Item 1-4. Not Applicable
Item 5. Other Events
The Registrant closed four acquisitions during the period beginning June 1,
1994 and ending October 26, 1994. None of these transactions was material.
Each is described below.
On June 1, 1994, the Registrant acquired certain assets and liabilities of Yes
Check Services, Inc. (hereinafter "Yes Check"). These assets and
liabilities were purchased directly from Yes Check. The assets and liabilities
are used in a Chicago-based check guarantee business.
Effective September 2, 1994, the Registrant acquired a Chicago-based check
guarantee business through the purchase of all of the capital stock
of Mercantile Systems, Inc. (hereinafter "Mercantile"). The stock was
purchased from the individual shareholders of Mercantile, a group of
approximately 13 persons.
On July 15, 1994, the Registrant acquired substantially all of the assets and
liabilities of Lytec Systems, Inc. (hereinafter "Lytec"), a Salt Lake City,
Utah-based physician and dental practice management software development
company. The assets and liabilities were bought by the Registrant from Lytec.
Effective October 26, 1994, the Registrant acquired all of the capital stock
of Zadall Systems Group, Inc. (hereinafter "Zadall"), a Vancouver, British
Columbia-based pharmacy and dental practice management software development
company. The stock was purchased from the individual shareholders of Zadall.
The principal shareholders were Barry Guld and Mark Lyle.
The aggregate price paid for these acquisitions was $36,177,000 plus future
earn-out payments required for both the Yes Check and Lytec transactions. These
subsequent payments are not estimable at this time. Cash from internally
generated funds was used to finance $33,171,000 of the purchase price and
non-negotiable installment notes in the amount of $3,006,000, payable over
3 years, were issued to finance the remainder. The net value of the tangible
assets acquired was $3,096,000 creating an excess of cost over tangible assets
acquired of $33,081,000.
Item 6. Not Applicable
Item 7. Financial Statements and Exhibits
The following financial statements, pro forma financial information and exhibits
are filed as part of this report.
(a) Financial Statements for a substantial majority of the businesses
acquired.
(1) Yes Check Services, Inc. Combined Balance Sheet, Income
Statement, Statement of Cash Flows, related notes and
accompanying auditor's report for the eleven month
period ended December 31, 1993.
(2) Yes Check, Inc. unaudited interim financial statements
for the period January 1, 1994 to May 31, 1994.
<PAGE>
(3) Mercantile Systems, Inc. Balance Sheets, Income
Statements, Statements of Cash Flows, related notes and
accompanying auditor's report for the years ended
December 31, 1993 and 1992.
(4) Mercantile Systems, Inc. unaudited interim financial
statements for the period January 1, 1994 to May 31,
1994.
(b) Pro Forma Financial Information.
(1) Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of August 31, 1994.
(2) Unaudited Pro Forma Condensed Consolidated Income
Statement for the fiscal year ended May 31, 1994.
(3) Unaudited Pro Forma Condensed Consolidated Income
Statement for the three months ended August 31, 1994.
(3) Notes to Unaudited Pro Forma Condensed Consolidated
Statements.
(c) Exhibits.
(1) Exhibit 23-A Consent of Arthur Andersen & Co.
(2) Exhibit 23-B Consent of KPMG Peat Marwick
Item 8. Not Applicable
<PAGE>
Signature
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.
NATIONAL DATA CORPORATION
By: /s/ Jerry W. Braxton
________________________
Jerry W. Braxton
Chief Financial Officer
Dated: May 23, 1995
<PAGE>
KPMG Peat Marwick
Certified Public Accountants
Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 60601-9973
Independent Auditors' Report
The Boards of Directors
Yes Check Services, Inc.
and Select Check, Inc.:
We have audited the accompanying combined balance sheets of Yes Check Services,
Inc. and Select Check, Inc. as of December 31, 1993 and the related combined
statements of operations and cash flows for the period from February 1, 1993,
date of inception, through December 31, 1993. These combined financial
statements are the responsibility of the management of Yes Check Services, Inc.
and Select Check, Inc. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Yes Check
Services, Inc. and Select Check, Inc. as of December 31, 1993 and the
combined results of their operations and their cash flows for the period from
February 1, 1993 through December 31, 1993, in conformity with generally
accepted accounting principles.
The accompanying combined financial statements have been prepared assuming that
Yes Check Services, Inc. and Select Check, Inc. will continue as going concerns.
As discussed in note 7 to the financial statements, the 1993 loss from
operations and the net capital deficiency raise substantial doubt about the
combined entities' ability to continue as going concerns. Management's plans
with regard to these matters are also described in note 7. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ KPMG Peat Marwick
March 18, 1994
<PAGE>
YES CHECK SERVICES, INC. AND SELECT CHECK, INC.
Combined Balance Sheet
December 31, 1993
Assets
________________________________________________________________________________
Current assets:
Cash $ 99,747
Accounts receivable, net of allowance for doubtful
accounts of $74,608 655,987
Claims receivable, net of allowance for doubtful
accounts of $ 1,909,801 112,857
Prepaid expenses 145,862
________________________________________________________________________________
Total current assets 1,014,453
________________________________________________________________________________
Furniture, fixtures, and equipment 704,788
Less accumulated depreciation 157,281
________________________________________________________________________________
Furniture, fixtures, and equipment, net 547,507
Intangible assets, net of accumulated amortization 20,166,441
________________________________________________________________________________
$21,728,401
Liabilities and Common Stockholder's Equity
________________________________________________________________________________
Current liabilities:
Accounts payable 219,361
Due to affiliates 5,667
Current portion of capital lease obligation 92,628
Accrued merchant claims 357,384
Accrued interest 1,447,622
Other accrued expenses 49,277
Notes payable 41,817,747
________________________________________________________________________________
Total current liabilities 43,989,686
Long-term portion of capital lease obligation 68,271
________________________________________________________________________________
Total liabilities 44,057,957
Common stockholder's equity (deficit):
Yes Check Services, Inc., common stock, $.01 par value;
100 shares authorized, issued, and outstanding 1
Select Check, Inc., common stock, $.01 par value;
100 shares authorized, issued, and outstanding 1
Additional paid in capital 99,998
Accumulated deficit (22,429,556)
________________________________________________________________________________
Total common stockholder's equity (deficit) (22,329,556)
________________________________________________________________________________
$21,728,401
________________________________________________________________________________
See accompanying notes to combined financial statements.
