================================================================================


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 --------------

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                                 --------------

For the fiscal year ended: December 31, 1998    Commission File Number 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)

               13100 Worldgate Drive, Suite 600, Herndon, VA 20170
                    (Address of Principal Executive Offices)
                                 (703) 834-8500
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class                    Name of Each Exchange on Which Registered
-------------------                    -----------------------------------------
                               NONE

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock par value $.001 per share

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            
   -------        -------

State by check mark if disclosure of delinquent  filers  pursuant to Item 405 of
Regulation S-K is not contained herein,  and will not be contained,  to the best
of  registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K  [ X ].

The  aggregate  market value of the Common Stock held by  non-affiliates  of the
registrant on March 1, 1999, was approximately $37,526,000.  In determining this
figure,  the  Registrant  has assumed that all of its  directors  and  executive
officers are affiliates.  Such assumptions should not be deemed to be conclusive
for any other purpose.

The number of shares of the  registrant's  Common Stock  outstanding on March 1,
1999 was 31,774,005.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of InteliData  Technologies  Corporation's Proxy Statement for its 1999
Annual  Stockholder  Meeting,  to be filed  within 120 days after the end of the
registrant's fiscal year, are incorporated into Part III of this Report.


================================================================================
<PAGE>

                       INTELIDATA TECHNOLOGIES CORPORATION

                         1998 ANNUAL REPORT ON FORM 10-K

                                TABLE OF CONTENTS


                                                                            Page
                                                                            ----
PART I 
------

Item 1.    Business............................................................3

Item 2.    Properties..........................................................7

Item 3.    Legal Proceedings...................................................8

Item 4.    Submission of Matters to a Vote of Stockholders.....................8


PART II 
-------

Item 5.    Market for Registrant's Common Stock and Related
           Stockholder Matters.................................................9

Item 6.    Selected Financial Data............................................10

Item 7.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations..............................................11

Item 8.    Financial Statements and Supplementary Data........................27

Item 9.    Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure...........................................52


PART III
--------

Item 10.   Directors and Executive Officers of the Registrant.................53

Item 11.   Executive Compensation.............................................54

Item 12.   Security Ownership of Certain Beneficial Owners and Management.....54

Item 13.   Certain Relationships and Related Transactions.....................54


PART IV
-------

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K....55

<PAGE>


                                     PART I

ITEM 1.  BUSINESS
-----------------

GENERAL

         InteliData  Technologies  Corporation  ("InteliData"  or the "Company")
develops and markets software products and consulting services for the financial
services  industry.  The Company  supplies  Internet  Banking  and bill  payment
software to financial institutions that want to provide their own remote banking
services.   The  Company  also  provides   maintenance   contracts  on  customer
installations  and  leases  Caller  ID  adjunct  units to  customers  in US West
Communications, Inc. ("US West") territory.

         The Company develops and markets software  products and  implementation
services  to  assist  financial  institutions  in  their  Internet  Banking  and
electronic  bill  payment  initiatives.  The  products  are  designed  to assist
consumers  in  accessing  and   transacting   business   with  their   financial
institutions electronically,  and to assist financial institutions in connecting
to and transacting  business with third party processors.  The services focus on
consulting  and  maintenance  agreements  that support the  Company's  products.
Additionally, during the fourth quarter of 1997, the Company received $5 million
relating  to  royalties  due to the  Company  from Visa.  The cash  payment  was
recorded  as deferred  revenue  and is being  recognized  into  revenues  over a
two-year period in accordance with the terms of the agreement.

BACKGROUND

         The Company  was  incorporated  on August 23,  1996 under the  Delaware
General  Corporation Law in order to effect the mergers ("Mergers") of US Order,
Inc. ("US Order") and Colonial Data Technologies  Corp.  ("Colonial  Data"). The
Mergers  were  announced  on August 5,  1996,  when US Order and  Colonial  Data
entered into an Agreement and Plan of Merger ("Merger  Agreement").  On November
7, 1996,  the Mergers were  consummated  with each share of outstanding US Order
and  Colonial  Data common  stock being  exchanged  for one share of  InteliData
common stock.  Accounting  for the Mergers was treated as a purchase of Colonial
Data by US Order.

         Effective  September 30, 1996, US Order acquired the business of Braun,
Simmons & Co., an Ohio  corporation  ("Braun  Simmons"),  for  approximately  $7
million,  including US Order transaction costs,  consisting of cash and US Order
common stock  pursuant to the merger of Braun  Simmons into US Order (the "Braun
Simmons  Acquisition").  Braun  Simmons  was  an  information  engineering  firm
specializing  in the  development  of Internet  Banking  solutions for financial
institutions. The acquisition expanded the Company's product line for both large
and small financial institutions.

         As a result of the Mergers and Braun Simmons  Acquisition,  the Company
operated its business in three operating  segments:  Internet Banking  (formerly
electronic commerce); telecommunications; and interactive services.
<PAGE>
         During the fourth quarter of 1997, the Company announced its intentions
to sell the  interactive  services  division.  The division was  established  to
provide  interactive  applications  for use on smart  telephones and other small
screen devices,  such as alpha-numeric  pagers,  Personal  Communication Systems
("PCS") devices and personal digital  assistants  ("PDAs").  Certain portions of
the interactive  services  division were sold in the first quarter of 1998 for a
nominal sum.

         During the second quarter of 1998, the Company announced its intentions
to discontinue the telecommunications business, other than the leasing of Caller
ID adjuncts,  formerly  transacted  by Colonial  Data.  The  division  designed,
developed and marketed  telecommunications  products including Caller ID adjunct
units,  smart  telephones  and small business  telecommunications  systems  that
supported intelligent network services developed and implemented by the regional
Bell operating companies and other telephone companies.

         Accordingly,   the  Company  has  reclassified   prior  year  financial
statements to account for the discontinued operations.

         The  Company's  principal  executive  offices  are  located  at   13100
Worldgate Drive,  Suite 600,  Herndon,  Virginia 20170 and its  telephone number
is (703) 834-8500.

INDUSTRY BACKGROUND

         The Company provides software products and  implementation  services to
financial  institutions  whose  processes  and systems are subject to regulatory
approvals. Internet Banking is a developing marketplace.  Financial institutions
are gradually  expanding their Internet Banking services to permit customers not
only to access historical account information from remote locations, but also to
engage  in  transactions  such as  paying  bills  and  transferring  funds.  The
Company's future growth and  profitability  will depend,  in part, upon consumer
acceptance of Internet  Banking,  and bill  presentment  processes and the speed
upon which such acceptance is received.

PRODUCTS AND SERVICES

         The Company's  business  strategy is to develop  products and services,
including  software,  to meet the  needs of  financial  institutions  and  their
customers  in the  Internet  Banking  markets.  The  Company  strives to develop
products  with broad  appeal that are  easy-to-use,  practical  and built around
common industry standards.

         The  Company's  strategy  is  to  support  financial   institutions  by
providing  products and services that help them deploy Internet Banking to their
customers. The Company's products and services are designed to provide financial
institutions with the capability  to process banking transactions from  multiple
channels  including  personal  computers,  internet or telephone.  The following
represent the Company's products and services:
<PAGE>
Internet Banking

Interpose (TM) Transaction Engine
---------------------------------

         The Interpose Transaction Engine is the heart of the Company's Internet
Banking software system.  It runs on the financial  institution's  host computer
system, providing real-time connectivity to remote delivery channels. Along with
this critical host connection,  the Interpose Transaction Engine provides robust
customer  profiling  and control over system  security.  Its Advanced  Financial
Message Set gives financial  institutions the  functionality to offer a complete
range of online financial services.

Interpose (TM) OFX Gateway
--------------------------

         The  Interpose  OFX  Gateway  allows a  financial  institution  to take
advantage of the Open Financial  Exchange  ("OFX")  standard to directly support
customers  who  use  Intuit  Quicken(R),   Microsoft  Money(R),  Home  Financial
Network's Home ATM(TM),  and other OFX compliant  client  software.  It supports
synchronized  information  across  all  delivery  channels,  including  personal
computers, the internet and telephones.

Interpose (TM) Payment Warehouse
--------------------------------

         The  Interpose  Payment  Warehouse  provides  a  software  solution  to
financial  institutions that automates bill payment  processing while giving the
financial  institution the benefit of tracking  payment activity and integrating
delivery channels.

