907 | 8,000,000 | 21,243,417 | ||||||||||||||||||
The accompanying notes are an integral part of these consolidated statements.
3
The six month period ended June 30, 1999 is presented in two columns below due to the acquisition of the Predecessor on March 9, 1999, which established a new basis of accounting for certain assets and liabilities of Netzee, Inc. The purchase method of accounting was used to record assets acquired and liabilities assumed by Netzee, Inc. Such accounting generally results in increased amortization reported in future periods. Accordingly, the accompanying financial statements of the Predecessor and Netzee, Inc. are not comparable in all material respects, since those financial statements report results of operations and cash flows on a different basis of accounting.
NETZEE, INC.
(FORMERLY DIRECT ACCESS INTERACTIVE, INC. (PREDECESSOR))
CONSOLIDATED STATEMENTS OF CASH FLOWS
Predecessor | Netzee, Inc. | |||||||||||||||
For the Period | ||||||||||||||||
from January | For the Period | |||||||||||||||
1, 1999 to | from March 1, | Six Months | ||||||||||||||
February 28, | 1999 to June 30, | Ended | ||||||||||||||
1999 | 1999 | June 30, 2000 | ||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net loss before preferred dividends | $ | (21,890 | ) | $ | (333,929 | ) | $ | (33,446,121 | ) | |||||||
Adjustments to reconcile net loss to cash used in operating | ||||||||||||||||
activities: | ||||||||||||||||
Depreciation | 2,476 | 54,334 | 689,556 | |||||||||||||
Amortization | 0 | 138,938 | 24,897,392 | |||||||||||||
Stock-based compensation expense | 0 | 0 | 1,582,322 | |||||||||||||
Provision for bad debt | 0 | 0 | 202,260 | |||||||||||||
Interest income on shareholder notes | 0 | 0 | (112,115 | ) | ||||||||||||
Changes in assets and liabilities, net of effect of acquisitions: | ||||||||||||||||
Accounts receivable | 12,606 | (70,788 | ) | 74,454 | ||||||||||||
Leases receivable | 0 | 0 | (450,011 | ) | ||||||||||||
Prepaid and other assets | 0 | (50,547 | ) | (343,652 | ) | |||||||||||
Accounts payable and accrued liabilities | (42,889 | ) | (150,463 | ) | (1,678,573 | ) | ||||||||||
Deferred revenue | 41,222 | 12,222 | 2,385,179 | |||||||||||||
Other liabilities | 0 | 0 | (20,190 | ) | ||||||||||||
Net cash used in operating activities | (8,475 | ) | (400,233 | ) | (6,219,499 | ) | ||||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchase of property, equipment and capitalized software, net | 0 | (862,728 | ) | (2,303,964 | ) | |||||||||||
Net cash used in investing activities | 0 | (862,728 | ) | (2,303,964 | ) | |||||||||||
Cash flows from financing activities: | ||||||||||||||||
Borrowings from shareholder | 0 | 750,000 | 13,605,078 | |||||||||||||
Repayments to shareholder | 0 | 0 | (9,611,500 | ) | ||||||||||||
Repayments of notes payable | 0 | (277,473 | ) | (3,172,891 | ) | |||||||||||
Payments of preferred stock dividends | 0 | 0 | (24,200 | ) | ||||||||||||
Exercise of warrants | 0 | 0 | 1,501,097 | |||||||||||||
Payments on shareholder notes | 0 | 0 | 360,000 | |||||||||||||
Exercise of options for common stock | 0 | 0 | 17,500 | |||||||||||||
Contribution from parent | 0 | 786,924 | 0 | |||||||||||||
Decrease in related-party loans from shareholder of predecessor | ||||||||||||||||
entity | (2,000 | ) | 0 | 0 | ||||||||||||
Net cash (used in) provided by financing activities | (2,000 | ) | 1,259,451 | 2,675,084 | ||||||||||||
Net decrease in cash and cash equivalents | (10,475 | ) | (3,510 | ) | (5,848,379 | ) | ||||||||||
Cash and cash equivalents, beginning of period | 13,985 | 3,510 | 11,255,099 | |||||||||||||
Cash and cash equivalents, end of period | $ | 3,510 | $ | 0 | $ | 5,406,720 | ||||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||||
Cash paid for interest | $ | 2,971 | $ | 0 | $ | 186,793 | ||||||||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||||||||||
Stock issued for acquisitions | $ | 0 | $ | 0 | $ | 19,446,037 | ||||||||||
Stock issued for exercise of warrants, net of cash received | $ | 0 | $ | 0 | $ | 4,618,760 | ||||||||||
The accompanying notes are an integral part of these consolidated statements.
4
NETZEE, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
ORGANIZATION
Netzee, Inc. provides financial institutions with an integrated retail suite of Internet-based products and services, including full-service Internet banking, bill payment, cash management, Internet commerce services, custom web design and hosting, branded portal design, access to brokerage services and implementation and marketing services. Netzee also provides financial institutions with an integrated wholesale suite of products and services, including regulatory reporting software, financial analytic tools and financial information tools.
