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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------------------------------------------------
For the Quarterly Period Ended: Commission File Number:
September 30, 2003 000-21685
INTELIDATA TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 54-1820617
(State of Incorporation) (I.R.S. Employer Identification Number)
11600 Sunrise Valley Drive, Suite 100, Reston, VA 20191
(Address of Principal Executive Offices) (Zip Code)
(703) 259-3000
(Registrant's Telephone Number)
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes No X
--------- ---------
The number of shares of the registrant's Common Stock outstanding on September
30, 2003 was approximately 51,168,000.
================================================================================
INTELIDATA TECHNOLOGIES CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets
September 30, 2003 and December 31, 2002 .......................... 3
Condensed Consolidated Statements of Operations
Three and Nine Months Ended September 30, 2003 and 2002 ........... 4
Condensed Consolidated Statement of Changes in Stockholders' Equity
Nine Months Ended September 30, 2003............................... 5
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2003 and 2002...................... 6
Notes to Condensed Consolidated Financial Statements .............. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ......................................... 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk......... 18
Item 4. Controls and Procedures ........................................... 18
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................... 19
SIGNATURES ............................................................ 20
PART I: FINANCIAL INFORMATION
- -----------------------------------
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------------
INTELIDATA TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
(in thousands, except share data; unaudited)
2003 2002
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,546 $ 5,674
Accounts receivable, net 3,451 2,974
Other receivables 135 309
Prepaid expenses and other current assets 490 802
------------ ------------
Total current assets 12,622 9,759
NONCURRENT ASSETS
Property and equipment, net 1,697 2,554
Goodwill, net 26,238 26,238
Intangibles, net 5,240 5,780
Other assets 211 175
------------ ------------
TOTAL ASSETS $ 46,008 $ 44,506
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,099 $ 2,081
Accrued expenses 1,652 3,458
Deferred revenues 1,392 1,673
Other liabilities 258 252
Net liabilities of discontinued operations 45 51
------------ ------------
TOTAL CURRENT LIABILITIES 5,446 7,515
Net liabilities of discontinued operations 102 200
Other liabilities 732 337
------------ ------------
TOTAL LIABILITIES 6,280 8,052
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; authorized 5,000,000 shares;
no shares issued and outstanding -- --
Common stock, $0.001 par value; authorized 100,000,000 shares;
issued 51,993,000 shares in 2003 and 49,797,000 shares in 2002;
outstanding 51,168,000 shares in 2003 and 48,991,000 shares in 2002 52 50
Additional paid-in capital 306,859 302,833
Treasury stock, at cost: 825,000 shares in 2003 and 806,000 shares in 2002 (2,525) (2,473)
Deferred compensation (281) (304)
Accumulated deficit (264,377) (263,652)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 39,728 36,454
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 46,008 $ 44,506
============ ============
See accompanying notes to condensed consolidated financial statements.
INTELIDATA TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(in thousands, except per share data; unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -------------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Revenues
Software $ 22 $ 183 $ 660 $ 704
Professional services, recurring and termination fees 4,670 5,827 15,608 15,475
----------- ----------- ----------- -----------
Total revenues 4,692 6,010 16,268 16,179
----------- ----------- ----------- -----------
Cost of revenues
Software -- -- -- --
Professional services, recurring and termination fees 1,858 2,376 5,740 6,414
----------- ----------- ----------- -----------
Total cost of revenues 1,858 2,376 5,740 6,414
----------- ----------- ----------- -----------
Gross profit 2,834 3,634 10,528 9,765
Operating expenses
General and administrative 1,417 2,375 5,437 7,305
Sales and marketing 451 793 1,329 2,547
Research and development 1,369 1,933 3,946 7,106
Amortization of intangibles 180 180 540 540
----------- ----------- ----------- -----------
Total operating expenses 3,417 5,281 11,252 17,498
----------- ----------- ----------- -----------
Operating loss (583) (1,647) (724) (7,733)
Realized loss on sales of investments -- -- -- (748)
Other income (expenses), net 16 32 (1) 87
----------- ----------- ----------- -----------
Loss before income taxes (567) (1,615) (725) (8,394)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Loss from continuing operations (567) (1,615) (725) (8,394)
Discontinued operations, net of income taxes -- -- -- --
----------- ----------- ----------- -----------
Net loss $ (567) $ (1,615) $ (725) $ (8,394)
=========== =========== =========== ===========
Basic and diluted loss per common share
Loss from continuing operations $ (0.01) $ (0.03) $ (0.01) $ (0.17)
Income (loss) from discontinued operations 0.00 0.00 0.00 0.00
----------- ----------- ----------- -----------
Net loss $ (0.01) $ (0.03) $ (0.01) $ (0.17)
=========== =========== =========== ===========
Basic and diluted weighted-average
common shares outstanding 50,864 49,359 49,641 48,901
=========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements.
INTELIDATA TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2003
(in thousands; unaudited)
Common Stock Additional
------------------------- Paid-in Treasury Deferred Accumulated
Shares Amount Capital Stock Compensation Deficit
----------- ------------- ------------- ----------- --------------- -------------
Balance at January 1, 2003 49,797 $ 50 $ 302,833 $ (2,473) $ (304) $ (263,652)
Issuances of common stock:
Exercises of stock options 603 1 706 - - -
Employee stock purchase plan 10 - 7 - - -
Exercises of stock warrants 1,454 1 3,132 - - -
Issuances of restricted stock 155 - 226 - (226) -
Cancellations of restricted stock (26) - (45) - 45 -
Treasury stock - - - (52) - -
Amortization of deferred compensation - - - - 204 -
Net loss - - - - - (725)
Comprehensive loss
----------- ------------- ------------- ----------- --------------- -------------
Balance at September 30, 2003 51,993 $ 52 $ 306,859 $ (2,525) $ (281) $ (264,377)
=========== ============= ============= =========== =============== =============
Comprehensive
Loss Total
---------------- ------------
Balance at January 1, 2003 $ 36,454
Issuances of common stock:
Exercises of stock options 707
Employee stock purchase plan 7
Exercises of stock warrants 3,133
Issuances of restricted stock -
Cancellations of restricted stock -
Treasury stock (52)
Amortization of deferred compensation 204
Net loss $ (725) (725)
---------------
Comprehensive loss $ (725)
===============
------------
Balance at September 30, 2003 $ 39,728
============
See accompanying notes to condensed consolidated financial statements.