Consulting Services 
------------------- 

         The  Company  offers  its  clients  consulting  services  to  assist in
implementation,  training and  customization  on a time and materials  basis and
provides  maintenance  and support  services and software  upgrades  pursuant to
agreements which are typically renewable on an annual basis.  Additionally,  the
Company offers consulting  services regarding the application and feasibility of
implementing  Internet  Banking  products within the bank's  mainframe  computer
system.

Leasing Activities

         The  Company  leases  Caller ID  adjunct  units in  accordance  with an
agreement  with US West,  whereby the Company leases Caller ID units directly to
US West customers.  The leasing program enables subscribers to pay a monthly fee
for the equipment and provides the Company with a stream of recurring  revenues.
The Company  has been  notified  by US West that it has  terminated  leasing new
units  under the  program.  Notwithstanding  the  termination  of this  program,
previously existing leases remain in effect. Although the Company is not able to
estimate the effect on future operations of this terminated leasing program, the
number of active records in the Company's  installed lease base has historically
decreased at a rate of approximately 30% per year.
<PAGE>
MARKETING AND DISTRIBUTION

         The Company  sells its  principal  products  and  services to financial
institutions  in the United States.  Additionally,  the Company leases Caller ID
adjunct units in the US West territory. Revenues from the US West lease base and
royalties from the Visa Bill-Pay system represented 53% and 26%, respectively of
total revenues for the year ended December 31, 1998. The Company does not market
its Caller ID lease business to new customers.

         The  Company  concentrates  its  marketing  efforts on direct  sales to
financial  institutions.  Currently,  the  Company  is  marketing  to  financial
institutions  that operate large IBM mainframe  processors in the United States.
The Company is developing products and services to assist financial institutions
who  want to  provide  their  customers  with  the  ability  to  access  certain
information   from  their   accounts  and  complete   transactions   with  those
institutions concerning bill payments, loan payments, online transfers and other
transactions from remote locations via personal computers.

COMPETITION

         The Company's products and services face competition from several types
of competitors.  Some financial  institutions have elected to develop internally
their own Internet Banking solutions instead of purchasing products and services
from the Company or third parties. Financial institutions may also contract with
service bureaus,  such as Checkfree Corp., Security First Network Bank or Online
Resources, Inc., to obtain Internet Banking services. Finally, a number of other
software  companies,  including Edify Corp.,  Corillian  Corporation and Destiny
Software Corporation, offer products and services that compete with those of the
Company.

         The  Company  expects  that  competition  in all of  these  areas  will
increase in the near future.  The Company believes that a principal  competitive
factor in its  markets is the ability to offer an  integrated  system of various
Internet  Banking  products and services.  Competition will be based upon price,
performance,  customer  service and the  effectiveness  of  marketing  and sales
efforts.  The  Company  competes  in its  various  markets  on the  basis of its
relationships  with  strategic  partners,  by  developing  many of the  products
required  for  complete  solutions,  by  leveraging  market  experience,  and by
building reliable products and offering those products at reasonable prices.

PRODUCT DEVELOPMENT

         The  Company  operates  in  industries  that are  rapidly  growing  and
changing.  In an effort to improve the  Company's  position  with respect to its
competition,  the Company has focused  management efforts in the area of product
development.  In 1998,  1997 and 1996,  the Company's  research and  development
expenditures,  exclusive of  nonrecurring  in-process  research and  development
expenses were $2,652,000,  $4,347,000 and $2,270,000,  respectively. At December
31, 1998, 24 employees were engaged in product development.
<PAGE>
         The Company's product  development  efforts are focused on software and
systems for electronic banking. In particular,  the Company applies its research
and  development  expenditures  to data  transaction  processing  and  messaging
software.  The Internet Banking  industry is  characterized by rapid change.  To
keep pace with this change,  the Company maintains an aggressive  program of new
product  development  and  dedicates  considerable  resources  to  research  and
development to further enhance its existing  products and to create new products
and  technologies.  The Company's  ability to attract and retain highly  skilled
research and  development  personnel is  important  to the  Company's  continued
success.

GOVERNMENT REGULATION

         The banking  market  which the Company has  targeted  for  marketing is
highly  regulated.  The banking  industry,  although it has  recently  undergone
significant deregulation,  remains quite regulated at both the federal and state
levels.  Interpretation,  implementation or revision of banking  regulations can
accelerate or hinder the ultimate success of the Company and its products.

PATENTS, PROPRIETARY RIGHTS AND LICENSES

         The Company holds limited registered  intellectual property rights with
respect to its products.  The Company  relies on trade secret laws and licensing
agreements  to establish  and maintain its  proprietary  rights to its products.
Although  the  Company  has  obtained  confidentiality  agreements  from its key
executives  and  engineers  in its product  development  group,  there can be no
assurance that third parties will not independently  develop the same or similar
alternative technology,  obtain unauthorized access to the Company's proprietary
technology or misuse the technology to which the Company has granted access.

         The Company does not believe that its products and services infringe on
the  rights  of  third  parties.   From  time  to  time,  third  parties  assert
infringement claims against the Company. There can be no assurance that any such
assertion  will not result in costly  litigation or require the Company to cease
using, or obtain a license to use, intellectual property rights of such parties.

EMPLOYEES

         At December 31, 1998, the Company had  approximately  75 employees,  of
whom 13  were  associated  with  discontinued  operations.  The  Company  has no
collective  bargaining  agreements with its employees and believes that it has a
positive relationship with its employees.


ITEM 2.  PROPERTIES
-------------------

         The  Company is  headquartered  in Herndon,  Virginia,  where it leases
15,000  square  feet of office  space from an  unaffiliated  party.  The Company
intends to move its headquarters to Reston,  Virginia,  in the second quarter of
1999.  The Company will lease  approximately  17,000
<PAGE>
square feet of office space from an unaffiliated party. The new lease expires in
January  2004.  The Company  leases  11,000  square feet of office space from an
unaffiliated party for its product development  facilities in Toledo,  Ohio. The
Ohio lease  expires  in January  2004.  The  Company  also  leases  other,  less
significant sales facilities.

         The  Company   also  owns  a  63,000  square  foot  manufacturing   and
distribution  facility in New Milford,  Connecticut which is listed for sale.

         The Company  believes that its facilities are suitable and adequate for
the current and foreseeable future business of the Company, however, the Company
will continue to assess its office space needs.


ITEM 3.  LEGAL PROCEEDINGS
--------------------------

         The Company is not currently a party to any material  litigation.  From
time to time,  the Company is a party to routine  litigation  incidental  to its
business.  Management does not believe that the resolution of any or all of such
routine  litigation  will be likely  to have a  material  adverse  effect on the
Company's financial condition or results of operations.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
--------------------------------------------------------

         None.
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
---------------------------------------------------------
         STOCKHOLDER MATTERS
         -------------------

         The  Company's  common  stock is traded on the Nasdaq  National  Market
under the symbol  INTD.  The table  below sets forth the high and low  quarterly
sales  prices  for the common  stock of the  Company as  reported  in  published
financial sources for each quarter during the last two years:

                                  Price Range of Common Stock
                                --------------------------------
                                     High                Low
                                --------------       -----------      
     1998
         Fourth Quarter         $  1   7/8           $     5/8
         Third Quarter             1   1/2                 9/16
         Second Quarter            3                       15/16
         First Quarter             3   13/16            1  7/8

     1997
         Fourth Quarter         $  3   15/16         $  1  1/4
         Third Quarter             5   3/8              2  3/4
         Second Quarter            6   1/4              4  1/8
         First Quarter             8   5/8              4  7/8

         The Company has never declared or paid any cash dividends on its common
stock. The Company currently  intends to retain its future earnings,  if any, to
fund the  development  and  growth  of its  business  and,  therefore,  does not
anticipate  paying any cash  dividends  in the  foreseeable  future.  Any future
decision  concerning the payment of dividends on the Company's common stock will
depend  upon  the  results  of  operations,   financial  condition  and  capital
expenditure plans of the Company,  as well as such other factors as the Board of
Directors, in its sole discretion, may consider relevant.

         The number of stockholders of record at March 1, 1999 was 629, and does
not include those  stockholders  who hold shares in street name accounts.