Direct Access Interactive, Inc. (Direct Access or the Predecessor) was incorporated on October 10, 1996. On March 9, 1999, Direct Access was purchased by The InterCept Group, Inc. (InterCept). Direct Access was operated as a separate subsidiary of InterCept. On August 6, 1999, Direct Access purchased the remote banking operations of SBS Corporation (SBS). Direct Access was later merged with and into Netzee. On September 3, 1999, we purchased the Internet banking divisions of TIB The Independent BankersBank (TIB) and The Bankers Bank, and we acquired Dyad Corporation and subsidiaries (Dyad) and Call Me Bill, LLC (Call Me Bill). On December 15, 1999, we purchased DPSC Software, Inc. (DPSC). On March 7, 2000, we purchased Digital Visions, Inc. (DVI). SBS, TIB, The Bankers Bank, Dyad, Call Me Bill, DPSC and DVI are collectively referred to as the Acquired Entities.
BASIS OF PRESENTATION
The accompanying statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, which are of a normal recurring nature, to present fairly our financial position, results of operations and cash flows at the dates and for the periods presented. Interim results of operations are not necessarily indicative of results to be expected for a 12-month period. The interim financial statements should be read in conjunction with our Annual Report on Form 10-K, as amended, for the year ended December 31, 1999.
The consolidated statements of operations and statements of cash flows for the Predecessor and our Company are not comparable in all material respects, since those financial statements report the results of operations and cash flows on a different basis of accounting. Although Direct Access was acquired on March 9, 1999, the accompanying unaudited financial statements for the period from March 1, 1999 to June 30, 1999 are presented as if the acquisition occurred on the close of business on February 28, 1999 instead of March 9, 1999. The operations between March 1, 1999 and March 9, 1999 were not material. The consolidated statements of operations and statements of cash flows prior to March 1, 1999 present the results of operations and cash flows of Direct Access, the predecessor to Netzee.
The unaudited consolidated financial statements include the accounts of our company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
NEW ACCOUNTING STANDARD
During December 1999, the Securities and Exchange released Staff Accounting Bulletin No. 101, Revenue Recognition, (SAB 101), to establish guidelines for revenue recognition and enhance revenue recognition disclosure requirements. SAB 101 clarifies basic criteria for revenue recognition and is effective for the quarter ended December 31, 2000. We are currently assessing the impact of adopting SAB 101, as revenue for non-refundable, up-front fees associated with product implementation will be recognized over the term of the underlying contract, rather than upon the completion of product implementation. The cumulative impact of adopting SAB 101 will be reported as a change in accounting principle in the period of adoption. We do not expect the adoption of SAB 101 to have a material impact on our results of operations.
5
2. ACQUISITION
ACQUISITION OF DIGITAL VISIONS, INC.
In March 2000, we completed the acquisition of substantially all of the assets and assumed certain liabilities of DVI. Based in Minneapolis, Minnesota, DVI provided Internet-based financial and analytical information tools for financial institutions. As consideration for this acquisition, we issued 838,475 shares of common stock. We also issued options to purchase 70,419 shares of common stock in exchange for the cancellation of options to purchase DVI common stock. In addition, we assumed approximately $3.3 million in debt and $1.2 million in operating liabilities. DVI also has the right to receive up to 628,272 additional shares of our common stock if certain revenue targets are met in fiscal years 2000 and 2001.
PRO FORMA RESULTS
The following summary presents unaudited pro forma results of operations assuming that the acquisitions of the Acquired Entities as discussed in Note 1 occurred on January 1, 1999.
Six Months Ended | Six Months Ended | |||||||
June 30, 1999 | June 30, 2000 | |||||||
(Unaudited) | (Unaudited) | |||||||
Total revenue | $ | 5,006,939 | $ | 7,454,747 | ||||
Net loss | $ | (44,521,789 | ) | $ | (35,548,217 | ) | ||
Net loss per share | $ | (2.10 | ) | $ | (1.65 | ) |
3. BASIC AND DILUTED NET LOSS PER SHARE
Basic and diluted net loss per share has been computed in accordance with SFAS No. 128, Earnings per Share, using net loss divided by the weighted average number of shares of common stock outstanding for the period presented. Potentially dilutive options to purchase 3,786,119 shares of common stock with a weighted average exercise price of $8.50 per share were outstanding at June 30, 2000 and were excluded from the presentation of diluted net loss per share, as they are antidilutive due to the net loss. There were no options or warrants outstanding as of June 30, 1999.
4. RELATED-PARTY BORROWINGS
In conjunction with the acquisition of DPSC, we received a commitment for a $15 million line of credit from InterCept. On March 24, 2000, pending the finalization of the line of credit, we issued a promissory note to InterCept in the principal amount of approximately $7.8 million, which reflected the amount borrowed under terms consistent with the commitment as of that date. This note bore interest at a rate of prime plus 2% and was secured by substantially all of our assets. Accrued interest under this note was payable monthly beginning May 1, 2000. The borrowings were used to fund working capital requirements.
In May 2000, the $15 million line of credit agreement with InterCept was finalized. At that time the outstanding principal balance due on the promissory note issued to InterCept was transferred to the line of credit. The line of credit bears interest at a rate of prime plus 2% and is secured by substantially all of our assets. Accrued interest under the line of credit is payable quarterly beginning July 1, 2000. The principal balance is payable at maturity on May 31, 2003. These borrowings are being used to fund working capital requirements.