INTELIDATA TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(in thousands; unaudited)
2003 2002
-------------- -------------
Cash flows from operating activities
Loss from continuing operations $ (725) $ (8,394)
Adjustments to reconcile loss from continuing operations
to net cash used in operating activities of continuing operations:
Realized loss on sales of investments -- 748
Amortization of intangibles 540 540
Depreciation and amortization 856 1,148
Deferred compensation expense 204 682
Loss on disposal of property and equipment 138 2
Changes in certain assets and liabilities:
Accounts receivable (477) 708
Other receivables 174 365
Prepaid expenses and other current assets 276 252
Accounts payable 18 (511)
Accrued expenses (1,405) (1,929)
Deferred revenues (281) (928)
------------ -------------
Net cash used in operating
activities of continuing operations (682) (7,317)
------------ -------------
Income (loss) from discontinued operations -- --
Change in net liabilities of discontinued operations (104) (213)
------------ -------------
Net cash used in operating activities of
discontinued operations (104) (213)
------------ -------------
Net cash used in operating activities (786) (7,530)
------------ -------------
Cash flows from investing activities
Net proceeds from warrant exercise and sales of investments -- 1,718
Purchases of property and equipment (137) (381)
Payments for acquisition costs for Home Account -- (50)
----------- -------------
Net cash (used in) provided by investing activities (137) 1,287
------------ -------------
Cash flows from financing activities
Proceeds from issuance of common stock 3,847 38
Payments to acquire treasury stock (52) --
------------ -------------
Net cash provided by financing activities 3,795 38
----------- -------------
Increase (decrease) in cash and cash equivalents 2,872 (6,205)
Cash and cash equivalents, beginning of period 5,674 12,026
----------- -------------
Cash and cash equivalents, end of period $ 8,546 $ 5,821
=========== =============
See accompanying notes to condensed consolidated financial statements.
INTELIDATA TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(Unaudited)
(1) Basis of Presentation
The condensed consolidated balance sheet of InteliData Technologies
Corporation ("InteliData" or the "Company") as of September 30, 2003, the
related condensed consolidated statements of operations and cash flows for the
nine-month periods ended September 30, 2003 and 2002, and the related condensed
consolidated statement of changes in stockholders' equity for the nine-month
period ended September 30, 2003 presented in this Form 10-Q are unaudited. In
the opinion of management, all adjustments necessary for a fair presentation of
such financial statements have been included. Such adjustments consist only of
normal recurring items. The condensed consolidated balance sheet as of December
31, 2002 was derived from the Company's audited December 31, 2002 balance sheet.
Interim results are not necessarily indicative of results for a full year.
Certain amounts in the prior periods have been reclassified to conform to the
current period presentation.
The condensed consolidated financial statements and notes are presented as
required by Form 10-Q, and do not contain certain information included in the
Company's annual audited financial statements and notes. These financial
statements should be read in conjunction with the annual audited financial
statements of the Company and the notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Form 10-K for the fiscal year ended December 31, 2002.
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries after elimination
of all material intercompany balances and transactions. Certain
reclassifications have been made to the prior year financial statements to
conform to the 2003 financial statement presentation.
(b) Accounting Estimates -The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the period. Estimates include, but are not limited
to, an allowance for doubtful accounts, an estimated fair value of net sublease
rent, a provision for forward loss and project plans for the completion and
delivery of certain solutions. Actual results could differ from those estimates.
(c) Revenue Recognition - The Company supplies Internet banking and electronic
bill presentment and payment software to financial institutions ("FI's"). The
Company's revenues associated with integrated solutions that bundle software
products with customization, installation and training services are recognized
using the percentage of completion method of accounting based on cost incurred
as compared to estimated costs at completion.
The Company enters into contracts for its bill payment technology software.
This software does not require significant customization. Upon delivery, the
Company either recognizes revenue ratably over the contract period for contracts
where vendor specific objective evidence ("VSOE") of fair value for post
contract customer support ("PCS") does not exist or recognizes revenue in full
where VSOE of fair value for PCS does exist.
The Company also enters into multiple element arrangements. Elements
typically include software, consulting, implementation and PCS. PCS contracts
generally require the Company to provide technical support and unspecified,
readily available software updates and upgrades to customers. Revenue for these
multiple element arrangements is recognized when there is persuasive evidence of
an arrangement and delivery to the customer has occurred, the fee is fixed and
determinable, and collectibility is considered probable. Advance payments are
recorded as deferred revenue until the products are shipped, services are
delivered and all obligations are met. Currently, the Company does not have VSOE
of fair value for some of the elements within its multiple element arrangements.
Therefore, all revenue under such arrangements is being recognized ratably over
the term of the PCS contract. Revenue from transactional services, which
includes hosting and application services provider ("ASP") services, is
recognized as transactions are processed.
Emerging Issues Task Force Abstract Issue No. 00-3, Application of AICPA
Statement of Position 97-2 to Arrangements that Include the Right to Use
Software Stored on Another Entity's Hardware ("EITF 00-3"), provides guidance in
determining whether or not the provisions of Statement of Position No. 97-2,
Software Revenue Recognition ("SOP 97-2"), should be applied to hosting
arrangements. The Company has some contracts where the customers operate our
software in an ASP environment. The customer may not take possession of the
software without incurring significant transition and infrastructure costs, as
well as potential payments of fees to the Company for the termination of such
arrangements. In cases where the customer has not licensed software from
InteliData, the customer must also purchase a license prior to having the right
to use the software in its own operating environment, in addition to the
aforementioned fees. In these situations, the Company applies the guidance under
EITF 00-3 and the Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements, and recognizes the revenue associated with the license
and/or implementation fees ratably over the initial term of the contract.