<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA
--------------------------------

                       INTELIDATA TECHNOLOGIES CORPORATION
                             Selected Financial Data
                      (in thousands, except per share data)
<TABLE>
                                                                    Year Ended December 31,
                                             ---------------------------------------------------------------------------
                                                1998           1997             1996             1995           1994     
                                             -----------    ----------       ----------       -----------    -----------
<S>                                          <C>            <C>              <C>              <C>            <C>
RESULTS OF OPERATIONS:
----------------------

Revenues                                     $    10,027    $   12,521       $    4,795        $    4,186    $     1,432
Cost of revenues                                   2,656         6,847            2,762             2,470          1,013
Operating expenses                                11,861        18,108           16,236             6,877         10,584
                                             -----------    ----------       ----------       -----------    -----------
Operating loss                                    (4,490)      (12,434)         (14,203)           (5,161)       (10,165)
Other income (expense)                               874         1,271           (2,391)              443         13,878  <F1>
                                             -----------    ----------       ----------       -----------    -----------     
(Loss) income from continuing operations          (3,616)      (11,163)         (16,594)           (4,718)         3,713
Discontinued operations                          (34,223)      (78,931) <F2>    (79,133) <F2>          --             -- 
                                             -----------    ----------       ----------       -----------    -----------

Net (loss) income                                (37,839)      (90,094)         (95,727)           (4,718)         3,713
Preferred dividend requirement                        --            --               --               681          1,895
                                             -----------    ----------       ----------       -----------    -----------
Net (loss) income applicable to common
      shareholders                           $   (37,839)   $  (90,094)      $  (95,727)      $    (5,399)   $     1,818
                                             ===========    ==========       ==========       ===========    ===========

Basic (loss) income from continuing
 operations per common share                 $     (0.11)   $    (0.35)      $    (0.90)      $     (0.50)   $      0.36
                                             ===========    ==========       ==========       ===========    ===========
Diluted (loss) income from continuing
 operations per common share                 $     (0.11)   $    (0.35)      $    (0.90)      $     (0.50)   $      0.12
                                             ===========    ==========       ==========       ===========    ===========
Basic (loss) income from discontinued
 operations per common share                 $     (1.09)   $    (2.50)      $    (4.31)      $      0.00    $      0.00
                                             ===========    ==========       ==========       ===========    ===========
Diluted (loss) income from discontinued
 operations per common share                 $     (1.09)   $    (2.50)      $    (4.31)      $      0.00    $      0.00
                                             ===========    ==========       ==========       ===========    ===========
Basic (loss) income per common share         $     (1.20)   $    (2.85)      $    (5.21)      $     (0.50)   $      0.36
                                             ===========    ==========       ==========       ===========    ===========
Diluted (loss) income per common share       $     (1.20)   $    (2.85)      $    (5.21)      $     (0.50)   $      0.12
                                             ===========    ==========       ==========       ===========    ===========
Basic weighted average shares outstanding         31,450        31,574           18,370            10,772          5,000
                                             ===========    ==========       ==========       ===========    ===========
Diluted weighted average shares outstanding       31,450        31,574           18,370            10,772         14,906
                                             ===========    ==========       ==========       ===========    ===========

FINANCIAL POSITION (as of December 31):
---------------------------------------

Cash, cash equivalents and
   short-term investments                    $     8,050    $   11,359       $   39,062       $    25,120    $     2,568
Total assets                                      10,911        46,702          130,038            40,252          4,637
Long-term debt                                        --            --               --                --          4,833
Stockholders' equity (deficit)                       331        37,069          124,289            37,733         (6,466)
<FN>
<F1> Includes  gain of  approximately  $14.5  million  on the sale of certain of
     the  Company's electronic banking and bill pay operations to Visa on August
     1, 1994.

<F2> Discontinued  operations  results for 1997 include  $65,200,000  of unusual
     charges  related  to  impairment  of  assets,  restructuring  charges,  and
     valuation  adjustment  relating  to  inventories.  Discontinued  operations
     results for 1996 include  $72,300,000 of nonrecurring  in-process  research
     and development expenses related to the Mergers.
</FN>
</TABLE>
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
----------------------------------------------------------  
         CONDITION AND RESULTS OF OPERATIONS
         -----------------------------------

Overview

         InteliData  Technologies  Corporation  ("InteliData"  or the "Company")
develops and markets software products and consulting services for the financial
services  industry.  The Company  supplies  Internet  Banking  and bill  payment
software to financial institutions that want to provide their own remote banking
services.   The  Company  also  provides   maintenance   contracts  on  customer
installations  and  leases  Caller  ID  adjunct  units to  customers  in US West
Communications, Inc. ("US West") territory.

         The Company develops and markets software  products and  implementation
services  to  assist  financial  institutions  in  their  Internet  Banking  and
electronic  bill  payment  initiatives.  The  products  are  designed  to assist
consumers  in  accessing  and   transacting   business   with  their   financial
institutions electronically,  and to assist financial institutions in connecting
to and transacting  business with third party processors.  The services focus on
consulting  and  maintenance  agreements  that support the  Company's  products.
Additionally, during the fourth quarter of 1997, the Company received $5 million
relating  to  royalties  due to the  Company  from Visa.  The cash  payment  was
recorded  as deferred  revenue  and is being  recognized  into  revenues  over a
two-year period in accordance with the terms of the agreement.

Background

         The Company  was  incorporated  on August 23,  1996 under the  Delaware
General  Corporation Law in order to effect the mergers ("Mergers") of US Order,
Inc. ("US Order") and Colonial Data Technologies  Corp.  ("Colonial  Data"). The
Mergers  were  announced  on August 5,  1996,  when US Order and  Colonial  Data
entered into an Agreement and Plan of Merger ("Merger  Agreement").  On November
7, 1996,  the Mergers were  consummated  with each share of outstanding US Order
and  Colonial  Data common  stock being  exchanged  for one share of  InteliData
common stock.  Accounting  for the Mergers was treated as a purchase of Colonial
Data by US Order.

         Effective  September 30, 1996, US Order acquired the business of Braun,
Simmons & Co., an Ohio  corporation  ("Braun  Simmons"),  for  approximately  $7
million,  including US Order transaction costs,  consisting of cash and US Order
common stock  pursuant to the merger of Braun  Simmons into US Order (the "Braun
Simmons  Acquisition").  Braun  Simmons  was  an  information  engineering  firm
specializing  in the  development  of Internet  Banking  solutions for financial
institutions. The acquisition expanded the Company's product line for both large
and small financial institutions.

         As a result of the Mergers and Braun Simmons  Acquisition,  the Company
operated its business in three operating  segments:  Internet Banking  (formerly
electronic commerce); telecommunications; and interactive services.
<PAGE>
         During the fourth quarter of 1997, the Company announced its intentions
to sell the  interactive  services  division.  The division was  established  to
provide  interactive  applications  for use on smart  telephones and other small
screen devices,  such as alpha-numeric  pagers,  Personal  Communication Systems
("PCS") devices and personal digital  assistants  ("PDAs").  Certain portions of
the interactive  services  division were sold in the first quarter of 1998 for a
nominal sum.

         During the second quarter of 1998, the Company announced its intentions
to discontinue the telecommunications business, other than the leasing of Caller
ID adjuncts,  formerly  transacted  by Colonial  Data.  The  division  designed,
developed and marketed  telecommunications  products including Caller ID adjunct
units,  smart  telephones  and  small business  telecommunications  systems that
supported intelligent network services developed and implemented by the regional
Bell operating companies and other telephone companies.

         Accordingly,   the  Company  has  reclassified   prior  year  financial
statements to account for the discontinued operations.

RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1998 AND 1997

Revenues

         The Company's revenues were $10,027,000 in 1998 compared to $12,521,000
in 1997, a decrease of  $2,494,000.  The primary reason for the decrease was due
to the expected  reduction in billable Caller ID leases and was partially offset
by increased  royalty  revenues.  During  1998,  software  revenues  contributed
$812,000,  consulting  and services  contributed  $1,138,000  and other revenues
contributed  $8,077,000.  Other  revenues  consisted of $5,344,000  from leasing
activities,  $2,620,000 from royalties relating to the Visa Bill-Pay System, and
$113,000 from monthly service fees.

         During 1997,  the Company  earned  $1,040,000  from software  sales and
installations,  $1,229,000  from consulting and services, and  $10,252,000  from
other revenues.  Other revenues consisted of $8,570,000 from leasing activities,
$625,000 from royalty  arrangements,  $697,000 from customer consulting services
and $360,000 from monthly service fees.

         During  1998,  the  Company  continued  to  transition  from  providing
primarily  back-end  processing  support to  financial  institutions  to selling
software that assists  financial  institutions in connecting  customers who bank
from remote locations, either from a personal computer or telephone. The Company
expects  that  revenues  generated  in 1999 will be a direct  result of software
sales and  installations  and the  related  consulting  business.  Additionally,
during  1999,  the  Company  expects to  recognize  a decrease  in the Caller ID
leasing business.  The number of active records in the Company's installed lease
base has historically decreased at a rate of approximately 30% per year.