6
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include all statements that are not statements of historical fact regarding the intent, belief or expectations of Netzee and its management with respect to, among other things: (1) whether we can successfully combine the operations we have acquired, and operations we may acquire, to create or continue improvements in our financial condition; (2) the anticipated impact of certain events and circumstances; (3) trends affecting our operations, financial condition and business; (4) our growth and operating strategies; (5) our ability to achieve our sales objectives; (6) the continued and future acceptance of and demand for our products and services by our customers and their customers; (7) our ability to raise additional capital if and when needed; and (8) whether our current or future strategic marketing alliances, including those with banking organizations, bankers banks and other financial institutions, will be successful in generating sales or in improving our business, results of operations or financial condition. The words may, will, anticipate, believe, intend, plan, allow, strategy and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are not guarantees of future performance and actual results may differ materially from those projected in the forward-looking statements as a result of risks related to the integration of acquired assets and businesses; our ability to achieve, manage or maintain growth and execute our business strategy successfully; our dependence on developing, testing and implementing enhanced and new products and services; our ability to sell our products and services to financial institution customers and their customers; our ability to respond to competition; the volatility associated with Internet-related companies; and various other factors discussed in detail in this Form 10-Q and in the section entitled Factors that May Affect Our Future Results of Operations or Financial Condition in our Form 10-K for the fiscal year ended December 31, 1999, as filed with the Securities and Exchange Commission on March 29, 2000, as amended on May 1, 2000. Netzee undertakes no obligations to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.
Overview
We are a rapidly growing provider of integrated Internet banking products and services and Internet commerce solutions to financial institutions and their customers. We provide a retail suite of integrated Internet banking products and services and Internet commerce solutions to financial institutions. The retail suite provides cost-effective, outsourced, secure and scalable Internet banking and Internet commerce solutions that enable financial institutions to offer to their customers a wide array of financial products and services over the Internet. We also market and sell a wholesale suite of products and services that help fulfill certain operational needs and regulatory requirements of financial institutions. We began to market and sell Internet-based financial information tools in March 2000, as a result of our acquisition of DVI. Our wholesale suite of products and services enables financial institutions to create internal efficiencies and provides employees with information to better manage banking operations.
Prior to July 1, 1999, we derived our revenues from software license, hardware and implementation fees for Internet and telephone banking products and services. Software license, hardware and implementation fees were recognized upon implementation, and maintenance and service fees were recognized on a monthly basis as the services were provided.
During the third and fourth quarters of 1999, we changed pricing policies for our existing retail products and services and modified the pricing policies of the Acquired Entities to more closely match our new pricing policies. For our retail suite of products and services, we charge a fixed monthly fee based on the number and type of products and services purchased by the financial institution. We also charge variable fees that are based on the number of end users and the number of transactions for certain retail products and services. We generally provide products and services under contracts with terms ranging from three to five years. For some of our wholesale suite of products, we charge an annual software subscription fee based on the products purchased. For other wholesale products, we charge variable fees that are based on the number of end users or transactions initiated by the financial institution.
7
Our costs of service, license, hardware, implementation and maintenance are comprised of the initial equipment and personnel costs required to implement Internet and telephone banking for our financial institution customers, ongoing personnel and system maintenance costs associated with our data centers, royalties paid to information providers, and production and shipping costs associated with our regulatory reporting software.
Selling and marketing expenses include marketing expenses, sales commissions and costs, and sales employee compensation and benefits. Commissions are paid to sales personnel based on products and services sold.
General and administrative expenses include employee compensation and benefits and general office expenses incurred in the ordinary course of business.
Depreciation consists of depreciation of property, equipment and software.
Amortization of intangible assets relates to purchase accounting adjustments resulting from our acquisitions. Intangible assets are being amortized over lives ranging from two to five years.
Stock-based compensation consists of amortization of deferred compensation for certain stock options with an exercise price below the initial public offering price and compensation expense for stock sold or awarded to employees at prices below the initial public offering price.
We use cash loss as a metric to measure company performance. Cash loss is defined as net loss attributable to common shareholders, excluding the effects of amortization of intangible assets and stock-based compensation.
We have incurred operating losses through June 30, 2000. Due to the uncertainty of the realizability of the net operating losses, we have not reflected an income tax benefit in our statements of operations, and we have recorded a valuation for the full amount of our net operating loss carryforwards.
Although we have experienced significant growth in customers and revenues, we have incurred substantial operating losses and negative cash flows from operations due to our pricing structure of little or no up-front fees, increasing our sales staff, expanding our data center operations and increasing staff required to support our growth. We incurred net losses of approximately $284,000 and $17.9 million for the three months ended June 30, 1999 and June 30, 2000, respectively. Depreciation, amortization and the amortization of stock-based compensation accounted for 80% of the net loss attributable to common shareholders for the three months ended June 30, 2000. We incurred cash losses of approximately $180,000 and $3.9 million for the three months ended June 30, 1999 and June 30, 2000, respectively.