Additionally, based on the EITF 00-3 guidance, the Company concluded that
SOP 97-2 should not be applied to certain of its contracts and their related
revenues for license and professional services were recognized under the
percentage of completion method. In addition to our developing and delivering
the solution, the Company is entitled to transaction fees based on the number of
users and transactions. These transaction fees are earned based on the monthly
user counts and as transactions are processed.
(d) Recent Accounting Pronouncements - In May 2003, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity ("SFAS 150"),
which requires that an issuer classify financial instruments that are within
scope of SFAS 150 as a liability. Under prior guidance, these same instruments
would be classified as equity. SFAS 150 is effective for all financial
instruments entered into or modified after May 31, 2003. Otherwise, it is
effective on July 1, 2003. The adoption of SFAS 150 does not have a material
effect on our financial position or results of operations.
In May 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities ("SFAS 149"), which amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 149
is effective for contracts entered into or modified after June 30, 2003, and for
hedging relationships designated after June 30, 2003. The adoption of SFAS 149
does not have a material impact on our financial position or results of
operations.
In December 2002, the FASB issued Statement of Financial Accounting
Standard ("SFAS") No. 148, Accounting for Stock-Based Compensation-Transition
and Disclosure-an amendment of FAS 123 ("SFAS 148"). SFAS 148 amends SFAS No.
123, Accounting for Stock-Based Compensation ("SFAS 123"), to provide
alternative methods of transition for an entity that voluntarily changes to the
fair value based method of accounting for stock-based employee compensation. It
also amends the disclosure provisions of SFAS 123 to require prominent
disclosure about the effects on reported net income of an entity's accounting
policy decisions with respect to stock-based employee compensation. SFAS 148
also amends APB Opinion No. 28, Interim Financial Reporting, to require
disclosure about those effects in interim financial information. SFAS 148 is
effective for annual and interim periods beginning after December 15, 2002. As
the Company has elected not to change to the fair value based method of
accounting for stock-based employee compensation, SFAS 148 does not have any
impact on our financial position, results of operations or cash flows.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities (including Certain Costs Incurred in a
Restructuring) ("SFAS 146"), which supersedes Emerging Issues Task Force Issue
No. 94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity ("EITF 94-3"). SFAS 146 requires recognition of
a liability for costs associated with an exit or
disposal activity when the liability is incurred, rather than when the entity
commits to an exit plan under EITF 94-3. The provisions of SFAS 146 are
effective for exit or disposal activities that are initiated after September 30,
2002. As of March 31, 2003, the Company ceased use of certain office space in
its corporate offices in Reston, Virginia. The remaining obligation on this
lease was approximately $1,090,000 through December 31, 2006. In accordance with
SFAS 146, the Company estimated the fair value of net sublease rent to be
approximately $465,000 over the remaining term. Accordingly, the Company
recorded an expense of $625,000 and a corresponding liability as of March 31,
2003. As of May 1, 2003, the Company has a subtenant for this space for the
majority of the remaining lease term and the actual results of net sublease rent
could differ from the above estimates. As of September 30, 2003, the estimated
liability was approximately $483,000.
(e) Goodwill and Other Intangible Assets - SFAS No. 141, Business Combinations
("SFAS 141") requires business combinations initiated after June 30, 2001 to be
accounted for using the purchase method of accounting, and broadens the criteria
for recording intangible assets separate from goodwill. SFAS No. 142, Goodwill
and Other Intangible Assets ("SFAS 142") requires the use of an amortization and
non-amortization approach to account for purchased goodwill and certain
intangibles. Under a non-amortization approach, goodwill and certain intangibles
are not to be amortized into results of operations, but instead would be
reviewed for impairment and written down and charged to results of operations
only in the periods in which the recorded value of goodwill and certain
intangibles is more than its fair value. The amortization and non-amortization
provisions of SFAS 142 are to be applied to all goodwill and intangible assets
acquired after June 30, 2001. The provisions of each statement that apply to
goodwill and intangible assets acquired prior to June 30, 2001 was adopted by
the Company on January 1, 2002. As of January 1, 2002, in accordance with SFAS
142, the Company ceased recognizing amortization expense on goodwill. The
goodwill and intangible assets consisted of the following components (in
thousands):
As of September 30, 2003: Goodwill Intangible Total
---------- ---------- --------
Gross carrying amount $ 29,793 $ 7,200 $ 36,993
Accumulated amortization (3,555) (1,960) (5,515)
---------- ---------- --------
Net $ 26,238 $ 5,240 $ 31,478
========== ========== ========
As of December 31, 2002: Goodwill Intangible Total
----------- ---------- --------
Gross carrying amount $ 29,793 $ 7,200 $ 36,993
Accumulated amortization (3,555) (1,420) (4,975)
---------- ---------- --------
Net $ 26,238 $ 5,780 $ 32,018
========== ========== ========
In accordance with SFAS 142, the Company had six months from adoption (up
until June 30, 2002) to complete the initial test for impairment as of January
1, 2002, the adoption date of SFAS 142. In accordance with the transition
provisions of SFAS No. 142, the Company conducted the first step of the
impairment tests as described above. The Company assessed the fair value of its
only reporting unit by considering its projected cash flows, comparable company
valuations, and recent purchase prices paid for entities within our industry.