Cost of Revenues and Gross Profit

         The  Company's  cost of revenues  decreased by $4,191,000 to $2,656,000
for 1998
<PAGE>
compared to $6,847,000 in 1997. The decrease is primarily  related to the change
in the  product  mix and  decreased  costs on the Caller ID adjunct  lease base,
which  earned 62% gross  profit  margins in 1998  compared  to 45% gross  profit
margins in 1997. The increased  margins on the Caller ID leasing  activities are
attributed  primarily to the Caller ID adjunct units becoming fully  depreciated
in the first quarter of 1998.

         The Company  expects  its gross  margin  percentages  to vary in future
periods based upon the revenue mix between software sales,  service revenues and
other revenues and based upon the composition of services revenues earned during
the period.

General and Administrative

         General and administrative  expenses decreased $1,236,000 to $6,240,000
in 1998 from $7,476,000 in 1997. The decrease was primarily attributable to cost
saving  measures   implemented  in  reducing  staff  employment  and  facilities
expenses.  In the future,  the Company expects that aggregate  recurring general
and  administrative  expenses will  decrease as the Company  continues to pursue
options to reduce fixed overhead costs.

Selling and Marketing

         Selling and marketing  expenses  decreased  $1,281,000 to $2,969,000 in
1998 from  $4,250,000  in 1997.  The  decrease is  primarily  attributed  to the
inclusion of $2,456,000 in  advertising  credits that were charged to operations
in 1997. The Company  adjusted the carrying value of a receivable  from the sale
of stock associated with advertising credits based on the Company's expected use
of the credits.  Exclusive of this transaction,  selling and marketing  expenses
actually increased $1,175,000.  This increase in recurring selling and marketing
expenses was primarily related to increases in the Company's labor force, travel
and  professional  services,  advertising, sales  promotion,  and  trade  shows.
Management  expects to  continue investing in  selling and marketing expenses in
1999 to promote the Company's brand name.

Research and Development

         Research and development  costs  decreased  $1,695,000 to $2,652,000 in
1998 compared to $4,347,000 in 1997. The decrease is primarily attributed to the
reduction of the workforce and  elimination  of certain  departments  within the
research and development  group.  The Company  primarily  invested  research and
development  expenses in writing the Interpose  Transaction  Engine for the Open
Financial Exchange ("OFX") standard, the majority of such work was performed  in
1997.

Unusual Charges

         For the year ended December 31, 1997, the Company  incurred a charge to
operations  of  $2,035,000  for the  remaining  unamortized  costs of intangible
assets  associated  with the Braun Simmons  Acquisition  due to impairment.  The
impairment  was measured  based on the excess of the net  carrying  value of the
asset over the asset's  fair value.  The fair value of the asset was  determined
based on estimates of future discounted cash flows to be generated by the asset.
<PAGE>
Other Income, Net

         Other income net  decreased  $397,000 to  $874,000 in  1998 compared to
$1,271,000 in 1997. The decrease is largely  associated with the use of cash and
cash equivalents and short-term investments during the year.

Income Taxes

         Income taxes were zero for the years ended  December 31, 1998 and 1997.
At December 31,  1998,  the Company had net  operating  loss  carryforwards  for
federal income tax purposes of  approximately  $63 million which expire by 2013.
However,  use of these net operating losses in future years may be limited under
applicable  tax laws and  regulations  as a result of the  Mergers and the Braun
Simmons Acquisition.

Discontinued Operations

         The loss from operations of telecommunications and interactive services
divisions (net of income taxes) was  $18,049,000  and  $78,931,000 for the years
ended  December  31,  1998  and  1997,  respectively.  The loss on  disposal  of
telecommunications  and interactive  services  divisions was $16,174,000 for the
year ended December 31, 1998.

         During  1998,  the  loss  from  operations  of  telecommunications  and
interactive  services  divisions (net of income taxes)  included  $13,784,000 in
inventory   adjustments.   The  loss  on  disposal  of  telecommunications   and
interactive service divisions consisted of $2,696,000 in expected sales returns,
$3,539,000  in property  adjustments,  $3,010,000  in  provisions  for  customer
accounts,  and $6,929,000 in actual and expected losses from operations from the
measurement date through the date of disposal.

         The Company recorded a provision for corporate restructuring during the
third  quarter of 1997 of  $1,003,000.  This  amount  consisted  of  $771,000 in
employee  reduction and related  matters,  $190,000 in obsolete  equipment,  and
$42,000 in facilities  closings.  As of December 31, 1997, the Company  incurred
employee reductions and relocation expenses  aggregating $177,000 and write-down
for obsolete  equipment of  $190,000.  As of December 31, 1997,  the Company had
$636,000 in remaining  restructuring accruals recorded on its books. The Company
incurred  these  costs in 1998.  Additional  accruals  were  posted for  closing
operations during the second and fourth quarters of 1998.

         During the third  quarter of 1997 the  Company  announced  a  strategic
repositioning  of the  Company's  telecommunications  division  based on  recent
events  in its  marketplace.  In  connection  with  this  repositioning  and the
aforementioned corporate  restructuring,  the Company's management evaluated its
financial  position and  determined  that it would be  appropriate  to charge to
operations  the  remaining   unamortized  costs  of  intangible  assets  due  to
impairment,  adjust  inventory  carrying  amounts to market  value,  and reflect
certain  additional  restructuring  charges,  including  charges for  separation
agreements with employees and charges associated with the termination of a joint
venture   agreement.   Such  third  quarter  1997  unusual  charges
<PAGE>
aggregated $49,246,000 for the impairment of intangible assets;  $11,333,000 for
inventories and commitments;  $1,003,000 for restructuring  charges (see above);
$1,434,000 for separation  agreements;  and $3,653,000 for assets  relating to a
joint  venture.  The impairment was based on the excess of the carrying value of
the assets  over the  assets'  fair  values.  The fair value of the assets  were
generally  determined as the estimates of future discounted cash flows generated
by those assets.

Loss from Continuing Operations, Net Loss and Weighted Average Shares

         As a result of the foregoing factors,  loss from continuing  operations
was $3,616,000 and  $11,163,000  for the years ended December 31, 1998 and 1997,
respectively. Basic and diluted loss from continuing operations per common share
was  $0.11  and  $0.35  for  the  years  ended   December  31,  1998  and  1997,
respectively.  Net loss was  $37,839,000  and  $90,094,000  for the years  ended
December  31, 1998 and 1997,  respectively.  Basic and  diluted  loss per common
share was $1.20 and $2.85 for the years ended  December  31, 1998 and 1997.  The
weighted average shares decreased to 31,450,000 in 1998 from 31,574,000 in 1997.
The decrease in weighted  average shares resulted  primarily from the repurchase
of treasury stock in late 1997.

RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1997 AND 1996

         The  consummation  of the Mergers on November 7, 1996 and the  required
accounting presentation of the historical financial statements had a significant
impact on the results of operations  for 1996.  Consolidated  total revenues and
all categories of expenses were significantly  greater in 1997 than 1996 because
1996 results only included  approximately  two months of Colonial Data's US West
leasing operations and three months of Braun Simmons' operations.

Revenues

         The Company's  revenues  increased by $7,726,000 to $12,521,000 in 1997
from $4,795,000 in 1996. The increase was primarily attributed to the results of
the leasing  operations in 1997 compared to 1996. The Company recorded  revenues
of $8,570,000 and $1,838,000  from US West leasing  operations  during the years
ended  December  31, 1997 and 1996,  respectively,  an  increase of  $6,732,000.
Additionally,  the Company recorded $1,040,000 in software revenues for the year
ended  December  31, 1997  compared to no software  revenues  for the year ended
December 31, 1996.

Cost of Revenues and Gross Profit

         The  Company's  cost of revenues  increased by $4,085,000 to $6,847,000
for 1997 compared to $2,762,000 in 1996.  The increase was primarily  attributed
to higher  revenues.  Gross margins  improved  approximately  3% led by improved
margins from the Company's leasing activities.  The combined operations resulted
in an increase in the Company's  overall gross margin to 45% in 1997 from 42% in
1996.
<PAGE>
General and Administrative

         General and administrative  expenses increased $1,156,000 to $7,476,000
in 1997 from $6,320,000  during the comparable  period in 1996. The increase was
primarily  attributable  to the increased  efforts  associated with managing the
growing revenues.  The general and administrative  expenses grew 18% compared to
the revenue growth of 161%.