We incurred net losses of approximately $356,000 and $33.7 million for the six months ended June 30, 1999 and June 30, 2000, respectively. Depreciation, amortization and the amortization of stock-based compensation accounted for 81% of the net loss attributable to common shareholders for the six months ended June 30, 2000. We incurred cash losses of approximately $215,000 and $7.2 million for the six months ended June 30, 1999 and June 30, 2000, respectively. We anticipate that we will continue to incur substantial operating losses and negative cash flows for the foreseeable future.
8
RESULTS OF OPERATIONS
The following tables set forth the results of our operations for the three months and the six months ended June 30, 1999 and 2000, selected cash flow information for the six months ended June 30, 1999 and 2000, and selected balance sheet data as of December 31, 1999 and June 30, 2000. These operating results are not necessarily indicative of our future results.
For the Three Months Ended | For the Six Months Ended | ||||||||||||||||||||||||||||||||
% of | % of | % of | % of | ||||||||||||||||||||||||||||||
June 30, 1999 | Revenue | June 30, 2000 | Revenue | June 30, 1999(1) | Revenue | June 30, 2000 | Revenue | ||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||||
Revenues | $ | 175,613 | 100 | % | $ | 4,313,940 | 100 | % | $ | 340,697 | 100 | % | $ | 7,171,984 | 100 | % | |||||||||||||||||
Costs of service, license, implementation and maintenance |
83,919 | 48 | % | 2,121,606 | 49 | % | 170,812 | 50 | % | 3,712,508 | 52 | % | |||||||||||||||||||||
Gross profit | 91,694 | 52 | % | 2,192,334 | 51 | % | 169,885 | 50 | % | 3,459,476 | 48 | % | |||||||||||||||||||||
Selling and marketing | 120,922 | 69 | % | 2,773,335 | 64 | % | 139,941 | 41 | % | 5,015,410 | 70 | % | |||||||||||||||||||||
General and administrative | 110,042 | 63 | % | 2,595,255 | 60 | % | 186,118 | 55 | % | 4,424,077 | 62 | % | |||||||||||||||||||||
Total selling, general and administrative | 230,964 | 132 | % | 5,368,590 | 124 | % | 326,059 | 96 | % | 9,439,487 | 132 | % | |||||||||||||||||||||
Depreciation | 40,750 | 23 | % | 414,278 | 10 | % | 55,001 | 16 | % | 689,556 | 10 | % | |||||||||||||||||||||
Interest expense, net | 0 | 0 | % | 228,113 | 5 | % | 3,897 | 1 | % | 296,840 | 4 | % | |||||||||||||||||||||
Preferred dividends | 0 | 0 | % | 130,000 | 3 | % | 0 | 0 | % | 260,000 | 4 | % | |||||||||||||||||||||
Subtotal other cash expenses | 40,750 | 23 | % | 772,391 | 18 | % | 58,898 | 17 | % | 1,246,396 | 18 | % | |||||||||||||||||||||
Cash loss (2) | (180,020 | ) | (3,948,647 | ) | (215,072 | ) | (7,226,407 | ) | |||||||||||||||||||||||||
Amortization | 104,204 | 13,163,594 | 140,747 | 24,897,392 | |||||||||||||||||||||||||||||
Stock-based compensation | 0 | 789,563 | 0 | 1,582,322 | |||||||||||||||||||||||||||||
Net loss attributable to common shareholders | $ | (284,224 | ) | $ | (17,901,804 | ) | $ | (355,819 | ) | $ | (33,706,121 | ) | |||||||||||||||||||||
Basic and diluted net loss per share | $ | (0.04 | ) | $ | 0.82 | ) | $ | (0.04 | ) | $ | (1.59 | ) | |||||||||||||||||||||
Cash loss per share (2) | $ | (0.02 | ) | $ | (0.18 | ) | $ | (0.03 | ) | $ | (0.34 | ) | |||||||||||||||||||||
Weighted average common shares outstanding | 8,000,000 | 21,705,907 | 8,000,000 | 21,243,417 | |||||||||||||||||||||||||||||
Selected Cash Flow Information: |
For the Six Months Ended | ||||||||
June 30, 1999 (1) | June 30, 2000 | |||||||
(Unaudited) | (Unaudited) | |||||||
Cash used in operating activities | $ | (408,708 | ) | $ | (6,219,499 | ) | ||
Cash used in investing activities | (862,728 | ) | (2,303,964 | ) | ||||
Cash provided by financing activities | 1,257,451 | 2,675,084 | ||||||
Net decrease in cash and cash equivalents | $ | (13,985 | ) | $ | (5,848,379 | ) | ||
Selected Balance Sheet Data: |
December 31, 1999 | June 30, 2000 | |||||||
(Unaudited) | ||||||||
Cash and cash equivalents | $ | 11,255,099 | $ | 5,406,720 | ||||
Accounts receivable, net | 2,496,953 | 2,309,665 | ||||||
Leases receivable | 1,252,979 | 1,702,990 | ||||||
Notes receivable from shareholders | 3,314,799 | 3,066,914 | ||||||
Deferred revenue | 6,329,310 | 8,750,622 |
(1) | The results of operations and statement of cash flows for the Predecessor from January 1, 1999 to February 28, 1999 and the results of operations for Netzee for the period from March 1, 1999 to June 30, 1999 have been combined for comparative purposes. | |
(2) | Cash loss is defined as net loss attributable to common shareholders, excluding the effect of amortization of intangibles and stock-based compensation. Cash loss and cash loss per share are not measures of financial performance under generally accepted accounting principles and should not be considered as an alternative either to net loss attributable to common shareholders as an indicator of our operating performance, or to cash flow as a measure of our liquidity. |
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THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Revenues
Total revenues increased approximately $4.1 million or 2,357% from approximately $176,000 for the three months ended June 30, 1999 to approximately $4.3 million for the three months ended June 30, 2000. This increase consisted primarily of an increase in monthly maintenance and service revenues due primarily to the increase in the number of financial institution customers obtained from the Acquired Entities, increased customers from our sales efforts and additional product offerings.