<PAGE>
YES CHECK SERVICES, INC. AND SELECT CHECK, INC.
Combined Statement of Operations
Eleven months ended December 31, 1993
_________________________________________________________________________
Net revenues $ 7,285,094
Net claim expense 2,826,104
_________________________________________________________________________
Gross Profit 4,458,990
General and administrative expenses 2,053,337
_________________________________________________________________________
Earnings from operations before depreciation and
amortization of goodwill and intangible assets 2,405,653
Depreciation and amortization of goodwill
and intangible assets 21,648,115
_________________________________________________________________________
Earnings from operations after amortization of goodwill
and intangible assets (19,242,462)
Interest expense (3,187,094)
_________________________________________________________________________
Net Income (loss) (22,429,556)
Retained earnings at February 1, 1993 -
_________________________________________________________________________
Retained earnings at December 31, 1993 ($22,429,556)
_________________________________________________________________________
See accompanying notes to combined financial statements
<PAGE>
YES CHECK SERVICES, INC. AND SELECT CHECK, INC.
Combined Statement of Cash Flows
Eleven months ended December 31, 1993
Cash flows from operating activities:
Net income (loss) ($22,429,556)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 21,648,115
Changes in assets and liabilities:
Increase in accounts receivable, net (655,987)
Increase in claims receivable, net (112,857)
Increase in prepaid expense (145,862)
Increase in accounts payable 219,361
Increase in due to affiliates 5,667
Increase in accrued expenses 49,277
Increase in accrued merchant claims 357,384
Increase in accrued interest 1,447,622
----------
Net cash provided by operating activities 383,164
Net cash used in investing activities:
Acquisition of certain assets of the Yes Check
Division of Cherry Payment Systems, Inc. (100,000)
Acquisition of furniture, fixtures and equipment (119,079)
----------
Net cash used in investing activities (219,079)
Cash flows from financing activities:
Decrease in obligation under capital lease (82,085)
Repayment of notes payable (82,253)
Issuance of common stock 100,000
----------
Net cash provided by financing activities (64,338)
Net increase in cash 99,747
Cash at February 1, 1993, date of inception -
----------
Cash at December 31, 1993 $99,747
----------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $1,717,747
Income taxes -
----------
See accompanying notes to combined financial statements.
<PAGE>
YES CHECK SERVICES, INC. AND SELECT CHECK, INC.
Notes to Combined Financial Statements
December 31, 1993
( 1 ) Summary of Significant Accounting Policies
(a) Principles of Combination
The combined financial statements include the accounts of Yes Check Services,
Inc. and Select Check, Inc. Yes Check Services, Inc. was incorporated in Iowa on
December 31, 1992 for the purpose of acquiring certain assets of the Yes Check
Division of Cherry Payment Systems, Inc. for $100,000 in cash, issuance of
$41,900,000 of senior subordinated notes, and assumption of a $236,515 capital
lease obligation. Select Check, Inc. was formed in March 1993. Yes Check
Services, Inc. and Select Check, Inc. (collectively "the Company") provide check
guarantee services at point-of-sale primarily to small and medium size merchants
located throughout the United States.
(b) Furniture, Fixtures, and Equipment
Furniture, fixtures, and equipment are stated at cost. Depreciation on
furniture, fixtures, and equipment is computed on a straight-line basis over the
estimated useful lives of the assets.
(c) Prepaid Expenses
Prepaid expenses consist primarily of prepaid sales commissions. Prepaid sales
commissions are amortized on a straight-line basis over the term of the service
contract, typically one year.
(d) Intangible Assets
Intangible assets consist of the value of the Company's merchant customer base
and its credit database. The merchant customer base and the credit database are
being amortized on a straight-line basis over periods of 6 and 7 years,
respectively.
(e) Income Taxes
The Company has elected subchapter S corporation status with the Internal
Revenue Service under Section 1362 of the Internal Revenue Code. As a result,
virtually all of the Company's income, deductions, and credits are passed
through to the Company's sole shareholder for Federal income tax purposes. State
and local tax jurisdictions do not uniformly recognize S corporation status.
Accordingly, the Company will continue to be liable for state and local
income taxes in certain of these jurisdictions.
(2) Related-party Transactions
Select Insurance Associates, Ltd., an affiliate, markets the Company's check
guarantee services. Amounts due from Select Insurance Associates, Ltd. at
December 31, 1993 amounted to approximately $17,000.
The Company rents office space from Illinois Capital Group, Inc., an affiliate,
on a month-to-month basis at a rate of approximately $8,000 per month.
Management believes that these rentals are comparable with rentals which
could be negotiated with third parties on an arm's length basis. Amounts due to
Illinois Capital Group amounted to approximately $8,300 at December 31, 1993.
(3) Furniture, Fixtures, and Equipment
Furniture, fixtures, and equipment consists primarily of office furniture,
office equipment, computer software, and computer equipment. The computer
equipment is being leased under a capital lease through August 1995 and is
carried at a cost of $211,000 with accumulated depreciation of $59,526 at
December 31, 1993.
<PAGE>
( 4 ) Intangible Assets
In connection with the Company's acquisition of certain assets of the Yes Check
Division of Cherry Payment Systems, Inc. (Cherry), the excess of the purchase
price over the fair value of net tangible assets acquired amounted
to $41,650,806, of which $36,000,000 was attributed to the value of the
Company's merchant customer base, and the remaining $5,650,806 was attributed to
the database of credit history compiled by the Company. During 1993,
the Company wrote off $18,000,000 relating to the merchant customer base after
management determined that the value of this intangible asset was significantly
impaired as a result of various actions by Cherry which occurred prior to the
acquisition.