Given consideration of these factors, the Company concluded that the fair value
of the reporting unit exceeded the carrying amount of its net assets. The
Company is required to perform reviews for impairment in future periods, at
least annually, that may result in future periodic write-downs. Tests for
impairment between annual tests may be required if events occur or circumstances
change that would more likely than not reduce the fair value of the net carrying
amount. As of June 30, 2003, the Company performed the required annual review
for impairment using the same approach and similar considerations as the initial
test. As a result, the Company concluded that the fair value of the reporting
unit exceeds the carrying amount of its net assets. As of September 30, 2003,
the Company is not aware of any events or circumstances that could indicate
potential impairment.
The estimated aggregate amortization expense related to the
contracts/relationships intangible asset for each of the next five years is as
follows (in thousands):
Year ending December 31:
2003 $ 720
2004 720
2005 720
2006 720
2007 720
The amortization of certain intangibles continued at an annualized rate of
$720,000 for the nine-month periods ended September 30, 2003 and 2002.
(3) Discontinued Operations
As of September 30, 2003, the net liabilities of discontinued operations of
$147,000 relate to the telecommunications divisions. These liabilities relate to
the potential environmental clean up associated with InteliData's former New
Milford, Connecticut property. In January 2000, InteliData sold the New Milford,
Connecticut building, its only remaining asset in discontinued operations of the
telecommunications division. In the context of this sale, InteliData agreed to
undertake limited remediation of the site in accordance with applicable state
law. The subject site is not a federal or state Superfund site and InteliData
has not been named a "potentially responsible party" at the site. The
remediation plan agreed to with the purchaser allows InteliData to use
engineering and institutional controls (e.g., deed restrictions) to minimize the
extent and costs of the remediation. Further, at the time of the sale of the
facility, InteliData established a $200,000 escrow account for certain
investigation/remediation costs. As of September 30, 2003, this escrow account
balance remained at $200,000. Moreover, InteliData has obtained environmental
insurance to pay for remediation costs up to $6,600,000 in excess of a retained
exposure limit of $600,000. InteliData estimates its remaining liability related
to this matter and other costs to be approximately $147,000 and has recorded a
liability for this amount.
The Company has engaged a legal firm and an environmental specialist firm
to represent it regarding this matter. The timing of the ultimate resolution of
this matter is estimated to be from two to four years under the Company's
proposed compliance plan, which involves a natural attenuation and periodic
compliance monitoring approach. Management does not believe that the resolution
of this matter will likely have a material adverse effect on the Company's
financial condition or results of operations.
(4) Stockholders' Equity
During July 2003, the Company issued 1,431,364 shares of its common stock
pursuant to the exercise of warrants, as amended, by institutional investors who
participated in the Company's private placement of common stock in November and
December, 2001. The warrant exercise resulted in gross proceeds of approximately
$3,335,000. The placement agent in the transaction received approximately
$200,000 in commissions. All of the warrants that were issued as part of the
2001 private placement have now been exercised.
* * * * * *
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ----------------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Critical Accounting Policies
We consider the following accounting policies to be the most important to
our financial position and results of operations or are policies that require
the exercise of significant judgment and/or estimates.
Revenue Recognition - We consider our revenue recognition policy critical
to the understanding of our business operations and results of operations. The
Company supplies Internet banking and electronic bill presentment and payment
software to financial institutions ("FI's"). The Company's revenues associated
with integrated solutions that bundle software products with customization,
installation and training services are recognized using the percentage of
completion method of accounting.
The Company's bill payment technology software does not require significant
customization. Upon delivery, the Company either recognizes revenue ratably over
the contract period for contracts where vendor specific objective evidence
("VSOE") of fair value for post contract customer support ("PCS") does not exist
or recognizes revenue in full where VSOE of fair value for PCS does exist.
The Company enters into multiple element arrangements. Elements typically
include software, consulting, implementation and PCS. PCS contracts generally
require the Company to provide technical support and unspecified readily
available software updates and upgrades to customers. Revenue for these multiple
element arrangements is recognized when there is persuasive evidence of an
arrangement and delivery to the customer has occurred, the fee is fixed and
determinable, and collectibility is considered probable. Advance payments are
recorded as deferred revenue until the products are shipped, services are
delivered and all obligations are met. Currently, the Company does not have VSOE
of fair value for some of the elements within its multiple element arrangements.
Therefore, all revenue under such arrangements is being recognized ratably over
the term of the PCS contract. Revenue from transactional services, which
includes hosting and application services provider ("ASP") services, is
recognized as transactions are processed.
Emerging Issues Task Force Abstract Issue No. 00-3, Application of AICPA
Statement of Position 97-2 to Arrangements that Include the Right to Use
Software Stored on Another Entity's Hardware ("EITF 00-3"), provides guidance in
determining whether or not the provisions of Statement of Position No. 97-2,
Software Revenue Recognition ("SOP 97-2"), should be applied to hosting
arrangements. The Company has some contracts where the customers operate our
software in an ASP environment. The customer may not take possession of the
software without incurring significant transition and infrastructure costs, as
well as potential payments of fees to the Company for the termination of such
arrangements. In cases where the customer has not licensed software from
InteliData, the customer must also purchase a license prior to having the right
to use the software in its own operating environment, in addition to the
aforementioned fees. In these situations, the Company applies the guidance under
EITF 00-3 and the Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements, and recognizes the revenue associated with the license
and/or implementation fees ratably over the initial term of the contract.
Additionally, based on the EITF 00-3 guidance, the Company concluded that
SOP 97-2 should not be applied to certain of its contracts and their related
revenue for license and professional services were recognized under the
percentage of completion method. In addition to our developing and delivering
the solution, the Company is entitled to transaction fees based on the number of
users and transactions. These transaction fees are earned based on the monthly
user counts and as transactions are processed.
Estimates at Completion - Revenues related to some of the Company's
contracts are recognized using the percentage of completion method of
accounting, which requires that we make estimates and judgments as to
anticipated project scope, timing and costs to complete the projects. The
completion of certain development efforts are critical for the Company to
perform on certain contracts. Delays in product implementation or new product
development and product defects or errors could affect our estimates and
judgments. Additionally, we may experience delays when implementing our products
at customer locations, and customers may be unable to
implement our products in the time frames and with the functionalities that they
expect or require. The accuracy of these estimates and judgments could affect
our business, operations and financial condition.