Costs of service, license, hardware, implementation and maintenance
Costs of service, license, hardware, implementation and maintenance increased approximately $2.0 million or 2,428% from approximately $84,000 for the three months ended June 30, 1999 to approximately $2.1 million for the three months ended June 30, 2000. The increase in the costs of service, license, hardware, implementation and maintenance was due primarily to an increase in the number of new institutional customers for which we have implemented our products. Additionally, we experienced increased data center costs required to support the increase in the total number of institutions to which we provided services.
Selling and marketing expenses
Selling and marketing expenses increased approximately $2.7 million or 2,193% from approximately $121,000 for the three months ended June 30, 1999 to approximately $2.8 million for the three months ended June 30, 2000. The increase in selling and marketing expenses was due to an increase in sales personnel and an increase in sales commissions paid on new sales. We also increased our advertising expenditures in order to increase our brand recognition and our end-user penetration.
General and administrative expenses
General and administrative expenses increased approximately $2.5 million or 2,258% from approximately $110,000 for the three months ended June 30, 1999 to approximately $2.6 million for the three months ended June 30, 2000. The increase in general and administrative expenses was due to increases in overall business and operating activities, an increase in the number of employees obtained primarily from the Acquired Entities and an increase in management and support staff to support our growth.
Depreciation
Depreciation increased approximately $373,000 or 917% from approximately $41,000 for the three months ended June 30, 1999 to approximately $414,000 for the three months ended June 30, 2000. This increase was due primarily to the depreciation of acquired assets and from depreciation associated with capital acquisitions used to support our growth.
Interest expense, net
Net interest expense increased to approximately $228,000 for the three months ended June 30, 2000 from $0 for the three months ended June 30, 1999. The increase was due to debt incurred to fund our operations.
Cash loss
Cash loss increased $3.8 million from $180,000 for the three months ended June 30, 1999 to $3.9 million for the three months ended June 30, 2000. The increase was due to increases in operating expenses, including selling and marketing, general and administrative, depreciation, interest and preferred dividends. Operating expenses have increased as we have continued to increase our sales staff, expand our data center operations, and increase the staff necessary to support our growth.
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Amortization expense
Amortization expense increased to approximately $13.2 million for the three months ended June 30, 2000 from approximately $104,000 for the three months ended June 30, 1999. Amortization expense increased due to an increase in intangible assets recorded as a result of purchase accounting adjustments associated with our acquisitions.
Stock-based compensation
Stock-based compensation expense increased to approximately $790,000 for the three months ended June 30, 2000 from $0 for the three months ended June 30, 1999 as there were no options or stock issued with an exercise price below fair market value as of that date.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
Revenues
Total revenues increased approximately $6.8 million or 2,005% from approximately $341,000 for the six months ended June 30, 1999 to approximately $7.2 million for the six months ended June 30, 2000. This increase consisted primarily of an increase in monthly maintenance and service revenues due primarily to the increase in the number of financial institution customers obtained from the Acquired Entities and additional product offerings.
Costs of service, license, hardware, implementation and maintenance
Costs of service, license, hardware, implementation and maintenance increased approximately $3.5 million or 2,073% from approximately $171,000 for the six months ended June 30, 1999 to approximately $3.7 million for the six months ended June 30, 2000. The increase in the costs of service, license, hardware, implementation and maintenance was due primarily to an increase in the number of new institutional customers for which we have implemented our products. Additionally, we experienced increased data center costs required to support the increase in the total number of institutions to which we provided services.
Selling and marketing expenses
Selling and marketing expenses increased approximately $4.9 million or 3,484% from approximately $140,000 for the six months ended June 30, 1999 to approximately $5.0 million for the six months ended June 30, 2000. The increase in selling and marketing expenses was due to an increase in sales personnel and an increase in sales commissions paid on new sales. We also increased our advertising expenditures in order to increase our brand recognition and our end-user penetration.
General and administrative expenses
General and administrative expenses increased approximately $4.2 million or 2,277% from approximately $186,000 for the six months ended June 30, 1999 to approximately $4.4 million for the six months ended June 30, 2000. The increase in general and administrative expenses was due to increases in overall business and operating activities, an increase in the number of employees obtained primarily from the Acquired Entities and an increase in management and support staff to support our growth.