( 5 ) Notes Payable
Notes payable as of December 31, 1993 consist of the following:
Senior Subordinated Promissory Note
bearing simple interest at 18% $ 4,817,747
Senior Subordinated Promissory Note
bearing simple interest at 7% $ 37,000,000
-------------
Notes payable $ 41,817,747
Combined monthly principal and interest payments on the notes amount to $300,000
through February 1, 1994, $400,000 through February 1, 1995, and $500,000
thereafter, until fully paid. All of the Company's stock has been pledged as
security for the notes payable. Since October 1993, the Company has failed to
make the required principal and interest payments on the notes as they came due,
and remains in default under the terms of the notes as of December 31, 1993. As
a result, the notes payable have been classified as current liabilities in the
financial statements.
(6) Lease Commitments
The Company leases certain computer equipment through capital leases. Future
minimum lease capital lease payments as of December 31, 1993 are as follows:
Year Ending December 31,
1994 $ 107,124
1995 71,416
----------
Total Minimum Lease Payments $ 178,540
Less amount representing interest (17,641)
----------
Present Value of net minimum
capital lease payments 160,899
Less current installments of
obligations under capital leases (92,628)
-----------
Obligations under capital leases,
excluding current installments $ 68,271
<PAGE>
(7) Liquidity
During 1993, the Company incurred net losses of $22,429,556. At December 31,
1993 the Company's current and total liabilities significantly exceeded its
current and total assets. These conditions indicate that the Company may
experience difficulty in meeting its obligations to its existing single debt
holder. Except for the obligation to such single debt holder, the Company has
sufficient operating cash flow to meet all its other obligations in a timely
manner.
Management is currently attempting to sell the business. In the event it is
unsuccessful in selling the business, management intends to negotiate a
recapitalization of the Company with its single debt holder.
<PAGE>
YES CHECK SERVICES, INC. AND SELECT CHECK, INC.
Unaudited Interim Combined Statement of Operations
For the five months ended May 31, 1994
Net revenues $2,903,285
Net claim expense 889,817
-----------
Gross profit 2,013,468
General and administrative expenses 1,222,301
-----------
Earnings from operations before depreciation and
amortization of goodwill and intangibles 791,167
Depreciation and amortization of goodwill and
intangible assets 1,661,356
-----------
Earnings from operations after amortization
of goodwill and intangibles (870,189)
Interest expense (1,435,912)
-----------
Income (loss) from operations (2,306,101)
Provision for income taxes -
Net Income ($2,306,101)
-----------
<PAGE>
YES CHECK SERVICES, INC. AND SELECT CHECK, INC.
Unaudited Interim Combined Statement of Cash Flows
Five months ended May 31, 1994
Cash flows from operating activities:
Net income (loss) ($2,306,101)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,661,740
Changes in assets and liabilities:
Decrease in accounts receivable, net 79,113
Decrease in claims receivable, net 45,243
Increase in prepaid expense (75,159)
Decrease in accounts payable (53,224)
Decrease in due to affiliates (4,999)
Increase in accrued expenses 1,990
Decrease in accrued merchant claims (189,013)
Increase in accrued interest 929,797
-----------
Net cash provided by operating activities 89,387
Net cash used in investing activities:
Acquisition of furniture, fixtures and equipment (38,009)
-----------
Net cash used in investing activities (38,009)
Cash flows from financing activities:
Decrease in obligation under capital lease (37,240)
-----------
Net cash provided by financing activities (37,240)
Net increase in cash 14,138
Cash at January 1, 1994 99,747
-----------
Cash at May 31, 1994 $113,885
===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $506,115
Income taxes -
===========
<PAGE>
YES CHECK SERVICES, INC. AND SELECT CHECK, INC.
Unaudited Interim Combined Balance Sheet
May 31, 1994
Assets
________________________________________________________________________________
Current assets:
Cash $ 113,885
Accounts receivable, net of allowance for doubtful
accounts of $74,848 576,874
Claims receivable, net of allowance for doubtful
accounts of $ 2,975,354 67,614
Prepaid expenses 221,021
________________________________________________________________________________
Total current assets 979,394
________________________________________________________________________________
Furniture, fixtures, and equipment 742,797
Less accumulated depreciation 232,278
________________________________________________________________________________
Furniture, fixtures, and equipment, net 510,519
Intangible assets, net of accumulated amortization 18,579,699
________________________________________________________________________________
$20,069,612
Liabilities and Common Stockholder's Equity
________________________________________________________________________________
Current liabilities:
Accounts payable 166,137
Due to affiliates 668
Current portion of capital lease obligation 71,189
Accrued merchant claims 168,371
Accrued interest 2,377,419
Other accrued expenses 51,267
Notes payable 41,817,747
________________________________________________________________________________
Total current liabilities 44,652,798
Long-term portion of capital lease obligation 52,470
________________________________________________________________________________
Total liabilities 44,705,268
Common stockholder's equity (deficit):
Yes Check Services, Inc., common stock, $.01 par value;
100 shares authorized, issued, and outstanding 1
Select Check, Inc., common stock, $.01 par value;
100 shares authorized, issued, and outstanding 1
Additional paid in capital 99,998
Accumulated deficit (24,735,656)
________________________________________________________________________________
Total common stockholder's equity (deficit) (24,635,656)
________________________________________________________________________________
$20,069,612
________________________________________________________________________________
ARTHUR ANDERSEN & CO.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Mercantile Systems, Inc.:
We have audited the accompanying balance sheets of MERCANTILE SYSTEMS, INC. (an
Illinois corporation) as of December 31, 1993 and 1992, and the related
statements of operations, direct expenses, operating expenses, shareholder's
investment and cash flows as restated (see Note 8) for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mercantile Systems, Inc. as of
December 31, 1993 and 1992, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
March 4, 1994
<PAGE>
Exhibit 1
MERCANTILE SYSTEMS, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND 1992
ASSETS 1993 1992
CURRENT ASSETS:
Cash $61,752 $92,315
Warranty claims (Notes 1 and 8) 1,378,334 1,231,575
Accounts receivable (Notes 1 and 2) 910,465 745,041
Prepaid expenses and other 66,096 40,066
---------- ----------
Total current assets 2,416,647 2,108,997
PROPERTY AND EQUIPMENT (Note 1):
Office furniture and equipment 534,335 532,678
Data processing equipment 2,181,023 2,266,067
Transportation equipment - 4,872
Leasehold improvements 163,151 162,950
---------- ----------
2,878,509 2,966,567
Less: Accumulated depreciation and
amortization 2,092,820 1,778,136
---------- ----------
Property and equipment, net 785,689 1,188,431
DEFERRED INCOME TAX ASSET (Note 7) 300,000 -
---------- ----------
$ 3,502,336 $3,297,428
---------- ----------
LIABILITIES
CURRENT LIABILITIES:
Note payable (Note 2) $857,800 $949,000
Current maturities of long-term
debt (Note 4) 228,869 1,117,774
Accounts payable -
Merchant 682,000 587,352
Trade 118,179 124,440
Deposits payable - 88,605
Accrued expenses -
Anticipated claims (Note 8) 581,000 581,000
Payroll and commissions 175,266 130,978
Other 40,238 100,117
---------- ----------
Total current liabilities 2,683,352 3,679,266
LONG-TERM DEBT, less current
maturities (Note 4) 2,007,343 1,401,969
SHAREHOLDER'S INVESTMENT
(Exhibit 3 and Notes 6 and 8) (1,188,359) (1,783,807)
---------- ----------
$ 3,502,336 $3,297,428
---------- ----------
The accompanying notes are an integral parts of these balance sheets.