Selling and Marketing

         Selling and marketing  expenses  increased  $2,375,000 to $4,250,000 in
1997 from  $1,875,000  in 1996.  The  increase was  attributed  primarily  to an
adjustment of $2,456,000, to the carrying value of a receivable from the sale of
stock for an  advertising  credit  based on the  Company's  expected  use of the
credit. The remaining fluctuation was not considered to be material.

Research and Development

         Research and development  costs  increased  $2,077,000 to $4,347,000 in
1997 from $2,270,000 in 1996. Research and development related expenses for 1997
were largely attributable to the writing of the Interpose Transaction Engine for
the OFX standard.

Unusual Charges

         For the year ended December 31, 1997, the Company  incurred a charge to
operations  of  $2,035,000  for the  remaining  unamortized  costs of intangible
assets due to impairment. The impairment was measured based on the excess of the
net carrying value of the assets over the assets' fair values. The fair value of
the assets were  generally  determined  based on estimates of future  discounted
cash flows to be generated by the assets.

         The Company  recorded  unusual charges  aggregating  $5,771,000 for the
year ended December 31, 1996.  Unusual  charges were  associated with facilities
consolidations and charges  associated with in-process  research and development
from the Braun  Simmons  Acquisition.  The  Company  recorded  a  provision  for
facilities  consolidations during the fourth quarter of 1996 of $857,000. During
1997, the Company  incurred  $301,000 in facilities  consolidation  costs in the
second  quarter when it closed its customer  service  location in Virginia.  The
remaining accrual for facilities consolidations was not utilized because of cost
savings associated with employee severance and closing costs. Accordingly, these
expenses were  reversed  back into income during the second  quarter of 1997. In
connection  with the Braun Simmons  Acquisition  in September  1996, the Company
charged in-process  research and development  expenses for purchased  in-process
technology that had not reached technological  feasibility as of the date of the
Braun Simmons  Acquisition  and did not have  alternative  future uses.  Amounts
charged to  in-process  research and  development  were based on an  independent
appraisal and totaled $4,914,000.
<PAGE>
Other Income, Net

         Other income (expense) increased $3,662,000 to $1,271,000 in 1997  from
($2,391,000)  in  1996.  The  increase  is  largely  associated  with  the  1996
recognition  of the Company's  proportionate  share of losses of Home  Financial
Network,  Inc.  ("HFN") and the amortization of the excess of the purchase price
over the Company's share of the equity in net assets of HFN.

Income Taxes

         Income taxes were zero for the years ended  December 31, 1997 and 1996.
At December 31,  1997,  the Company had net  operating  loss  carryforwards  for
federal income tax purposes of  approximately  $50 million which expire by 2012.
However,  use of these net operating losses in future years may be limited under
applicable  tax laws and  regulations  as a result of the  Mergers and the Braun
Simmons Acquisition.

Discontinued Operations

         The loss from operations of telecommunications and interactive services
divisions (net of income taxes) was  $78,931,000  and  $79,133,000 for the years
ended  December 31, 1997 and 1996,  respectively.  A significant  portion of the
losses was attributed to unusual charges in each of the comparative periods.

         The loss from  operations for the year ended December 31, 1996 included
a provision for  corporate  restructuring  during the fourth  quarter of 1996 of
$711,000.  This  amount  consisted  of $466,000  in  facilities  consolidations,
$175,000  in  relocation  expenses  for certain  employees,  and $70,000 for the
write-down of duplicative processing equipment.

         During  1997,  the Company  incurred  $90,000 in  relocation  costs for
certain employees during the first and second quarter,  and incurred $70,000 for
the write-down of  duplicative  processing  equipment in the first quarter.  The
remaining  $551,000  of  the  accrual  for  corporate  restructuring  costs  was
associated with other facilities  consolidations  that did not occur because the
Company  recognized the need to retain such  facilities for product  development
during 1997 and  accordingly,  these  expenses  were  reversed  back into income
during the second quarter of 1997.

         The Company recorded a provision for corporate restructuring during the
third  quarter of 1997 of  $1,003,000.  This  amount  consisted  of  $771,000 in
employee  reduction and related  matters,  $190,000 in obsolete  equipment,  and
$42,000 in  facilities  closings.  As of  December  31,  1997,  the  Company had
incurred employee  reductions and relocation expenses  aggregating  $177,000 and
write-down  for obsolete  equipment of  $190,000.  As of December 31, 1997,  the
Company had $636,000 in remaining  restructuring accruals recorded on its books.
The Company  incurred these costs in 1998.  Additional  accruals were posted for
discontinuing operations during the second and fourth quarters of 1998.

         During the third  quarter of 1997 the  Company  announced  a  strategic
repositioning  of the  Company's  telecommunications  division  based on  recent
events  in its  marketplace.  In  connection
<PAGE>
with this  repositioning and the  aforementioned  corporate  restructuring,  the
Company's  management  evaluated its financial  position and determined  that it
would be appropriate to charge to operations the remaining  unamortized costs of
intangible  assets due to impairment,  adjust inventory  carrying amounts to the
market value, and reflect certain additional  restructuring  charges,  including
charges for separation agreements with employees and charges associated with the
termination  of a joint  venture  agreement.  Such third  quarter  1997  unusual
charges  aggregated   $49,246,000  for  the  impairment  of  intangible  assets;
$11,333,000  for  inventories  and  commitments;  $1,003,000  for  restructuring
charges (see above);  $1,434,000 for separation  agreements;  and $3,653,000 for
assets  relating to a joint  venture.  The impairment was based on the excess of
the carrying value of the assets over the assets' fair values. The fair value of
the assets were generally  determined as the estimates of future discounted cash
flows generated by those assets.

Loss from Continuing Operations, Net Loss and Weighted Average Shares

         As a result of the foregoing factors,  loss from continuing  operations
was  $11,163,000 and $16,594,000 for the years ended December 31, 1997 and 1996,
respectively. Basic and diluted loss from continuing operations per common share
was  $0.35  and  $0.90  for  the  years  ended   December  31,  1997  and  1996,
respectively.  Net loss was  $90,094,000  and  $95,727,000  for the years  ended
December  31, 1997 and 1996.  Basic and diluted  loss per common share was $2.85
and $5.21 for the years ended December 31, 1997 and 1996.  The weighted  average
shares  increased to 31,574,000 in 1997 from 18,370,000 in 1996. The increase in
weighted average shares resulted  primarily from the shares issued in connection
with the Mergers.

LIQUIDITY AND CAPITAL RESOURCES

         During 1998,  the  Company's  cash,  cash  equivalents  and  short-term
investments  decreased by $3,309,000 resulting from funding operating losses. At
December  31, 1998,  the Company had  $8,050,000  in cash and cash  equivalents,
negative working capital of $274,000 and no long-term debt.

         The Company's cash requirements for operating,  investing and financing
activities  in  1998  were  financed  primarily  by  $5,000,000  from  royalties
associated  with the Visa  Bill-Pay  system,  which was  received  in the fourth
quarter of 1997 and cash provided by discontinued operations of $4,268,000.

         The  Company's  principal  needs  for  cash in 1998  were  for  funding
operating  losses,  investments  in property and  equipment  and to fund working
capital,  primarily related to accrued expenses,  deferred revenues and accounts
receivable.  The Company  funded an increase in accounts  receivable of $825,000
for the year ended  December 31, 1998.  The increase in accounts  receivable  is
attributed to the timing of receipts for services performed.  The Company's cash
position benefited from an increase in accounts payable of $588,000.

         Net cash provided by investing activities  aggregated $9,209,000 during
1998,  primarily  from the  sale of  short-term  investments  in the  amount  of
$9,304,000, offset in part by the purchase of capital equipment in the amount of
$95,000.
<PAGE>
         Net cash used in  financing  activities  aggregated  $1,139,000  during
1998, primarily from the payment of short-term borrowings of $1,500,000,  offset
in part by proceeds from the issuance of common stock in the amount of $361,000.

         The   decision   by   the   Company   to   divest   itself   from   the
telecommunications  business segment created certain  financial  obligations and
uncertainties  for the  future.  The  Company is  required  to  satisfy  certain
obligations  of the  telecommunications  business  which  will  carry on  beyond
December  31, 1998.  Such  obligations  include  settlement  of trade  payables,
satisfaction of product  royalties and license fees,  satisfaction of commission
and other selling expenses, providing product warranty service, customer support
and technical service,  satisfying employee severance agreements,  arranging the
destruction  of  inventory  and  shutdown  of  warehouse  facilities,  and final
closedown of all operating  activities and compliance with all federal and state
regulatory  requirements.  At December  31, 1998 the Company  estimated  the net
liability  for the final  shutdown  at $5.3  million  which is  recorded  on the
Company's balance sheet at year-end.