Depreciation
Depreciation increased approximately $635,000 or 1,154% from approximately $55,000 for the six months ended June 30, 1999 to approximately $690,000 for the six months ended June 30, 2000. This increase was due primarily to the depreciation of acquired assets and from depreciation associated with capital acquisitions used to support our growth.
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Interest expense, net
Net interest expense increased approximately $293,000 from approximately $4,000 for the six months ended June 30, 1999 to approximately $297,000 for the six months ended June 30, 2000. The increase was due primarily to additional debt incurred to fund our operations.
Cash loss
Cash loss increased $7.0 million from $215,000 for the six months ended June 30, 1999 to $7.2 million for the six months ended June 30, 2000. The increase was due to increases in operating expenses, including selling and marketing, general and administrative, depreciation, interest and preferred dividends. Operating expenses have increased as we have continued to increase our sales staff, expand our data center operations, and increase the staff necessary to support our growth.
Amortization expense
Amortization expense increased to approximately $24.9 million for the six months ended June 30, 2000 from approximately $141,000 for the six months ended June 30, 1999. Amortization expense increased due to an increase in intangible assets recorded as a result of purchase accounting adjustments associated with our acquisitions.
Stock-based compensation
Stock-based compensation increased to approximately $1.6 million for the six months ended June 30, 2000 from $0 for the six months ended June 30, 1999 as there were no options or stock issued with an exercise price below fair market value as of that date.
LIQUIDITY AND CAPITAL RESOURCES
Our operating activities used cash of approximately $409,000 and $6.2 million for the period from January 1, 1999 to June 30, 1999 and the period from January 1, 2000 to June 30, 2000, respectively. Cash used in operating activities for the period from January 1, 1999 to June 30, 1999 and the period from January 1, 2000 to June 30, 2000 resulted primarily from our net operating losses.
Our investing activities used cash of approximately $863,000 and $2.3 million for the period from January 1, 1999 to June 30, 1999 and the period from January 1, 2000 to June 30, 2000, respectively. Cash used in investing activities from January 1, 2000 to June 30, 2000 primarily resulted from the continued investment in hardware for our data centers to support our growth.
Our financing activities generated cash of approximately $1.3 million and $2.7 million for the period from January 1, 1999 to June 30, 1999 and the period from January 1, 2000 to June 30, 2000, respectively. Cash generated for the period from January 1, 1999 to June 30, 1999 was primarily due to a capital contribution from InterCept, which at the time was the parent of our Predecessor. Cash generated for the period from January 1, 2000 to June 30, 2000 was primarily from borrowings on the line of credit with InterCept offset by the repayment of certain debt assumed from DVI.
The Company has a $15.0 million line of credit with InterCept. The line of credit bears interest at prime plus 2% with a term of three years and is secured by substantially all assets of the Company. Borrowings on the line of credit have been used primarily to fund working capital needs.
The period from January 1 to June 30, 2000 showed a decline of approximately $5.8 million in cash and cash equivalents. This decline is due primarily to our operating losses, the continued expansion of our data centers and operations, and the repayment of debt assumed from DVI.
On March 2, 2000, warrants to purchase 461,876 shares of common stock were exercised. Proceeds from the exercise of the warrants totaled approximately $1.5 million.
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We believe that our existing capital resources and our financing commitments, together with cash provided by our operations, will be sufficient to fund our working capital requirements for the next 12 months. If we expand more rapidly than currently anticipated, if our working capital requirements exceed our current expectations, if we do not achieve our forecasted revenue, or if we make additional acquisitions, we may need to raise additional capital either through debt or equity sources before that time. We cannot be sure that we will be able to obtain the additional financing necessary to satisfy these additional capital requirements or to implement our growth strategy on acceptable terms or at all. If we cannot obtain this financing on terms acceptable to us, we may be forced to curtail some planned business expansion and may be unable to fund our ongoing operations.
YEAR 2000 ISSUE
The year 2000 issue refers to the problems that may have arisen from the improper processing of dates and date-sensitive calculations by computers and embedded microprocessors as the year 2000 was reached. These problems generally arose from the fact that most computer hardware and software components historically have been programmed to use only two digits to identify the year in a date. For example, the computer would recognize a code of 00 as the year 1900 rather than the year 2000. As of August 4, 2000, we had not encountered any significant year 2000 business interruptions or losses, either from our own systems or from those of our suppliers or customers.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not use derivative financial instruments in our operations and do not have operations subject to fluctuations in foreign currency exchange rates. We have a line of credit with InterCept that has an interest rate that fluctuates based on the prime rate. As of June 30, 2000, we had approximately $14.95 million outstanding under this line of credit, which exposes us to interest rate risk. Interest rate risk reflects the fact that increases in interest rates, which may increase the interest rate on our borrowings, would make it more costly to borrow funds thereunder and may impede our acquisition and growth strategies if we determine the costs associated with borrowing funds are too high to implement these strategies.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 15, 2000, we held our annual shareholders meeting. The only matter submitted to a vote of our shareholders at this meeting was the election of four class I director nominees and one class II director nominee. Each nominee had served as a director of Netzee prior to this annual meeting.