<PAGE>
<TABLE>
Exhibit 2
MERCANTILE SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
<CAPTION>
Common Stock - -
2,000,000 Shares
Authorized
--------------------
$0.001 Additional Retained Total
Shares Par Paid-in Earnings Shareholders'
Issued Value Capital (Deficit) Investment
------ ----- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
Shareholders' Investment,
December 31, 1991 1,001,000 $1,001 $26,158 ($1,833,997) ($1,806,838)
Prior period
adjustment (Note 8) - - - ($267,000) ($267,000)
--------- ------- -------- ------------ ------------
Shareholders' Investment,
December 31, 1991, as restated 1,001,000 $1,001 $26,158 (2,100,997) ($2,073,838)
Sale of stock (Note 6) 86,667 $87 $129,914 - $130,001
Conversion of subordinated
debentures (Note 6) 159,246 $159 $238,531 - $238,690
Net loss for the
year (Exhibit 3) - - - ($78,660) ($78,660)
--------- ------- -------- ------------ ------------
Shareholders' Investment,
December 31, 1992 1,246,913 $1,247 $394,603 ($2,179,657) ($1,783,807)
Issuance of stock (Note 6) 5,000 $5 $7,495 - $7,500
Exercise of stock
option (Note 6) 50,000 $50 - - $50
Net income for the
year (Exhibit 3) - - - $587,898 $587,898
--------- ------- -------- ------------ ------------
Shareholders' Investment,
December 31, 1993 1,301,913 $1,302 $402,098 ($1,591,759) ($1,188,359)
--------- ------- -------- ------------ ------------
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
Exhibit 3
MERCANTILE SYSTEMS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992
GROSS REVENUES (Note 1):
Commission income $8,733,125 $6,587,235
Interest income 25,142 41,348
Discount income - 14,632
Affiliation fees 170,520 235,347
Service charges 775,098 560,363
P.O.S. equipment sales 51,874 6,033
---------- ----------
Total gross revenues $9,755,759 $7,444,958
Less: Warranty claim losses and provisions for
doubtful accounts, net of recoveries 4,275,256 2,756,836
---------- ----------
Net revenues 5,480,503 4,688,122
DIRECT EXPENSES (Exhibit 4) 2,157,939 1,910,551
OPERATING EXPENSES (Exhibit 5) 2,748,607 2,534,572
---------- ----------
Total expenses 4,906,546 4,445,123
INTEREST EXPENSE 321,388 372,204
---------- ----------
Income (loss) from operations 252,569 (129,205)
OTHER (INCOME) EXPENSE, net 31,135 (20,044)
CREDIT FOR INCOME TAXES (300,000) -
---------- ----------
Net income (loss) for the year from 521,434 (109,161)
continuing operations
GAIN FROM DISCONTINUED INSTANT CREDIT
OPERATIONS (Note 4) 66,464 30,501
---------- ----------
NET INCOME (LOSS) FOR THE YEAR $587,898 ($78,660)
---------- ----------
The accompanying notes and Exhibits 4 and 5 are integral
parts of these statements.
<PAGE>
Exhibit 4
MERCANTILE SYSTEMS, INC.
STATEMENTS OF DIRECT EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992
DIRECT EXPENSES:
Salaries -
Merchant services $83,799 $84,423
Collections 416,675 330,012
Authorizations 220,328 191,776
Data processing 100,574 101,684
Financial services 144,748 127,891
Telephone and P.O.S. 526,320 454,730
Postage 128,556 130,533
Credit bureau service fees and other 145,897 140,264
Payroll taxes 178,368 143,279
Printing 56,720 66,462
Data processing -
Lease 77,240 78,795
Programming 2,371 1,950
Maintenance and supplies 43,152 27,762
Collection 21,191 18,990
Telephone lease 12,000 12,000
---------- ----------
Total direct expense $2,157,939 $1,910,551
========== ==========
<PAGE>
Exhibit 5
MERCANTILE SYSTEMS, INC.