         At December 31, 1998, including  discontinued  operations,  the Company
had $274,000 in negative working capital and $331,000 in  shareholders'  equity.
In order for the Company to build up its core Internet  Banking business it will
be necessary to obtain additional  sources of working capital either through the
issuance of debt, equity or some combination  thereof.  Without adequate working
capital to fund the  business  the Company will find it difficult to attract new
customers,  retain  key  employees,  and  provide  financial  resources  to meet
customer product requirements.

         The Company's  continuation  as a going concern is  dependent upon  its
ability to generate  sufficient  cash flow to meet its  obligations  on a timely
basis, to obtain additional  financing,  and ultimately to attain profitability.
To that extent,  management has retained an investment banking firm to assist in
investigating additional financing sources.

         In addition,  the Company's  accuracy in  predicting  revenues and cash
flow is limited in that the sale of the Company's core product is reliant on the
banking industry's willingness to invest in a new market, internet banking. This
market  segment is slowly  evolving  and is subject to a number of  variables in
1999 that will  determine  the timing and quantity of new sales that the Company
is able to achieve.  Such variables include: (1) the effect of consolidations in
the  banking  industry;  (2)  financial  institutions'  progress  on  Year  2000
compliance;  and (3) the banking  customers'  willingness to invest freely in an
untested customer channel.  These reasons further require that the Company raise
additional  working  capital in order to have  adequate  funds in 1999 to remain
competitive as the product demand evolves.

INFLATION

         The Company  believes that  inflation has not had a material  effect on
the Company's sales and revenue during the past three years.
<PAGE>
YEAR 2000 UPDATE

General
-------

         The  inability of  computers,  software and other  equipment  utilizing
microprocessors  to recognize  and properly  process data fields  containing a 2
digit year is commonly  referred to as the Year 2000  Compliance  issue.  As the
year 2000 approaches,  such systems may be unable to accurately  process certain
date-based information.

         The Company  believes it has  identified all  significant  applications
that will  require  modification  to ensure Year 2000  Compliance.  Internal and
external  resources are being used to make the required  modifications  and test
Year 2000 Compliance.

Project
-------

         The Company's Year 2000 Project ("Project") is generally  proceeding on
schedule.  In  1996,  the  Company  began a  significant  re-engineering  of its
business  processes  across the Company  including  improved  access to business
information  through common,  integrated  computing  systems.  As a result,  the
Company  replaced its business systems with systems from J.D. Edwards & Company,
IBM  Corporation and Microsoft  Corporation,  which are designed to be Year 2000
Compliant. The Company became fully operational on these systems in 1998.

         The Company has a Project  team,  with  certain sub teams.  The Project
includes four major areas - corporate business systems,  local software systems,
third party suppliers of goods and services, and Interpose software systems. The
general  phases of the Project  are:  (1)  inventorying  date-aware  items;  (2)
determining  criticality  and  assigning  priorities to  identified  items;  (3)
assessing  the Year 2000  compliance  of items  determined to be material to the
Company; (4) repairing,  replacing or identifying workarounds for material items
that are determined not to be Year 2000 Compliant;  (5) testing  material items;
(6) identifying critical third parties; and (7) designing contingency plans.

         At  September  30,  1998,  the  inventory,   priority   assessment  and
compliance  assessment  phases  of each  area of the  Project  were  essentially
complete.  Material  items  are those  believed  by the  Company  to have a risk
involving the welfare of our customers or substantially affect revenues.

         Corporate  business  systems on schedule at September  30, 1998 include
hardware and systems software,  networks and  telecommunications.  All corporate
systems activities are expected to be complete by mid-1999.
<PAGE>
         Local software  systems  include  process  control and  instrumentation
systems and building systems.  Operational improvement projects already underway
address  some of the Year  2000  concerns.  Some  manufacturer  replacements  or
upgrades  are  behind  schedule;   however,   the  Company  estimates  necessary
replacements or upgrades will be completed by mid-1999.

         The third party suppliers phase includes the process of identifying and
prioritizing  critical  suppliers of goods and services,  and communicating with
them about their plans and progress in addressing  the Year 2000  concerns.  The
Company has recently initiated the  identification  phase which will be followed
by an evaluation of the most critical third parties.  These  evaluations will be
followed by the development of contingency  plans as necessary,  including plans
to use  alternative  third party  vendors,  if necessary.  This Project phase is
scheduled  for  completion  by mid-1999,  with  monitoring  planned  through the
remainder of 1999.

         The   Company   has   contingency   plans  for  some   mission-critical
applications and is working on plans for others. For example,  contingency plans
for the  payroll  system  have been in place  since the second  quarter of 1998,
while detailed plans for other business  processes will be completed by mid-year
1999.  A steering  committee  is closely  monitoring  the  progress  of business
process contingency plans involving, among other actions, manual workarounds and
additional staffing.

         The Interpose  software phase included  actions to address the issue of
Year 2000  Compliance  as it relates to the  Company's  customer  software.  The
Company believes that its current version of the Interpose software is Year 2000
Compliant. Actions taken to address previous releases of the software were, with
minor exceptions, programming changes to replace a non-compliant date conversion
routine  with one that was  already  Year 2000  compliant.  Any  customer  whose
product was not already compliant was notified of any source code changes and/or
release  updates  made to the  product.  The Company  has issued  letters to its
customers  that assure that any changes  pertinent to the  correcting  Year 2000
concerns  were  addressed  by the  third  quarter  of 1997 and  that all  future
releases of Interpose will be fully year 2000 compliant.

Costs
-----

         The estimated  total cost  associated  with required  modifications  to
become Year 2000 compliant has not been and is not anticipated to be material to
the Company's financial position or results of operations in any given year. The
estimated  total  cost  of the  Project  is or  will be  expensed  and  includes
allowances  for  some  items  for  which  a fix or  workaround  is  still  being
determined.

Risks
-----

         The failure to correct a material  Year 2000 problem could result in an
interruption in, or failure of certain normal business activities or operations,
which could materially and adversely affect the Company's results of operations,
liquidity and financial  condition.  Due to the general uncertainty  inherent in
the Year 2000 problem,  resulting in part from the  uncertainty of the Year 2000
readiness  of  third-party  suppliers  and  customers,  the Company is unable to
determine at this time whether the  consequences of Year 2000 problems will have
a material impact on the Company's results of operations, liquidity or financial
condition.  The Project is expected to reduce  significantly the Company's level
of uncertainty  about the Year 2000 problem and, in  particular,  about the Year
2000 compliance and readiness of its material third-party suppliers. The Company
believes that with the previously accomplished implementation of global business
<PAGE>
systems and completion of the Project as scheduled,  the possibility of material
interruptions of normal operations should be reduced significantly.


CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

         The Company  desires to take advantage of the "safe harbor"  provisions
of the Private  Securities  Litigation Reform Act of 1995. The Company wishes to
caution  readers that the following  important  factors,  among others,  in some
cases have affected the Company's actual results,  and could cause the Company's
actual results for 1999 and beyond, to differ materially from those expressed in
any forward-looking statements made by, or on behalf of, the Company.

Successful Implementation of Business Strategy

         During 1998, as the market for telecommunications products and services
changed, the Company discontinued its  telecommunications  business in an effort
to  streamline  its  operations  and focus its business on its Internet  Banking
business, selling software to financial institutions. There can be no assurances
that the Company will be able to successfully  implement this business  strategy
or effectively fund and grow this line of business.

Liquidity and Capital Resources

         The   decision   by   the   Company   to   divest   itself   from   the
telecommunications  business segment created certain  financial  obligations and
uncertainties  for the  future.  The  Company is  required  to  satisfy  certain
obligations  of the  telecommunications  business  which  will  carry on  beyond
December  31, 1998.  Such  obligations  include  settlement  of trade  payables,
satisfaction of product  royalties and license fees,  satisfaction of commission
and other selling expenses, providing product warranty service, customer support
and technical service,  satisfying employee severance agreements,  arranging the
destruction  of  inventory  and  shutdown  of  warehouse  facilities,  and final
closedown of all operating  activities and compliance with all federal and state
regulatory  requirements.  At December  31, 1998 the Company  estimated  the net
liability  for the final  shutdown  at $5.3  million  which is  recorded  on the
Company's balance sheet at year-end.