The following class I director nominees were elected at this meeting, each to serve for a term of three years and until his successor is elected and qualified:
Class I Director Nominee | Votes For | Votes Withheld | ||||||
Joel A. Katz | 16,519,255 | 17,718 | ||||||
Stiles A. Kellett, Jr. | 16,519,792 | 17,181 | ||||||
Joseph F. Quinlan, Jr. | 16,519,792 | 17,181 | ||||||
Glenn W. Sturm | 16,517,825 | 19,148 |
The following class II director nominee was elected at this meeting to serve for a term of one year and until his successor is elected and qualified:
Class I Director Nominee | Votes For | Votes Withheld | ||||||
Jon R. Burke | 16,519,483 | 17,493 |
There were no broker non-votes or abstentions cast at the annual meeting.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
EXHIBIT | ||
NO. | DESCRIPTION OF EXHIBITS | |
2.1 | Agreement and Plan of Merger, dated August 6, 1999, by and among Direct Access Interactive, Inc., SBS Corporation and the shareholders of SBS Corporation.(1) | |
2.2 | Agreement and Plan of Merger, dated September 3, 1999, by and among Netzee, Inc., Dyad Corporation and certain of the shareholders of Dyad Corporation.(1) | |
2.3 | Asset Contribution Agreement, dated September 3, 1999, by and among The InterCept Group, Inc., Netzee, Inc. and The Bankers Bank.(1) |
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2.4 | Asset Contribution Agreement, dated September 3, 1999, by and among The InterCept Group, Inc., Netzee, Inc. and TIB The Independent BankersBank.(1) | |
2.5 | Acquisition Agreement, dated September 3, 1999, by and among Netzee, Inc., Call Me Bill, LLC and each of the members of Call Me Bill, LLC.(1) | |
2.6 | Asset Transfer Agreement, dated August 6, 1999, by and between The InterCept Group, Inc. and Direct Access Interactive, Inc.(1) | |
2.7 | Agreement and Plan of Merger, dated September 3, 1999, by and between Netzee, Inc. and Direct Access Interactive, Inc.(1) | |
2.8 | Asset Purchase Agreement, dated December 15, 1999, by and among Netzee, Inc., Netcal, Inc. and DPSC Software, Inc.(2) | |
2.9 | Asset Purchase Agreement, dated February 28, 2000, by and among Netzee, Inc., Digital Visions, Inc. and certain shareholders of Digital Visions, Inc.(3) | |
3.1 | Amended Articles of Incorporation of Netzee, Inc., as amended to date.(2) | |
3.2 | Amended and Restated Bylaws of Netzee, Inc., as amended.(4) | |
4.1 | Form of Netzee, Inc. common stock certificate.(1) | |
4.2 | Form of Netzee, Inc. Series A 8% Convertible Preferred Stock certificate.(2) | |
4.3 | Registration Rights Agreement, dated August 6, 1999, by and among Netzee, Inc. (as successor to Direct Access Interactive, Inc.) and each of the former shareholders of SBS Corporation.(1) | |
4.4 | Registration Rights Agreement, dated September 3, 1999, by and among Netzee, Inc., The Bankers Bank and TIB The Independent BankersBank.(1) | |
4.5 | Registration Rights Agreement, dated August 31, 1999, by and among Netzee, Inc. and each of the former shareholders of Dyad Corporation.(1) | |
4.6 | Agreement, dated September 3, 1999, by and between Netzee, Inc. and Sirrom Investments, Inc., regarding registration rights of Sirrom.(1) | |
4.7 | Registration Rights Agreement, dated October 18, 1999, by and between Netzee, Inc. and Kellett Partners, L.P.(1) | |
4.8 | Warrant, dated October 18, 1999, issued to Kellett Partners, L.P.(1) | |
4.9 | Registration Rights Agreement, dated December 15, 1999, by and between Netzee, Inc. and each of the former shareholders of DPSC Software, Inc.(2) | |
4.10 | Registration Rights Agreement, dated March 7, 2000, by and between Netzee, Inc. and Digital Visions, Inc.(3) | |
10.1 | Netzee, Inc. 1999 Stock Option and Incentive Plan.(1) | |
10.2 | Option Agreement, dated July 1, 1999, by and between Netzee, Inc. (as successor to Direct Access Interactive, Inc.) and Glenn W. Sturm.(1) | |
10.3 | Option Agreement, dated July 1, 1999, by and between Netzee, Inc. (as successor to Direct Access Interactive, Inc.) and John W. Collins.(1) | |
10.4 | Option Agreement, dated August 5, 1999, by and between Netzee, Inc. (as successor to Direct Access Interactive, Inc.) and Richard S. Eiswirth.(1) | |
10.5 | Employment Agreement, dated September 1, 1999, by and between Netzee, Inc. and Glenn W. Sturm.(1) | |
10.6 | Employment Agreement, dated September 1, 1999, by and between Netzee, Inc. and C. Michael Bowers.(1) | |
10.7 | Employment Agreement, dated March 1, 2000, by and between Netzee, Inc. and Richard S. Eiswirth.(4) | |
10.8 | Form of Indemnification Agreement to be entered into between Netzee, Inc. and each of its executive officers and directors.(1) | |
10.9 | Promissory Note, dated August 6, 1999, from Netzee, Inc. as maker to The InterCept Group, Inc. as payee, in the principal amount of $21,534,625.(1) | |