Allowance for Doubtful Accounts - Determination of our allowance for
doubtful accounts requires significant estimates. Financial instruments that
potentially subject the Company to credit risk consist principally of trade
receivables. The Company sells its products primarily to FI's in the United
States. The Company believes that the concentration of credit risk in its trade
receivables is substantially mitigated by the Company's on-going credit
evaluation process and the financial position of the FI's that are highly
regulated. The Company does not generally require collateral from customers. The
Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends and other
information.
A number of factors are considered in establishing the allowance including,
but not limited to, historical collection experience, the macro-economic
environment, estimates of forecasted write-offs, and the aging of the accounts
receivable portfolio. If the financial condition of our accounts receivable
portfolio deteriorates, additional allowances would be required.
Valuation of Long-Lived Assets - On an annual basis, we review long-lived
assets such as identifiable intangibles and goodwill for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. This review requires us to make estimates of our undiscounted
future cash flows in order to determine if our long-lived assets are impaired.
If the total of the expected undiscounted future cash flows is less than the
carrying amount of the assets, we are required to make estimates of our
discounted future cash flows in order to calculate a loss for the difference
between the fair value and carrying value of the assets. We make significant
assumptions and estimates in this process regarding matters that are inherently
uncertain, such as calculating remaining useful lives and assuming discount
rates. The resulting cash flows are computed over an extended period of time,
which subjects those assumptions and estimates to an even larger degree of
uncertainty. When known and available, we also use comparable values of similar
businesses in corroborating the results from the discounted cash flows approach.
This process involves making estimates about matters that are inherently
uncertain. Reviews for impairment between annual reviews may be required if
events occur or circumstances change that would more likely than not reduce the
fair value of the net carrying amount. While we believe that our estimates are
reasonable, different assumptions regarding such cash flows could materially
affect our valuation.
Depreciation of Fixed Assets - The Company's business requires our
investment in office and computer equipment to facilitate certain research and
development activities and to support the operations in serving our customers.
We record these assets, which in management's opinion extend the useful life of
the underlying asset, at cost and depreciate the assets over their estimated
useful lives. We periodically reassess the economic life of these elements and
make adjustments to these useful lives using, among others, historical
experience, capacity requirements, and assessments of new product and market
demands. When these factors indicate certain elements may not be useful for as
long as anticipated, we depreciate the remaining book value over the remaining
useful life. Further, the timing and deployment of any new technologies could
affect the estimated lives of our assets, which could have significant impacts
on results of operations in the future.
Recent Accounting Pronouncements - In May 2003, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity ("SFAS 150"),
which requires that an issuer classify financial instruments that are within
scope of SFAS 150 as a liability. Under prior guidance, these same instruments
would be classified as equity. SFAS 150 is effective for all financial
instruments entered into or modified after May 31, 2003. Otherwise, it is
effective on July 1, 2003. The adoption of SFAS 150 does not have a material
effect on our financial position or results of operations.
In May 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities ("SFAS 149"), which amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 149
is effective for contracts entered into or modified after June 30, 2003, and for
hedging relationships designated after June 30, 2003. The adoption of SFAS 149
does not have a material impact on our financial position or results of
operations.
In December 2002, the FASB issued Statement of Financial Accounting
Standard ("SFAS") No. 148, Accounting for Stock-Based Compensation-Transition
and Disclosure-an amendment of FAS 123 ("SFAS 148"). SFAS 148 amends SFAS No.
123, Accounting for Stock-Based Compensation ("SFAS 123"), to provide
alternative methods of transition for an entity that voluntarily changes to the
fair value based method of accounting for stock-based employee compensation. It
also amends the disclosure provisions of SFAS 123 to require prominent
disclosure about the effects on reported net income of an entity's accounting
policy decisions with respect to stock-based employee compensation. SFAS 148
also amends APB Opinion No. 28, Interim Financial Reporting, to require
disclosure about those effects in interim financial information. SFAS 148 is
effective for annual and interim periods beginning after December 15, 2002. As
the Company has elected not to change to the fair value based method of
accounting for stock-based employee compensation, SFAS 148 does not have any
impact on our financial position, results of operations or cash flows.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities (including Certain Costs Incurred in a
Restructuring) ("SFAS 146"), which supersedes Emerging Issues Task Force Issue
No. 94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity ("EITF 94-3"). SFAS 146 requires recognition of
a liability for costs associated with an exit or disposal activity when the
liability is incurred, rather than when the entity commits to an exit plan under
EITF 94-3. The provisions of SFAS 146 are effective for exit or disposal
activities that are initiated after September 30, 2002. As of March 31, 2003,
the Company ceased use of certain office space in its corporate offices in
Reston, Virginia. The remaining obligation on this lease was approximately
$1,090,000 through December 31, 2006. In accordance with SFAS 146, the Company
estimated the fair value of net sublease rent to be approximately $465,000 over
the remaining term. Accordingly, the Company recorded an expense of $625,000 and
a corresponding liability as of March 31, 2003. As of May 1, 2003, the Company
has a subtenant for this space for the majority of the remaining lease term and
the actual results of net sublease rent could differ from the above estimates.
As of September 30, 2003, the estimated liability was approximately $483,000.
Results of Operations for the Three Months Ended September 30, 2003 and 2002
The following represents the results of operations for InteliData
Technologies Corporation for the three months ended September 30, 2003 and 2002.
Such information should be read in conjunction with the interim financial
statements and the notes thereto in Part I, Item 1 of this Quarterly Report.
