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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 2, 2001
NETZEE, INC.
(Exact name of registrant as specified in its charter)
Georgia 0-27925 58-2488883
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
6190 Powers Ferry Road, Suite 400, Atlanta, Georgia 30339
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(Address of principal executive offices)
(770) 850-4000
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(Registrant's telephone number including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
Pursuant to the terms of the Asset Purchase Agreement dated February 2, 2001 by
and among Netzee, Inc. ("Netzee"), Netcal, Inc., a wholly-owned subsidiary of
Netzee ("Netcal"), and The InterCept Group, Inc. ("InterCept"), Netcal sold to
InterCept certain of its operating assets and operating liabilities for a total
purchase price of approximately $16 million including liabilities assumed of
approximately $2 million. Netzee received cash proceeds of approximately
$14 million, of which $250,000 was placed in escrow for indemnification and
other purposes. The amount of the consideration was determined based upon arm's
length negotiations.
In conjunction with the sale of these assets, Netzee converted its $15 million
line of credit with InterCept and its $5 million promissory note with the John
H. Harland Company ("Harland") into a $20 million joint credit facility ($15
million to be funded by InterCept and $5 million to be funded by Harland). The
terms of the credit facility remain consistent with the terms of the former line
of credit and promissory note, except that both InterCept and Harland now have
the right (instead of just InterCept) to enforce the covenants contained in the
line of credit agreement.
After settling certain closing and other liabilities and retaining cash for
operations, Netzee used approximately $11.8 million of the proceeds from the
sale to pay down principal balances on the $20 million revolving credit facility
from InterCept and Harland. The revolving credit facility will remain in place,
and will be used to fund Netzee's future operations. The amended facility will
expire on November 2, 2002. As of February 5, 2001, Netzee had approximately
$8.2 million outstanding under this facility.
Netzee will record a loss of approximately $7.5 million on the sale of the
Netcal assets.
The assets sold were primarily located in Calabasas Hills, California and were
used principally in Netzee's business of developing, marketing and distributing
regulatory reporting software and related products and services to financial
institutions.
Netzee was formed as a Georgia corporation in August 1999 to be merged with
Direct Access Interactive, Inc. ("Direct Access"), a company that was formed in
October 1996 to provide Internet and telephone banking products and services.
InterCept acquired Direct Access as a wholly-owned subsidiary in March 1999.
InterCept currently owns approximately 28% of Netzee's common stock. Netzee's
CEO and director Donny R. Jackson is also a director of InterCept. Several of
Netzee's directors are also directors of InterCept. Additionally, Netzee has a
marketing agreement with InterCept and sublets certain office space from
InterCept. InterCept also sublets certain office space from Netzee.
As a result of Netzee's purchase of certain assets from Harland in November
2000, Harland currently owns approximately 16% of Netzee's common stock.
Item 7. Pro Forma Financial Information and Exhibits.
(a) Pro forma Financial Statements of Business Disposed.
The following unaudited pro forma condensed consolidated financial
statements of Netzee, Inc. giving effect to the disposition described
above are provided for the periods stated therein:
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 2000
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the nine months ended September 30, 2000
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1999
Notes to Pro Forma Condensed Consolidated Financial Information
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(c) Exhibits.
Item No. Exhibit List
2.1 Asset Purchase Agreement dated February 2, 2001, by and among
Netzee, Netcal and InterCept.
10.1 Amended and Restated Credit Agreement dated as of February 2,
2001, by and among Netzee, Harland, and InterCept.
99.1 Press Release dated February 5, 2001.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NETZEE, INC.
Date: February 16, 2001 /s/ Richard S. Eiswirth
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Senior Executive Vice President, Chief
Financial Officer and Secretary
(Principal Financial Officer and
Duly Authorized Officer)
Date: February 16, 2001 /s/ Jarett J. Janik
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Vice President and Controller
(Principal Accounting Officer)
EXHIBIT LIST
Exhibit No. Description
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Item No. Exhibit List
2.1 Asset Purchase Agreement dated February 2, 2001, by and
among Netzee, Netcal and InterCept.
10.1 Amended and Restated Credit Agreement dated as of
February 2, 2001, by and among Netzee, Harland,
and InterCept.