STATEMENTS OF OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992
SELLING EXPENSES:
Commissions $949,538 $671,214
Salaries 294,772 274,692
Advertising and promotion 6,916 15,654
Shows and exhibits 26,925 15,709
Recruitment and training - sales agents 9,117 3,451
--------- --------
Total selling expenses 1,287,268 980,720
GENERAL AND ADMINISTRATIVE EXPENSES:
Salaries 535,062 533,136
Depreciation and amortization 396,596 467,962
Rent and utilities 121,303 137,087
Professional fees 52,488 58,831
Group health insurance 104,597 106,211
Bank charges 62,461 38,930
Freight and delivery 17,950 25,327
Office supplies 32,901 39,556
Recruiting 2,207 680
Repairs and maintenance 56,326 60,554
General insurance 25,703 29,649
Director fees 7,500 12,250
Dues, subscriptions and donations 12,872 6,374
Real estate taxes and C.A.M charges - 3,953
Seminars and conventions 3,701 2,919
Employee welfare 13,616 12,373
Officers' life insurance 10,170 13,842
Other 5,886 4,218
Total general and ---------- ---------
administrative expenses 1,461,339 1,553,852
Total operating expenses $2,748,607 $2,534,572
========== ==========
<PAGE>
Exhibit 6
MERCANTILE SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) for the year from continuing
operations (Exhibit 3) $521,434 ($109,161)
Adjustments to reconcile net income (loss) from
continuing operations to net cash provided by
operating activities -
Net cash flows from
discontinued operations 66,464 30,501
Depreciation and amortization 396,596 467,962
Deferred income tax asset (300,000) -
Gain on sale of property and equipment (51,414) -
Issuance of common stock 7,500 -
Exercise of stock option 50 -
Changes in operating assets and liabilities -
Warranty claims (146,759) (56,477)
Accounts receivable (165,424) (18,339)
Prepaid expenses and other (26,030) 18,209
Refundable income taxes - 7,179
Accounts payable 88,387 (147,363)
Deposits payable (88,605) 2,835
Accrued expenses (15,591) (19,085)
Cash flows from discontinued operations - 178,086
--------- ---------
Net cash provided by operating activities 286,608 354,347
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (38,294) (36,147)
Proceeds from the sale of property and equipment 95,854 -
--------- ---------
Net cash provided by (used in) 57,560 (36,147)
investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debentures
and notes payable 20,388 356,129
Net payments on bank note payable (91,200) (350,000)
Payments on the principal of
debentures payable (123,153) (210,095)
Payments on the principal of other debt (180,766) (168,665)
Proceed from the sale of common stock - 130,001
--------- ---------
Net cash used in financing activities (374,731) (242,630)
<PAGE>
NET INCREASE (DECREASE) IN CASH FOR THE YEAR (30,563) 75,570
CASH, beginning of the year 92,315 16,745
--------- ---------
CASH, end of the year $61,752 $92,315
--------- ---------
SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the year for interest $362,005 $400,275
Exchange of debentures for shares of
common stock - $238,690
--------- ---------
The accompanying notes are an integral part of these statements
<PAGE>
MERCANTILE SYSTEMS. INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31. 1993 AND 1992
1. BUSINESS--ACCOUNTING POLICIES:
The Company provides check-guarantee services to companies and individuals
operating in automotive, car repair and retail businesses throughout the United
States. Significant accounting policies of the Company are as follows:
Revenues
Commission income is based on a percentage of the dollar amount of each check
guaranteed. Service charges are received on all checks for which the Company is
required to reimburse the merchant for each warranty claim presented. Interest
income relates to interest earned from finance charges on outstanding accounts
receivable. Affiliation fees are derived annually from merchants who utilize
the check-guarantee service.
Warranty Claims
Warranty claims represent amounts owed to the Company by individuals for checks
they wrote to merchants which were guaranteed by the Company and were not
honored by the bank when presented. These claims are recorded net of
anticipated losses.
Accounts Receivable
Accounts receivable of the Company at December 31, 1993 and 1992, consist of the
following:
1993 1992
Merchants $947,590 $713,886
Private label cards 4,979 79,488
Other - 10,218
------------ -----------
952,569 803,592
Less- Allowance for
doubtful accounts 42,104 58,551
-------------- -----------
$910,465 $745,041
============== ===========
Property and Equipment
Property and equipment are stated at cost. The Company provides depreciation
and amortization utilizing straight-line and various accelerated methods over
the estimated useful lives of the assets, which are as follows:
Asset Description Life
Office furniture and equipment 7-10 years
Data processing equipment 3-7 years
Transportation equipment 3 years
Leasehold improvements Lease term
<PAGE>
Basis of Presentation
The accompanying financial statements have been prepared on a going-concern
basis although, at December 31, 1993, the Company had a stockholder's deficit
and had current liabilities and total liabilities which exceeded its current
assets and total assets. The financial statements do not include any
adjustments relating to the recoverability and classification of assets and
liabilities that might be necessary should the Company be unable to continue as
a going concern. The Company's continuation as a going concern is dependent
upon its ability to generate sufficient cash flow from operations, meet its
obligations on a timely basis, obtain additional financing or refinancing as is
required (Note 2) and, ultimately, attain successful operations.
In the upcoming year, management's plan is to continue to increase check-
guarantee volume sales in new and existing markets. New selling techniques,
combined with improved authorization techniques started in prior years, will
continue to reduce warranty claim losses and allow penetration into new markets
with higher profit margins. The Company will continue to emphasize methods to
reduce direct costs, interest and selling expenses through a comprehensive cost
reduction program and seek additional equity financing In addition, the
Company expects to reduce losses through improved collection techniques. As a
result of these programs, management believes the Company will continue as a
going concern through December 31, 1994.
2. REVOLVING LINE OF CREDIT:
In December, 1991, the Company entered into a financing agreement with a bank.
The agreement provides for a revolving line of credit limited to the lesser of
$949,000 or 80% of acceptable merchant and private label receivables (as
defined), plus up to 25% advance against acceptable warranty claims. Monthly
interest payments based upon the outstanding balance were made through December,
1992, at which time the outstanding balance was due. In addition, a $350,000
term loan collateralized by, and limited to, 100% of Instant Credit Service
(ICS) receivables was due and paid in full on December 31, 1992.
Since the expiration of the credit agreement on December 31, 1992, the Company
successfully negotiated with its bank to extend the terms of the previous credit
agreement through June, 1993, and again through December 31, 1993
At December 31, 1993, the revolver bore annual interest at the bank's prime rate
plus 2-1/2% (8.5%), was secured by the assets of the Company and was guaranteed
by the majority shareholder.
The Company must also meet certain financial covenants under the terms of the
agreements. As of December 31, 1993, the Company was in compliance with, or had
received waiver from, the lender for all covenant violations.
Subsequent to year-end, the Company modified and extended its financing
agreement through December 31, 1994. Under terms of the modified agreement, the
Company is required to make monthly principal payments of $15,625 through
February, 1994 (at which time payments based upon the Company's pretax net
income are required) and not make monthly debenture payments in excess of
$3,000. Also, amounts outstanding bear interest at the bank's prime rate plus
2-1/2%, and new financial covenants consist of maintaining tangible net worth of
$550,000 through June 29, 1994, and $700,000 through December 31, 1994, and
maintaining a debt to tangible net worth (as defined) of not more than 4:1
through June 29, 1994, and 3.9:1 through December 31, 1994.