Revenues
The Company's third quarter revenues were $4,692,000 in 2003 compared to
$6,010,000 in 2002, a decrease of $1,318,000. The decrease was a result of a
decrease in professional services, recurring and termination fees of $1,157,000
and a decrease in software revenues of $161,000. During the third quarter of
2003, the Company generated $22,000 of software revenues and $4,670,000 of
professional services, recurring and termination fees. During the third quarter
of 2002, software revenues were $183,000 and professional services, recurring
and termination fees were $5,827,000.
The decrease in professional services, recurring and termination fees in
the third quarter of 2003 compared to the third quarter of 2002 was primarily
due to the timing of completion of deliveries of professional services and
implementations and to the decrease in the recurring revenue resulting from the
termination of clients that were using the Company's Canopy Banking ASP
services. The decrease in software revenues in the third quarter of 2003
compared to the third quarter of 2002 was primarily due to the timing of system
deliveries.
Cost of Revenues and Gross Profit
The Company's cost of revenues decreased $518,000 to $1,858,000 for the
third quarter of 2003 from $2,376,000 for the third quarter of 2002. The
decrease was primarily due to a decrease in service provider costs resulting
from contract renegotiations and changes in service providers.
Overall gross profit margin was 60% for the third quarter of 2003 and 2002.
The Company anticipates that gross profit margins may fluctuate in the future
due to changes in product mix and distribution, outsourcing
activities associated with an ASP business model, competitive pricing pressure,
the introduction of new products, and changes in volume.
General and Administrative
General and administrative expenses decreased $958,000 to $1,417,000 for
the third quarter of 2003 from $2,375,000 for the third quarter of 2002. The
decrease was primarily attributable to the Company's reduction of corporate and
administrative expenses that resulted from the continued evaluation of on-going
cost structures. The Company plans to continually assess its operations to
manage its expenses and infrastructures in light of anticipated business levels.
Sales and Marketing
Sales and marketing expenses decreased $342,000 to $451,000 for the third
quarter of 2003 from $793,000 for the third quarter of 2002. This was primarily
attributable to decreases in the number of selling and marketing employees,
travel and outside professional consulting expenses that resulted from the
continued evaluation of on-going cost structures. The Company plans to
continually assess its operations to manage its expenses and infrastructures in
light of anticipated business levels.
Research and Development
Research and development costs decreased $564,000 to $1,369,000 for the
third quarter of 2003 from $1,933,000 for the third quarter of 2002. The
decrease was primarily attributable to the Company's reduction of research and
development expenses that resulted from the continued evaluation of on-going
cost structures. The Company incurs research and development expenses primarily
in developing the next generation, open standards-based InteliWorks(TM)
Enterprise Payment Solution. The Company plans to continually assess its
operations to manage its expenses and infrastructures in light of anticipated
business levels.
Amortization of Goodwill and Intangibles
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets ("SFAS 142"), requires the Company to not amortize goodwill
and certain intangibles into results of operations, but instead the Company
would review these assets for impairment. The assets would be written down and
impairment losses would be charged to results of operations only in the periods
in which the recorded values are determined to be more than their fair values.
As of January 1, 2002, in accordance with SFAS 142, the Company ceased
recognizing amortization expense on goodwill. The amortization of certain
intangibles continues at an annualized rate of $720,000 for 2003 and 2002.
In accordance with SFAS 142, the Company had six months from adoption (up
until June 30, 2002) to complete the initial test for impairment as of January
1, 2002, the adoption date of SFAS 142. In accordance with the transition
provisions of SFAS No. 142, the Company conducted the first step of the
impairment tests. The Company assessed the fair value of its only reporting unit
by considering its projected cash flows, comparable company valuations, and
recent purchase prices paid for entities within our industry. Given
consideration of these factors, the Company concluded that the fair value of the
reporting unit exceeded the carrying amount of its net assets. The Company is
required to perform reviews for impairment in future periods, at least annually,
that may result in future periodic write-downs. Tests for impairment between
annual tests may be required if events occur or circumstances change that would
more likely than not reduce the fair value of the net carrying amount. As of
June 30, 2003, the Company performed the required annual review for impairment
using the same approach and similar consideration as the initial test. As a
result, the Company concluded that the fair value of the reporting unit exceeds
the carrying amount of its net assets. As of September 30, 2003, the Company is
not aware of any events or circumstances that could indicate potential
impairment.
Other Income
Other income (expense), primarily interest income and other expenses
including state and local taxes, decreased $16,000 to $16,000 for the third
quarter of 2003 from $32,000 for the third quarter of 2002. The decrease is
primarily associated with decreased levels of interest income.
Weighted-Average Common Shares Outstanding and Basic and Diluted Loss Per Common
Share
The basic and diluted weighted-average common shares outstanding increased
to 50,864,000 for the third quarter of 2003 compared to 49,359,000 for the third
quarter of 2002. The increase resulted primarily from the issuance of stock
awards, issuance of stock pursuant to the exercises of stock warrants and stock
options, and stock purchases under the Employee Stock Purchase Plan.
Losses from continuing operations were $567,000 and $1,615,000 for the
three-month periods ended September 30, 2003 and 2002, respectively, while there
was no gain or loss from discontinued operations in either period. Net losses
were $567,000 and $1,615,000 for 2003 and 2002, respectively. As a result of the
foregoing, basic and diluted net loss per common share was $0.01 for the third
quarter of 2003 compared to a basic and diluted net loss per common share of
$0.03 for the third quarter of 2002.
Results of Operations for the Nine Months Ended September 30, 2003 and 2002
The following represents the results of operations for InteliData
Technologies Corporation for the nine months ended September 30, 2003 and 2002.
Such information should be read in conjunction with the interim financial
statements and the notes thereto in Part I, Item 1 of this Quarterly Report.
Revenues
The Company's revenues for the first nine months were $16,268,000 in 2003
compared to $16,179,000 for 2002, an increase of $89,000. The increase was a
result of an increase in professional services, recurring and termination fees
of $133,000 and a decrease in software revenues of $44,000. During the first
nine months of 2003, the Company generated $660,000 of software revenues and
$15,608,000 of professional services, recurring and termination fees. During the
first nine months of 2002, software revenues were $704,000 and professional
services, recurring and termination fees were $15,475,000.