99.1 Press Release dated February 5, 2001.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS SEPTEMBER 30, 2000
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,254,925 $ 14,100,000 (a) $ 7,554,925
(11,800,000)(b)
Accounts receivable, net 2,425,557 (845,876)(c) 1,579,681
Leases receivable, current 419,435 419,435
Prepaids and other current assets 788,859 (100,805)(c) 688,054
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Total current assets 8,888,776 10,242,095
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PROPERTY AND EQUIPMENT, net 9,634,805 (35,524)(c) 9,599,281
LEASES RECEIVABLE, NET OF CURRENT 1,573,652 1,573,652
OTHER ASSETS:
Intangible assets, net 108,747,312 (26,312,024)(c) 82,435,288
Deposits and other long-term assets 170,198 (13,001)(c) 157,197
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Total other assets 108,917,510 82,592,485
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Total assets $129,014,743 $104,007,513
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PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS SEPTEMBER 30, 2000
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 4,380,296 $ (273,496)(c) $ 4,356,800
250,000 (d)
Deferred revenue 6,255,734 (3,069,058)(c) 3,186,676
Notes payable 134,232 134,232
Other current liabilities 415,534 415,534
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Total current liabilities 11,185,796 8,093,242
NONCURRENT LIABILITIES:
Deferred revenue, net of current 1,466,943 1,466,943
Related party loans 15,000,000 (6,800,000)(b) 8,200,000
Long-term debt, net of current maturities 6,507,500 (5,000,000)(b) 1,507,500
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Total liabilities 34,160,239 19,267,685
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, Series A 8%
convertible, 5,000,000 shares authorized,
500,000 shares issued and outstanding at
September 30, 2000 6,500,000 6,500,000
Common stock, no par value, 70,000,000 shares
authorized 22,028,083 shares issued and
outstanding at September 30, 2000 176,021,418 176,021,418
Notes receivable from shareholders (3,122,972) (3,122,972)
Deferred stock compensation (6,201,621) (6,201,621)
Accumulated deficit (78,342,321) (10,114,676)(e) (88,456,997)
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Total shareholders' equity 94,854,504 84,739,828
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Total liabilities and shareholders' $ 129,014,743 $ 104,007,513
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
PRO FORMA
FOR THE YEAR
PRO FORMA ENDED
HISTORICAL(1) ADJUSTMENTS DECEMBER 31, 1999
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REVENUES:
Monthly maintenance and service $ 1,770,674 (222,019)(f) $ 1,548,655
License, hardware, implementation and other 579,239 579,239
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Total revenues 2,349,913 2,127,894
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COSTS AND EXPENSES:
Costs of services, license, hardware,
implementation and maintenance 1,958,318 (50,562)(f) 1,907,756
Selling general and administrative expenses 4,481,635 (74,969)(f) 4,406,666
Stock based compensation expense 4,591,888 4,591,888
Depreciation and amortization 13,056,016 (541,740)(f) 12,514,276
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Total operating expenses 24,087,857 23,420,586
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OPERATING LOSS (21,737,944) (21,292,692)
INTEREST EXPENSE (INCOME), net 673,972 673,972
EXTRAORDINARY LOSS (4,518,760) (4,518,760)
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INCOME BEFORE TAXES (26,930,676) (26,485,424)
PREFERRED DIVIDENDS (24,200) (24,200)
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NET (LOSS) INCOME $(26,954,876) $(26,509,624)
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BASIC AND DILUTED NET LOSS PER SHARE $ (2.34) $ (2.30)
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 11,542,034 11,542,034
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(1) The results of operations for the predecessor Direct Access from January 1,
1999 to February 28, 1999 and the results of operations for Netzee for the
period from March 1, 1999 to December 31, 1999 have been combined for these
proforma statements.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
PRO FORMA
FOR THE NINE MONTHS
PRO FORMA ENDED
HISTORICAL ADJUSTMENTS SEPTEMBER 30, 2000
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REVENUES:
Monthly maintenance and service $ 11,508,301 (4,009,862)(f) $ 7,498,439
License, hardware, implementation and other 1,041,964 (5,074)(f) 1,036,890
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Total revenues 12,550,265 8,535,329
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COSTS AND EXPENSES:
Costs of services, license, hardware,
implementation and maintenance 6,307,590 (903,378)(f) 5,404,213
Selling general and administrative expenses 14,818,968 (1,101,216)(f) 13,717,752
Stock based compensation expense 2,345,591 -- 2,345,591
Depreciation and amortization 39,518,414 (8,920,498)(f) 30,597,916
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Total operating expenses 62,990,563 52,065,472
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OPERATING LOSS (50,440,298) (43,530,143)
INTEREST EXPENSE (INCOME), net 579,037 579,037
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INCOME BEFORE TAXES (51,019,335) (44,109,180)
PREFERRED DIVIDENDS (390,000) (390,000)
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NET (LOSS) INCOME $(51,409,335) $(44,499,180)
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BASIC AND DILUTED NET LOSS PER SHARE $ (2.39) $ (2.07)
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 21,475,349 21,475,349
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Notes to Pro Forma Consolidated Financial Information
The unaudited pro forma condensed consolidated balance sheet as of September 30,
2000, was prepared as if the sale occurred on such date. The following unaudited
condensed consolidated statements of operations give effect to the sale as of
the beginning of the periods presented. The unaudited pro forma condensed
consolidated statements of operations do not purport to represent what our
results of operations actually would have been if the sale had occurred as of
such date or what such results will be for any future periods. The unaudited pro
forma condensed consolidated financial statements are derived from our
historical financial statements and the assumptions and adjustments described in
the accompanying notes. We believe that all adjustments necessary to present
fairly such unaudited financial information have been made. The unaudited pro
forma financial data should be read in conjunction with the accompanying notes
thereto.
(a) Reflects the approximate net cash proceeds from the assets sold.
(b) Reflects the cash proceeds from the assets sold that were used to pay
down the credit facility and reflects the conversion of the
$5 million promissory note from Harland to participation in $20
million credit facility.
(c) Reflects the elimination of the carrying value of the assets and
liabilities sold net of the loss on the sale.
(d) Reflects the accrual for costs incurred on the sale of the assets.
(e) Reflects the elimination of the accumulated deficit related to the
assets sold net of the loss on the sale.
(f) Reflects the elimination of the income and expenses related to the
assets sold.