<PAGE>
3. LONG-TERM DEBT:
Long-term debt of the Company at December 31, 1993 and 1992, consists of the
following:
1993 1992
Installment note payable to a bank,
secured by equipment,
interest payable monthly at 8.0%,
monthly principal
payments of $2,917 through June, 1993 $ - $17,500
Subordinated debentures, three-year term,
due 1994, bearing interest from
11.00% to 12.00% - 1,048,363
Subordinated debentures (see below) 1,832,606 887,008
Equipment under capital lease obligation,
$176,249 due annually through July, 1995,
discounted at an effective
rate of 11.5% 248,662 375,953
Equipment under capital lease obligation,
$54,300 due annually through March,
1996, discounted at an effective rate
of 11.5% 104,944 140,919
Shareholder note payable,
bearing interest at 7% 50,000 50,000
------------------------
2,236,212 2,519,743
Less- Current maturities 228,869 1,117,774
------------------------
Total long-term debt $2,007,343 $1,401,969
========================
The Company issues renewable debentures to individuals and certain shareholders.
The debentures bear interest ranging from 7% to 11%. Interest and principal are
due upon maturity at various dates. Due to bank restrictions, only $36,000 of
principal payments can be made to these debenture holders in 1994. These
debentures are unsecured and subordinated to all secured debt of the Company.
4. DISCONTINUED INSTANT CREDIT OPERATIONS:
During 1991, the Company terminated its Instant Credit operations. Instant
Credit card applications were not accepted after January, 1991, although charges
were approved through April, 1991.
The Instant Credit operations have been accounted for as discontinued operations
in the accompanying statements of operations. The Company recorded a gain from
discontinued Instant Credit operations of $66,464 and $30,501 at December 31,
1993 and 1992, respectively Included in these amounts were net revenues of
$66,464 and $100,576; direct expense of $0 and $23,325; operating expenses of $0
and $46,750 at December 31, 1993 and 1992, respectively. There was no tax
benefit associated with the loss from discontinued operations.
5. EMPLOYEE BENEFIT PLANS
The Company has a discretionary profit-sharing plan covering all eligible
employees. Annual contributions are determined by the Board of Directors. No
contribution was made to the plan in 1993 or 1992.
<PAGE>
6. SHAREHOLDERS' EQUITY:
In 1993, a director/shareholder exercised his option to acquire 50,000 shares of
the Company's stock at book value at the time of purchase. Also, in 1993, all
directors were each issued 1,000 shares of common stock valued at $1.50 in lieu
of cash for directors' fees.
In 1992, the Company sold 86,667 shares of its common stock for $1.50 per share
and the majority shareholder exchanged $238,690 of subordinated debentures for
159,246 shares of common stock.
7. INCOME TAXES:
Effective January 1, 1991, the Company adopted Statement of Financial Accounting
Standards No. 109 (FAS 109), "Accounting for Income Taxes," which was issued in
February, 1992. There was no cumulative effect of adopting this new accounting
principle.
At December 31, 1993, the Company has available for federal income tax purposes
cumulative net operating loss carryforwards of approximately $4,100,000. The
tax net operating loss carryforwards begin to expire in 2003. As permitted
under FAS 109, the Company reflected a valuation allowance for the benefit of
the tax net operating loss carryforward in 1992. In 1993, the Company reduced
its valuation allowance as a result of current and projected taxable income and
a corresponding credit was recorded in the accompanying statement of operations.
Differences between financial reporting and federal taxable income relate
primarily to the timing of deductions for the provision for bad debts,
methods of financial and tax depreciation and the timing of deductions for
accrued vacation.
8. ANTICIPATED CLAIMS:
Historically, the Company had not given consideration to unrecognized claims
associated with checks which have been guaranteed. In an effort to better match
its revenues and associated costs, the Company has accrued the anticipated
claims which it estimates will be presented by merchants based upon the
volume of checks guaranteed and historical claim data. The effect of recording
the anticipated claims at December 31, 1991, has been accounted for as a prior-
period adjustment and resulted in a charge to retained earnings of $267,000. An
accrued liability for anticipated claims of $581,000 and warranty claims, net of
anticipated losses of $314,000, are recorded in the accompanying balance sheets.
9. LEASES:
The Company has entered into leases for its computer equipment, phone system and
office/warehouse facility. Under the terms of the current office and warehouse
facility lease, which expires in November, 1997, the Company is responsible for
utilities, insurance and maintenance. The Company also has an option to renew
for an additional five years at a base rental adjusted for increases in the
cost-of-living index. Total expenses under these leases, excluding utilities,
insurance and maintenance, for the years ended December 31, 1993 and 1992, were
$111,790 and $177,282, respectively.
Future minimum annual lease payments by year are as follows:
Year Amount
1994 $103,116
1995 90,710
1996 90,710
1997 79,371
<PAGE> =======
MERCANTILE SYSTEMS, INC.
Unaudited Interim Combined Statement of Operations
For the five months ended May 31, 1994 and 1993
1994 1993
Gross revenues $4,061,353 $3,823,784
Less: Warranty claim provision 1,594,789 1,576,312
---------------------------------------------------------------------
Net revenues 2,466,564 2,247,472
Direct expenses 927,057 836,042
Operating expenses 1,203,547 1,098,737
---------------------------------------------------------------------
Total expenses 2,130,604 1,934,779
Interest expense 150,298 139,747
---------------------------------------------------------------------
Net income from operations 185,662 172,946
Provision for income taxes - -
---------------------------------------------------------------------
Net income $185,662 $172,946
---------------------------------------------------------------------
<PAGE>
MERCANTILE SYSTEMS, INC.