         At December 31, 1998, including  discontinued  operations,  the Company
had $274,000 in negative working capital and $331,000 in  shareholders'  equity.
In order for the Company to build up its core Internet  Banking business it will
be necessary to obtain additional  sources of working capital either through the
issuance of debt, equity or some combination  thereof.  Without adequate working
capital to fund the  business  the Company will find it difficult to attract new
customers,  retain  key  employees,  and  provide  financial  resources  to meet
customer product requirements.

         The Company's  continuation  as a going concern is  dependent upon  its
ability to generate  sufficient  cash flow to meet its  obligations  on a timely
basis, to obtain additional  financing,  and ultimately to attain profitability.
To that extent,  management has retained an investment banking firm to assist in
investigating additional financing sources.
<PAGE>
         In addition,  the Company's  accuracy in  predicting  revenues and cash
flow is limited in that the sale of the Company's core product is reliant on the
banking  industry's  willingness to invest in a new market,  home banking.  This
market  segment is slowly  evolving  and is subject to a number of  variables in
1999 that will  determine  the timing and quantity of new sales that the Company
is able to achieve.  Such variables include: (1) the effect of consolidations in
the  banking  industry;  (2)  financial  institutions'  progress  on  Year  2000
compliance;  and (3) the banking  customers'  willingness to invest freely in an
untested customer channel.  These reasons further require that the Company raise
additional  working  capital in order to have  adequate  funds in 1999 to remain
competitive as the product demand evolves. The Company's continuation as a going
concern is dependent upon its ability to generate  sufficient  cash flow to meet
its  obligations  on  a  timely  basis,  to  obtain  additional  financing,  and
ultimately to attain profitability.

Developing Marketplace

         Internet  Banking is a developing  market.  The Company's future growth
and  profitability  will depend,  in part, upon consumer  acceptance of Internet
Banking technologies.  Even if this market experiences substantial growth, there
can  be  no  assurance  that  the  Company's   products  and  services  will  be
commercially  successful  or benefit  from such  growth.  Much of the  Company's
success in the Internet  Banking market  depends on the financial  institutions'
success in marketing to the consumer.  Consumer  acceptance of Internet  Banking
will  depend  to a  large  degree  on the  ability  of the  Company's  financial
institution  customers to implement  applications in anticipated  time frames or
with  anticipated  features  and  functionality.  Therefore,  there  can  be  no
assurance of the timing of, introduction of, necessary regulatory approvals for,
or market acceptance of the Company's products and services.

Fluctuations in Operating Results

         The Company may experience  fluctuations in quarterly operating results
due to a variety of  factors,  some of which are beyond the  Company's  control.
These include the size and timing of customer  orders,  changes in the Company's
pricing  policies  or those of its  competitors,  new product  introductions  or
enhancements  by  competitors,  delays in the  introduction  of new  products or
product  enhancements  by the  Company  or by its  competitors,  customer  order
deferrals in anticipation of upgrades and new products, market acceptance of new
products,  the  timing  and  nature  of  sales,  marketing,   and  research  and
development  expenses  by the  Company  and its  competitors,  other  changes in
operating   expenses,   personnel  changes  and  general  economic   conditions.
Additionally,  certain  financial  institutions  have  recently  merged  and the
Company is unable to assess the future  effect on the  Company of these  mergers
and of other  possible  consolidations  in the  banking  industry.  Furthermore,
customer  purchasing  decisions may be delayed by their  devoting  attention and
resources to Year 2000  compliance  issues.  No assurance can be given that such
quarterly variations will not occur in the future and, accordingly,  the results
of any one quarter may not be  indicative  of the  operating  results for future
quarters.
<PAGE>
Reliance on Caller ID Leasing Revenues

         A majority of the  Company's  revenues  are derived from the leasing of
Caller ID products.  The Company  leases  Caller ID adjunct  units in accordance
with an  agreement  with US West,  whereby  the Company  leases  Caller ID units
directly to US West customers.  The leasing program enables subscribers to pay a
monthly  fee for the  equipment  and  provides  the  Company  with a  stream  of
recurring  revenues.  In 1996, the Company was notified by US West that it would
terminate leasing new Caller ID adjunct units under the program. Notwithstanding
the  termination of this program,  previously  existing leases remain in effect.
Although the Company is not able to estimate the effect on future  operations of
this discontinued leasing program, the number of active records in the Company's
installed lease base has historically  decreased at a rate of approximately  30%
per  year.  There can be no  assurance  that this  trend or the  realized  gross
margins on these revenues will continue.

InteliData Common Stock Owned by WorldCorp and World Airways

         As of December  31, 1998,  WorldCorp  and World  Airways,  collectively
owned  approximately  29% of the  outstanding  common stock of the  Company.  On
February 12, 1999,  WorldCorp announced that it had reached an agreement with it
creditors to restructure the company.  Pursuant to the restructuring,  WorldCorp
filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code.

         Under the proposed  restructuring  plan, most of the InteliData  shares
that were held by  WorldCorp,  as well as those that were held as  collateral by
World  Airways,  will be sold  to  WorldCorp  Acquisition  Corp.,  a  standalone
subsidiary of WorldCorp.

         Sale of such shares of the  Company's  common stock by  WorldCorp  from
time to time, or the threat of such sales,  could have a material adverse effect
on the market price for the Company's  common stock. In addition,  the Company's
Board of  Directors  has six  members,  two of whom  also  serve on the Board of
Directors of WorldCorp and one on the Board of Directors of World Airways.  As a
result of membership on the Company's Board and stock  ownership,  WorldCorp and
World Airways,  collectively  may have a significant  influence on the decisions
made by the Company.

Technological Considerations

         The  Company's   business   activities  are   concentrated   in  fields
characterized by rapid and significant  technological advances.  There can be no
assurance that the Company will remain  competitive  technologically or that the
Company's products, processes or services will continue to be reflective of such
advances. Failure to introduce new products or product enhancements that achieve
market  acceptance on a timely basis could  materially and adversely  affect the
Company's business,  operating results and financial condition.  There can be no
assurance that the Company will not encounter unanticipated technical, marketing
or other problems or delays relating to new products, features or services which
the Company has  recently  introduced  or which it may  introduce in the future.
Moreover, there can be no assurance that the Company's new products, features or
services will be successful,  that the introduction of new products,
<PAGE>
features  or services  by the  Company's  competitors  will not  materially  and
adversely  affect  the  sales of the  Company's  existing  products  or that the
Company  will be  able to  adapt  to  future  changes  in the  Internet  Banking
industry.  Most of the  Company's  competitors  and potential  competitors  have
significantly  greater  financial,  technological  and research and  development
resources than the Company.

Competition

         The  market  for  Internet  Banking  products  and  services  is highly
competitive and subject to rapid innovation and technological  change,  shifting
consumer  preferences  and frequent  new product  introductions.  The  Company's
Internet Banking products and services compete with services offered by a number
of competitors and competition may intensify as a result of new market entrants.
Financial  institutions  have developed  Internet Banking products for their own
customers  and, in the  future,  may offer  these  services  to other  financial
institutions.  Other third parties also may develop Internet Banking products to
offer to financial institutions. Computer software and data processing companies
also offer Internet  Banking  services.  The Company expects that competition in
these areas will increase in the near future.

Dependence on Key Employees

         The Company is highly  dependent on certain key executive  officers and
technical employees to manage the operations and business of the Company as well
as to implement the business plans of the Company on an ongoing basis.  The loss
of any such key employees could have an adverse impact on the future  operations
of the Company.

Volatility of Stock Price

         The market price of the  Company's  stock has  experienced  significant
volatility.  The stock market has experienced  volatility that has  particularly
affected the market  prices of equity  securities  of many high  technology  and
development  stage  companies and that has often been unrelated to the operating
performance of such companies. Factors such as announcements of the introduction
of new products or services by the Company or its competitors, market conditions
in the banking and other emerging  growth company sectors and rumors relating to
the Company or its competitors may have a significant impact on the market price
of the Company's stock.

Limited Proprietary Protection

         The  Company  possesses  limited  patent  or  registered   intellectual
property rights with respect to its technology. The Company depends in part upon
its proprietary technology and know-how to differentiate its products from those
of its  competitors  and works  independently  and from time to time with  third
parties  with respect to the design and  engineering  of its own  products.  The
Company also relies on a combination of contractual rights and trade secret laws
to protect its proprietary technology. There can be no assurance,  however, that
the Company will be able to protect its technology or  successfully  develop new
technology  or gain access to such  technology or that third parties will not be
able to develop similar  technology  independently  or
<PAGE>
that  competitors  will  not  obtain   unauthorized   access  to  the  Company's
proprietary  technology,  that third  parties will not misuse the  technology to
which the Company has granted access, or that the Company's contractual or legal
remedies  will  be  sufficient  to  protect  the  Company's   interests  in  its
proprietary technology.