The increase in professional services, recurring and termination fees in
the first nine months of 2003 compared to the first nine months of 2002 was
primarily due to increases in the professional services billing rates and hours,
offset by the decrease in the recurring revenue resulting from the termination
of clients that were using the Company's Canopy Banking ASP services. The
decrease in software revenues in the first nine months of 2003 compared to the
first nine months of 2002 was primarily due to the timing of system deliveries.
Cost of Revenues and Gross Profit
The Company's cost of revenues decreased $674,000 to $5,740,000 for the
first nine months of 2003 from $6,414,000 for the first nine months in 2002. The
decrease was primarily due to a decrease in service provider costs resulting
from contract renegotiations and changes in service providers.
Overall gross profit margins increased to 65% for the first nine months of
2003 from 60% for the first nine months of 2002. The increase in gross profit
margin was attributable to increases in professional services revenue coupled
with the decrease in cost of revenues as discussed above. The Company
anticipates that gross profit margins may fluctuate in the future due to changes
in product mix and distribution, outsourcing activities associated with an ASP
business model, competitive pricing pressure, the introduction of new products,
and changes in volume.
General and Administrative
General and administrative expenses decreased $1,868,000 to $5,437,000 for
the first nine months of 2003 from $7,305,000 for the first nine months of 2002.
The decrease was primarily attributable to the Company's reduction of corporate
and administrative expenses that resulted from the continued evaluation of
on-going cost structures. The Company plans to continually assess its operations
to manage its expenses and infrastructures in light of anticipated business
levels.
Sales and Marketing
Sales and marketing expenses decreased $1,218,000 to $1,329,000 for the
first nine months of 2003 from $2,547,000 for the first nine months of 2002.
This was primarily attributable to decreases in the number of selling and
marketing employees, travel and outside professional consulting expenses that
resulted from the continued evaluation of on-going cost structures. The Company
plans to continually assess its operations to manage its expenses and
infrastructures in light of anticipated business levels.
Research and Development
Research and development costs decreased $3,160,000 to $3,946,000 for the
first nine months of 2003 from $7,106,000 for the first nine months of 2002. The
decrease was primarily attributable to the Company's reduction of research and
development expenses that resulted from the continued evaluation of on-going
cost structures. The Company incurs research and development expenses primarily
in developing the next generation, open standards-based InteliWorks(TM)
Enterprise Payment Solution. The Company plans to continually assess its
operations to manage its expenses and infrastructures in light of anticipated
business levels.
Amortization of Goodwill and Intangibles
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets ("SFAS 142"), requires the Company to not amortize goodwill
and certain intangibles into results of operations, but instead the Company
would review these assets for impairment. The assets would be written down and
impairment losses would be charged to results of operations only in the periods
in which the recorded values are determined to be more than their fair values.
As of January 1, 2002, in accordance with SFAS 142, the Company ceased
recognizing amortization expense on goodwill. The amortization of certain
intangibles continues at an annualized rate of $720,000 for 2003 and 2002.
In accordance with SFAS 142, the Company had six months from adoption (up
until June 30, 2002) to complete the initial test for impairment as of January
1, 2002, the adoption date of SFAS 142. In accordance with the transition
provisions of SFAS No. 142, the Company conducted the first step of the
impairment tests. The Company assessed the fair value of its only reporting unit
by considering its projected cash flows, comparable company valuations, and
recent purchase prices paid for entities within our industry. Given
consideration of these factors, the Company concluded that the fair value of the
reporting unit exceeded the carrying amount of its net assets. The Company is
required to perform reviews for impairment in future periods, at least annually,
that may result in future periodic write-downs. Tests for impairment between
annual tests may be required if events occur or circumstances change that would
more likely than not reduce the fair value of the net carrying amount. As of
June 30, 2003, the Company performed the required annual review for impairment
using the same approach and similar consideration as the initial test. As a
result, the Company concluded that the fair value of the reporting unit exceeds
the carrying amount of its net assets. As of September 30, 2003, the Company is
not aware of any events or circumstances that could indicate potential
impairment.
Realized and Unrealized Gains on Investments
As part of the January 20, 2000 merger between Home Financial Network, Inc.
("HFN") and Sybase, Inc. ("Sybase"), InteliData received certain consideration
in exchange for its approximate 25% ownership interest in HFN. As part of this
consideration, the Company received 640,000 "warrant units" with an exercise
price of $2.60 per warrant unit. Upon exercise of each warrant unit, the Company
was entitled to receive $1.153448 in cash and 0.34794 share of Sybase common
stock.
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"), establishes
accounting and reporting standards for derivative instruments and for hedging
activities by requiring that derivatives be recognized in the balance sheet and
measured at fair value. The Company accounted for its investment in the warrants
to purchase Sybase common stock under SFAS 133.
SFAS 133 requires that derivative financial instruments, such as forward
currency exchange contracts, interest rate swaps and the Company's warrants to
purchase Sybase stock, be recognized in the financial statements and measured at
fair value regardless of the purpose or intent for holding them. Changes in the
fair value of derivative financial instruments are either recognized
periodically in income or shareholders' equity (as a component of comprehensive
income), depending on whether the derivative is being used to hedge changes in
fair value or cash flows. During June 2002, the Company exercised all of its
640,000 warrants units to purchase Sybase common stock and sold the resulting
223,000 shares of Sybase common stock. The Company recorded a loss of $748,000
as a result of the sales of investments.
Other Income
Other income (expense), primarily interest income and other expenses
including state and local taxes, decreased $88,000 to ($1) for the first nine
months of 2003 from $87,000 for the first nine months of 2002. The decrease is
primarily associated with decreased levels of interest income.