UNAUDITED INTERIM BALANCE SHEETS
AS OF MAY 31, 1994 AND 1993
ASSETS 1994 1993
CURRENT ASSETS:
Cash $249,682 -
Warranty claims 1,388,338 1,409,466
Accounts receivable 873,504 910,329
Prepaid expenses and other 68,561 106,638
---------- -----------
Total current assets 2,580,085 2,426,433
PROPERTY AND EQUIPMENT
Office furniture and equipment 534,335 533,261
Data processing equipment 2,191,888 2,280,201
Transportation equipment - 4,872
Leasehold improvements 178,566 163,151
---------- -----------
2,904,789 2,981,485
Less: Accumulated depreciation and
amortization 2,261,820 1,974,636
---------- -----------
Property and equipment, net 642,969 1,006,849
DEPOSITS 19,198 29,516
DEFERRED INCOME TAX ASSET 300,000 -
---------- -----------
$3,542,252 $3,462,798
---------- -----------
LIABILITIES
CURRENT LIABILITIES:
Note payable $824,675 $990,667
Current maturities of long-term debt 242,088 1,064,321
Accounts payable -
Merchant 659,951 663,567
Trade 67,903 61,569
Deposits payable - 92,462
Due to bank - 37,557
Accrued expenses -
Anticipated claims 581,000 581,000
Payroll and commissions 165,313 147,640
Other 122,823 81,339
---------- -----------
Total current liabilities 2,663,753 3,720,122
LONG-TERM DEBT, less current maturities 1,881,198 1,353,537
SHAREHOLDER'S INVESTMENT (1,002,699) (1,610,861)
---------- -----------
$3,542,252 $3,462,798
---------- -----------
<PAGE>
MERCANTILE SYSTEMS, INC.
UNAUDITED INTERIM STATEMENTS OF CASH FLOWS
FOR THE FIVE MONTHS ENDED MAY 31, 1994 AND 1993
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $185,662 $172,946
Adjustments to reconcile net income (loss)
to net cash provided by operating activities -
Depreciation and amortization 168,998 196,500
Changes in operating assets and liabilities -
Warranty claims (10,004) (177,891)
Accounts receivable 36,961 (165,288)
Prepaid expenses and other (2,465) (66,572)
Deposits (19,198) (29,516)
Accounts payable (72,325) 13,344
Deposits payable - 3,857
Accrued expenses 72,632 (2,116)
---------- ----------
Net cash provided by operating activities 360,261 (54,736)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (26,280) (14,918)
---------- ----------
Net cash provided by (used in)
investing activities (26,280) (14,918)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of notes payable - 41,667
Net payments on bank note payable (33,125) -
Payments on the principal of debentures payable (14,494) (53,235)
Payments on the principal of other debt (98,432) (48,650)
---------- ----------
Net cash used in financing activities (146,051) (60,218)
NET INCREASE (DECREASE) IN CASH FOR THE YEAR 187,930 (129,872)
CASH, beginning of the period 61,752 92,315
---------- ----------
CASH, end of the period $249,682 ($37,557)
---------- ----------
<PAGE>
Pro Forma Financial Information (Unaudited)
The following pro forma financial information has been prepared as if
the acquisitions transactions reported had taken place on August 31, 1994
for the pro forma condensed consolidated balance sheet and June 1, 1993 for the
pro forma condensed consolidated income statement. The pro forma results
presented are unaudited and reflect estimates for differences in year end.
All acquisitions have been accounted for using the purchase method. Goodwill
and intangibles resulting from these acquisitions will be amortized over periods
not exceeding 20 years. The purchase price allocations are estimated at this
time. Any adjustments to the purchase price are not expected to be material to
the pro forma financial information taken as a whole.
The pro forma financial information is presented for information purposes only
and is not necessarily indicative of the operating results that would have
occurred had the acquisitions taken place on June 1, 1993, nor are they
necessarily indicative of future operations. The pro forma financial
information should be read in conjunction with the accompanying notes.
<PAGE>
NATIONAL DATA CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AUGUST 31, 1994
(in thousands)
NDC Acquired
Historical BusinessesPro Forma Pro Forma
@ 8-31-94 @ 8-31-94 Adjustments Combined
ASSETS
Current assets:
Cash and cash equivalents $30,686 $405 ($23,828)d $7,263
Short-term investments 25 1,059 1,084
Accounts receivable- trade, net 36,917 2,533 39,450
Accounts receivable- other, net 17,151 1,470 18,621
Other current assets 9,822 1,309 11,131
------- ------- ------- -------
Total current assets 94,601 6,776 (23,828) 77,549
Property and equipment,
net of depreciation 34,568 1,265 35,833
Acquired intangibles and goodwill,net 47,966 72 24,703 c 72,741
Deferred income tax asset - 857 857
Other 5,704 232 (193)b 5,743
------- ------- ------- -------
88,238 2,426 24,510 115,174
------- ------- ------- -------
Total Assets $182,839 $9,202 $682 $192,723
------- ------- ------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $10,308 $936 $11,244
Notes payable - 788 (750)a 38
Current maturities on long-term debt 1,835 479 (229)a 2,085
Merchant processing payables 17,733 1,671 19,404
Income tax payable 4,843 20 4,863
Deferred revenue 1,629 1,629
Other current liabilities 16,126 1,080 17,206
------- ------- ------- -------
Total current liabilities 50,845 6,603 (979) 56,469
Mortgage and other long-term debt 11,920 2,459 1,434 a 15,813
Other long-term liabilities 8,216 367 8,583
------- ------- ------- -------
Total liabilities 70,981 9,429 455 80,865
Stockholders' Equity:
Common stock 1,586 1 (1)e 1,587
Capital in excess of par value 31,162 625 (625)e 31,162
Retained earnings 80,550 (853) 853 e 80,550
Equity adjustments (1,440) (1,440)
------- ------- ------- -------
111,858 (227) 227 112,585
Total Liabilities
and Stockholders' Equity $182,839 $9,202 $682 $192,723
------- ------- ------- -------
<PAGE>
NATIONAL DATA CORPORATION
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE FISCAL YEAR ENDED MAY 31, 1994
(in thousands except per share data)
NDC
Historical Acquired
(See Note 1) Businesses Pro Forma Pro Forma
@ 5-31-94 @ 5-31-94 Adjustments Combined
Revenue $206,133 $28,306 $234,439
Operating Expenses:
Cost of Service 119,264 9,622 1,762 c 130,648
Sales, general
and administrative 68,482 14,796 83,278
-------- -------- -------- --------
187,746 24,418 1,762 213,926
Operating Income 18,387 3,888 (1,762) 20,513