10.10 | Promissory Note, dated September 1, 1999, from Netzee, Inc. as maker to The InterCept Group, Inc. as payee, in the principal amount of $4,399,639.22.(1) | |
10.11 | Promissory Note, dated September 1, 1999, from Netzee, Inc. as maker, to The InterCept Group, Inc. as payee, in the principal amount of $2,882,200.(1) | |
10.12 | Promissory Note, dated September 1, 1999, from John W. Collins as maker, to Netzee, Inc. (as successor to Direct Access Interactive, Inc.)(1) | |
10.13 | Promissory Note, dated September 1, 1999, from Glenn W. Sturm as maker, to Netzee, Inc. (as successor to Direct Access Interactive, Inc.)(1) | |
10.14 | Promissory Note, dated September 1, 1999, from Donny R. Jackson as maker, to Netzee, Inc. (as successor to Direct Access Interactive, Inc.)(1) |
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10.15 | Promissory Note, dated September 1, 1999, from Richard S. Eiswirth as maker, to Netzee, Inc. (as successor to Direct Access Interactive, Inc.)(1) | |
10.16 | Line of Credit Agreement, dated October 18, 1999, by and between Netzee, Inc. and Kellett Partners, L.P.(1) | |
10.17 | General Marketing Agent Agreement, dated September 3, 1999, as amended, by and between Netzee, Inc. and TIB The Independent BankersBank.(1)(5) | |
10.18 | General Marketing Agent Agreement, dated September 3, 1999, as amended, by and between Netzee, Inc. and The Bankers Bank.(1)(5) | |
10.19 | Sublease, dated September 1, 1999, by and between The Bankers Bank and Netzee, Inc.(1) | |
10.20 | Commercial Lease, dated January 9, 1998, by and between DMB, LLC and Netzee, Inc. (as successor to Direct Access Interactive, Inc. (as successor to SBS Corporation)).(1) | |
10.21 | Employment Agreement, dated February 28, 2000, by and between Netzee, Inc. and Michael E. Murphy.(4) | |
10.22 | Promissory Note, dated March 24, 2000, from Netzee, Inc. as maker, to The InterCept Group, Inc., as payee, in the principal amount of $7,800,000.(4) | |
10.23 | Master Agreement, dated March 1, 2000 by and between Netzee, Inc. and The Bankers Bank.(4)(6) | |
10.23.1 | Amendment to Master Agreement and Schedule, dated June 1, 2000, by and between Netzee, Inc. and The Bankers Bank.(8) | |
10.24 | Maintenance Agreement, dated March 1, 2001, by and between Netzee, Inc. and The Bankers Bank.(4)(6) | |
10.25 | Credit Agreement, dated May 31, 2000, by and between Netzee, Inc. and The InterCept Group, Inc.(7) | |
27.1 | Financial Data Schedule (For SEC use only). |
(1) | Previously filed as an exhibit to Netzee, Inc.s Registration Statement on Form S-1 (File No. 333-87089), and hereby incorporated by reference herein. | |
(2) | Previously filed as an exhibit to Netzee, Inc.s Form 10-Q for the quarter ended September 30, 1999, as filed with the Securities and Exchange Commission on December 22, 1999, and hereby incorporated by reference herein. | |
(3) | Previously filed as an exhibit to Netzee, Inc.s Form 8-K dated March 7, 2000, as filed with the Securities and Exchange Commission on March 22, 2000, and hereby incorporated by reference herein. | |
(4) | Previously filed as an exhibit to Netzee, Inc.s Form 10-K for the fiscal year ended December 31, 1999 as filed with the Securities and Exchange Commission on March 29, 1999, and as amended May 1, 2000, and hereby incorporated by reference herein. | |
(5) | Portions of this exhibit were previously omitted pursuant to a confidential treatment request granted by the Securities and Exchange Commission on November 8, 1999. | |
(6) | Portions of this exhibit were previously omitted pursuant to a confidential treatment request granted by the Securities and Exchange Commission on July 18, 2000. | |
(7) | Previously filed as an exhibit to Netzee, Inc.s Form 8-K dated May 31, 2000, as filed with the Securities and Exchange Commission on June 20, 2000. | |
(8) | Portions of this exhibit were omitted pursuant to a confidential treatment request that Netzee, Inc. has filed with the Securities and Exchange Commission simultaneously herewith. |
(b) Reports on Form 8-K
(1) | On May 22, 2000, we filed Amendment No. 1 to our Form 8-K dated March 22, 2000 to include financial statements of Digital Visions, Inc., which we acquired on March 7, 2000. | |
(2) | On June 20, 2000, we filed a Form 8-K dated May 31, 2000 to report that we finalized a Credit Agreement with The InterCept Group, Inc. on May 31, 2000. No financial statements were filed with this report. |
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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.
NETZEE, INC. | ||
Date: August 14, 2000 | /s/ Richard S. Eiswirth | |
Senior Executive Vice President, Chief Financial Officer and Secretary (Principal Financial Officer and Duly Authorized Officer) |
||
Date: August 14, 2000 | /s/ Jarett J. Janik | |
Vice President
and Controller (Principal Accounting Officer) |
17
|