Weighted-Average Common Shares Outstanding and Basic and Diluted Loss Per Common
Share
The basic and diluted weighted-average common shares outstanding increased
to 49,641,000 for the first nine months of 2003 compared to 48,901,000 for the
first nine months of 2002. The increase resulted primarily from the issuance of
stock award, issuance of stock pursuant to the exercises of stock warrants and
stock options, and stock purchases under the Employee Stock Purchase Plan.
Losses from continuing operations were $725,000 and $8,394,000 for the
nine-month periods ended September 30, 2003 and 2002, respectively, while there
was no gain or loss from discontinued operations in either period. Net losses
were $725,000 and $8,394,000 for 2003 and 2002, respectively. As a result of the
foregoing, basic and diluted net loss per common share was $0.01 for the first
nine months of 2003 compared to a basic and diluted net loss per common share of
$0.17 for the first nine months of 2002.
Liquidity and Capital Resources
During the first nine months of 2003, the Company's cash and cash
equivalents increased by $2,872,000. At September 30, 2003, the Company had
$8,546,000 in cash and cash equivalents, $7,176,000 of working capital with no
long-term debt, and $39,728,000 in stockholders' equity. The Company's principal
needs for cash in the first nine months of 2003 were for funding operating
losses and changes in working capital.
The Company's cash requirements for operating activities in the first nine
months of 2003 were financed primarily by cash and cash equivalents on hand.
Net cash used in investing activities in the first nine months of 2003 was
$137,000 for the purchases of property and equipment.
Financing activities provided net cash of $3,795,000 in the first nine
months of 2003 and consisted of $3,847,000 from the issuance of the Company's
common stock through stock warrant exercises, stock option exercises and the
Employee Stock Purchase Plan, offset by $52,000 related to payments made to
acquire treasury stock.
During July 2003, the Company issued 1,431,364 shares of its common stock
pursuant to the exercise of warrants, as amended, by institutional investors who
participated in the Company's private placement of common stock in November and
December, 2001. The warrant exercise resulted in gross proceeds of approximately
$3,335,000. The placement agent in the transaction received approximately
$200,000 in commissions. All of the warrants that were issued as part of the
2001 private placement have now been exercised.
Based on the Company's current capital levels and its assumptions about
future operating results, the Company believes that it will have sufficient
resources to fund existing operating plans for the remainder of 2003 and
throughout 2004. However, if actual results differ materially from current
assumptions, the Company may not have sufficient capital resources and may have
to modify operating plans and/or seek additional capital resources. If the
Company engages in efforts to obtain additional capital, it can make no
assurances that these efforts will be successful or that the terms of such
funding would be beneficial to the common stockholders.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
The information contained in this report includes forward-looking
statements, the realization of which may be impacted by the factors discussed
below. The forward-looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 (the "Act").
This report contains forward-looking statements that are subject to risks and
uncertainties, including, but not limited to, our ability to continue funding
operating losses, our ability to manage our expenses in line with anticipated
business levels, the ability of the Company to complete product implementations
in required time frames and the Company's ability to increase its recurring
revenues from its ASP business model, the Company's ability to retain key
customers and to increase revenue from existing customers, the impact of
competitive products, pricing pressure, product demand and market acceptance
risks, pace of consumer acceptance of Internet banking and reliance on the
Company's bank clients to increase usage of Internet banking by their customers,
the effect of general economic conditions on the financial services industry,
mergers and acquisitions, risk of integration of the Company's technology by
large software companies, the ability of financial institution customers to
implement applications in the anticipated time frames or with the anticipated
features, functionality or benefits, reliance on key strategic alliances and
newly emerging technologies, the ability of the Company to leverage its
relationships with third parties into new business opportunities in the EBPP
market, the on-going viability of the mainframe marketplace and demand for
traditional mainframe products, the ability to attract and retain key employees,
the availability of cash for long-term growth, product obsolescence, ability to
reduce product costs, fluctuations in operating results, delays in development
of highly complex products and other risks detailed from time to time in
InteliData filings with the Securities and Exchange Commission, including the
risk factors disclosed in the Company's Form 10-K for the fiscal year ended
December 31, 2002. These risks could cause the Company's actual results for 2003
and beyond to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, InteliData. The foregoing list of factors
should not be construed as exhaustive or as any admission regarding the adequacy
of disclosures made by the Company prior to the date hereof or the effectiveness
of said Act. InteliData is not under any obligation (and expressly disclaims an
obligation) to update or alter its forward-looking statements, whether as a
result of new information or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
The Company currently has no long-term debt and is not currently engaged in
any transactions that involve foreign currency. The Company does not engage in
hedging activities.
ITEM 4. CONTROLS AND PROCEDURES
- --------------------------------
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, the
Company carried out an evaluation, with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the Company's disclosure controls and
procedures (as defined under Rule 13a-15(e) under the Securities Exchange Act of
1934 as of the end of the period covered by this report. Based upon that
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
concluded that the
Company's disclosure controls and procedures are effective in timely alerting
them to material information relating to the Company's (including its
consolidated subsidiaries) required to be included in the Company's periodic SEC
filings.
(b) CHANGE IN INTERNAL CONTROLS
There has been no change in the Company's internal control over financial
reporting during the quarter ended September 30, 2003 that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) EXHIBITS
31.1 Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
(b) REPORTS ON FORM 8-K
The Company furnished a Current Report on Form 8-K with the Securities and
Exchange Commission on July 30, 2003, relating to Regulation FD Disclosure to
furnish a copy of the press release dated July 30, 2003, that reported
InteliData's results of operations and financial condition for the quarter ended
June 30, 2003.
* * * * * *
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 on November 6, 2003.
INTELIDATA TECHNOLOGIES CORPORATION
By: /s/ Alfred S. Dominick, Jr.
-----------------------------------------
Alfred S. Dominick, Jr.
Chairman and Chief Executive Officer
/s/ John R. Polchin
-----------------------------------------
John R. Polchin
Vice President, Chief Financial Officer,
and Treasurer