Other Income (expense):
Interest and other income 1,489 0 1,489
Interest and other expense (2,517) 0 (672) d (3,189)
-------- -------- -------- --------
(1,028) 0 (672) (1,700)
Income before income taxes 17,359 3,888 (2,434) 18,813
Provision for income taxes 6,199 904 (442) 6,661
-------- -------- -------- --------
Net Income $11,160 $2,984 ($1,992) $12,152
-------- -------- -------- --------
Number of common and common
equivalent shares 12,987 12,987
Earnings per share $0.86 $0.94
-------- --------
<PAGE>
NATIONAL DATA CORPORATION
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED AUGUST 31, 1994
(in thousands except per share data)
NDC Acquired
Historical Businesses Pro Forma Pro Forma
@ 8-31-94 @ 8-31-94 Adjustments Combined
Revenue $55,969 $7,095 $63,064
Operating Expenses:
Cost of Service 30,658 2,033 338 c 33,029
Sales, general and administrative 20,371 4,330 24,701
------- ------- ------- -------
51,029 6,363 338 57,730
Operating Income 4,940 732 (338) 5,334
Other Income (expense):
Interest and other income 452 0 452
Interest and other expense (584) 0 (273)d (857)
------- ------- ------- -------
(132) 0 (273) (405)
Income before income taxes 4,808 732 (611) 4,929
Provision for income taxes 1,731 238 (73) 1,896
------- ------- ------- -------
Net Income $3,077 $494 ($538) $3,033
Number of common and common
equivalent shares 13,311 13,311
Earnings per share $0.23 $0.23
------- -------
See Note 2 to pro forma condensed consolidated financial statements
<PAGE>
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Note 1. Basis of presentation
Certain reclassifications have been made to National Data Corporation's
historical condensed consolidated income statement for the period ended May 31,
1994 used in the pro forma presentation to conform to fiscal year 1995
presentation.
Note 2. Acquisition Dates
NDC historical income statement for the first quarter pro forma presentation
includes all the activity of Yes Check, acquired on June 1, 1994 and one
and one half months activity for Lytec, acquired on July 15, 1994.
Both of these acquisitions are reflected in the NDC historical balance sheet
information for August 31, 1994.
Note 3. Narrative description of pro forma adjustments.
a) The reduction in notes payable of $750,000 and current maturities on
long-term debt of $229,000, represent liabilities of Mercantile that
were paid concurrent with the acquisition closing. The increase in
mortgage and other long-term debt of $1,434,000 is the net effect of a
three year note payable in the amount of $3,006,000 issued as part of
the acqusition of Mercantile, less Mercantile long-term debt of
$1,572,000 which was paid off at closing.
b) Long term receivables ($193,000) from employees were collected as part
of the acquisition agreement with Zadall Systems Group, Inc.
c) Calculation of intangibles and goodwill:
Mercantile
Total (4) and
Zadall
Acquisitions Only
-------------- --------
Total combined purchase price
Cash $ 33,171,000 $ 24,021,000
Notes $ 3,006,000 $ 3,006,000
--------------- ---------------
$ 36,177,000 $ 27,027,000
Less: Net assets of acquired
businesses $ 3,096,000 $ 2,324,000
--------------- ---------------
Excess of cost over tangible
assets acquired $ 33,081,000 $ 24,703,000
=============== ===============
Year 1 amortization expense $ 1,762,000 $ 1,235,000
<PAGE> =============== ===============
d) The reduction in cash and cash equivalents of $23,828,000 consists of the
cash outlay to acquire Mercantile and Zadall of $24,021,000 less the
$193,000 in employee recievables collected as part of the purchase
agreement.
The $672,000 and the $273,000 increase in Interest and Other Expense
for the fiscal year ended May 31, 1994 and and three months ended August
31, 1994, respectively, represent the interest income that would have
been forfeited had the cash equivalents been reduced by $23,828,000 at
the beginning of the fiscal periods. The average interest earned on
investments was approximately 3% in both periods.
e) Stockholders' equity adjustments represent the elimination of the book
equity of the acquired companies.
f) Historical income statements of acquired companies have been adjusted to
reflect differing fiscal years. Non-recurring items were excluded from
the pro forma presentation.
Commission File Number 03966
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS FILED ON FORM 8-K
DATED NOVEMBER 17, 1994
NATIONAL DATA CORPORATION
National Data Plaza
Atlanta, Georgia 30329-2010
<PAGE>
NATIONAL DATA CORPORATION
FORM 8-K
INDEX TO EXHIBITS
Exhibit
Numbers Description Page Number
23-A Consent of Independent Public Accountant E-1
(Arthur Andersen)
23-B Consent of Independent Public Accountant E-2
(KPMG Peat Marwick)
<PAGE>
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation
of our report dated March 4, 1994 on the financial statements of Mercantile
Systems, Inc., included in this Form 8-K/A, into the Company's previously
filed Registrations Statement File Nos. 2-81717, 2-86961, 2-92193,
33-25635, 33-43005, 33-44858, 33-58622 and 33-58624.
/s/ Arthur Andersen LLP
--------------------------
Chicago, Illinois
May 23, 1995
ACCOUNTANTS' CONSENT
The Boards of Directors
Yes Check Services, Inc.
and Select Check, Inc.
We consent to the incorporation by reference in the registration statements
of National Data Corporation's file Nos. 2-81717, 2-86961, 2-92193,
33-25635, 33-43005, 33-44858, 33-58622 and 33-58624, on Form S-8, of our
report dated March 18, 1994, with respect to the combined balance sheets
of Yes Check Services, Inc. and Select Check, Inc. as of December 31, 1993,
and the related combined statements of operations and cash flows for the
period from February 1, 1993, date of inception, through December 31, 1993,
which report appears in the Form 8-K of National Data Corporation dated
November 17, 1994.
Our report dated March 18, 1994, contains an explanatory paragraph that
states that the 1993 loss from operations and the net capital deficiency
raises substantial doubt about the combined entities' ability to continue
as going concerns. The combined financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ KPMG Peat Marwick LLP
--------------------
Chicago, Illinois
November 14, 1995