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page
                                                                            ----

Consolidated Financial Statements 

      Consolidated Balance Sheets as of December 31, 1998 and 1997............28

      Consolidated Statements of Operations for the Years Ended
        December 31, 1998, 1997 and 1996......................................29

      Consolidated Statements of Stockholders' Equity for the Years Ended
        December 31, 1998, 1997 and 1996......................................30

      Consolidated Statements of Cash Flows for the Years Ended
        December 31, 1998, 1997 and 1996......................................31

      Notes to Consolidated Financial Statements for the Years Ended
        December 31, 1998, 1997 and 1996......................................32


Independent Auditors' Report..................................................51

<PAGE>
                       INTELIDATA TECHNOLOGIES CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997
                        (in thousands, except share data)

<TABLE>
                                                                                        1998            1997       
                                                                                    ------------    ------------
<S>                                                                                 <C>             <C>
ASSETS
  CURRENT ASSETS
     Cash and cash equivalents                                                      $      8,050    $      2,055
     Short-term investments                                                                   --           9,304
     Accounts receivable, net of allowances of $592
         in 1998 and $1,702 in 1997 (Notes 14 and 16)                                      2,113           1,309
     Net current assets of discontinued operations (Note 5)                                   --          27,289
     Prepaid expenses and other current assets                                               143             165
                                                                                    ------------    ------------
         Total current assets                                                             10,306          40,122

  NONCURRENT ASSETS
     Property and equipment, net (Note 7)                                                    348           1,820
     Noncurrent assets of discontinued operations (Note 5)                                    --           4,432
     Other assets                                                                            257             328
                                                                                    ------------    ------------
TOTAL ASSETS                                                                        $     10,911    $     46,702
                                                                                    ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
  CURRENT LIABILITIES
     Accounts payable                                                               $      1,344    $        756
     Accrued expenses and other liabilities (Note 8)                                         910           4,231
     Deferred revenues (Note 2)                                                            3,056           2,771
     Net liabilities of discontinued operations (Note 5)                                   5,270              --
                                                                                    ------------    ------------
         Total current liabilities                                                        10,580           7,758

  NONCURRENT LIABILITIES
     Deferred revenues (Note 2)                                                               --           1,875
                                                                                    ------------    ------------
TOTAL LIABILITIES                                                                         10,580           9,633

COMMITMENTS AND CONTINGENCIES (Note 15)

STOCKHOLDERS' EQUITY (Note 10)
     Preferred stock, $0.001 par value; authorized 5,000,000 shares;
         no shares issued and outstanding                                                     --              --
     Common stock, $0.001 par value; authorized 60,000,000 shares; issued
         32,293,005 shares in 1998 and 31,862,449 shares in 1997; outstanding
         31,611,505 shares in 1998 and 31,180,949 shares in 1997                              32              32
     Additional paid-in capital                                                          247,359         245,699
     Treasury stock, at cost                                                              (2,064)         (2,064)
     Deferred compensation                                                                  (152)            (18)
     Accumulated other comprehensive income                                                   --             425
     Accumulated deficit                                                                (244,844)       (207,005)
                                                                                    ------------    ------------
TOTAL STOCKHOLDERS' EQUITY                                                                   331          37,069
                                                                                    ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                          $     10,911    $     46,702
                                                                                    ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.
<PAGE>
                       INTELIDATA TECHNOLOGIES CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                      (in thousands, except per share data)
<TABLE>
                                                                         1998               1997              1996     
                                                                      -----------      -----------       -----------
<S>                                                                   <C>              <C>               <C>  

Revenues
     Software                                                         $       812      $     1,040       $        --
     Consulting and services                                                1,138            1,229             2,396
     Leasing and other                                                      8,077           10,252             2,399
                                                                      -----------      -----------       -----------
         Total revenues                                                    10,027           12,521             4,795
                                                                      -----------      -----------       -----------

Cost of revenues
     Software                                                                 109              223                --
     Consulting and services                                                  509              987             1,583
     Leasing and other                                                      2,038            5,637             1,179
                                                                      -----------      -----------       -----------
         Total cost of revenues                                             2,656            6,847             2,762
                                                                      -----------      -----------       -----------
         Gross profit                                                       7,371            5,674             2,033

Operating expenses
     General and administrative                                             6,240            7,476             6,320
     Selling and marketing                                                  2,969            4,250             1,875
     Research and development                                               2,652            4,347             2,270
     Unusual charges (Note 11)                                                 --            2,035             5,771
                                                                      -----------      -----------       -----------
         Total operating expenses                                          11,861           18,108            16,236
                                                                      -----------      -----------       -----------
         Operating loss                                                    (4,490)         (12,434)          (14,203)
                                                                      -----------      -----------       -----------

Other income (expense)
     Interest, net                                                            874            1,271             1,445
     Other, net                                                                --               --            (3,836)
                                                                      -----------      -----------       -----------
         Total other income (expense)                                         874            1,271            (2,391)
                                                                      -----------      -----------       -----------

Loss before income taxes                                                   (3,616)         (11,163)          (16,594)
Income taxes (Note 13)                                                         --               --                --
                                                                      -----------      -----------       -----------
Loss from continuing operations                                            (3,616)         (11,163)          (16,594)

Discontinued operations (Note 5):
Loss from operation of telecommunications and
 Interactive service divisions (net of income taxes)                      (18,049)         (78,931)          (79,133)
Loss on disposal of telecommunications and
 Interactive service divisions (net of income taxes)                      (16,174)              --                -- 
                                                                      -----------      -----------       -----------
         Total discontinued operations                                    (34,223)         (78,931)          (79,133)
                                                                      -----------      -----------       -----------

Net loss                                                              $   (37,839)     $   (90,094)      $   (95,727)
                                                                      ===========      ===========       ===========

Basic and diluted loss from continuing operations per common share    $     (0.11)     $     (0.35)      $     (0.90)
                                                                      ===========      ===========       ===========
Basic and diluted loss from discontinued operations per common share  $     (1.09)     $     (2.50)      $     (4.31)
                                                                      ===========      ===========       ===========
Basic and diluted loss per common share                               $     (1.20)     $     (2.85)      $     (5.21)
                                                                      ===========      ===========       ===========
Basic and diluted weighted average shares                                  31,450           31,574            18,370
                                                                      ===========      ===========       ===========
</TABLE>

          See accompanying notes to consolidated financial statements.
<PAGE>
                       INTELIDATA TECHNOLOGIES CORPORATION
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                                 (in thousands)
<TABLE>
                                                                                            Accumu-
                                                                                            lated
                                                                                            Other
                                                      Addi-                                 Compre-             Compre-
                                       Common stock   tional            Receivable Deferred hensive  Accumu-    hensive
                                       -------------  Paid-in  Treasury from Sale  Compen-  Income   lated      (Loss)
                                       Shares Amount  Capital  Stock    of Stock   sation   (Loss)   Deficit    Income      Total
                                       ------ ------  -------- -------- ---------- -------- -------  ---------  --------  ----------
<S>                                    <C>    <C>     <C>      <C>      <C>        <C>      <C>      <C>        <C>       <C>
Balance at December 31, 1995           15,530 $   16  $ 61,650 $     -- $  (2,488) $  (261) $    --  $ (21,184) $     --  $  37,733
 Issuance of common stock:
  Braun Simmons Acquisition               375     --     4,170       --        --       --       --         --        --      4,170
  Merger with Colonial Data            15,406     15   179,103       --        --       --       --         --        --    179,118
  Exercise of options
   and warrants                           730      1     2,176       --        --       --       --         --        --      2,177
  Employee stock
   purchase plan                            6     --        50       --        --       --       --         --        --         50
 Retirement of common stock
  for long-term investment               (230)    --    (3,392)      --        --       --       --         --        --     (3,392)
 Use of advertising credits                --     --        --       --        32       --       --         --        --         32
 Compensation expense                      --     --        --       --        --      128       --         --        --        128
 Net loss                                  --     --        --       --        --       --       --    (95,727)  (95,727)   (95,727)
                                                                                                                --------
 Comprehensive loss                                                                                              (95,727)          
                                       ------ ------  --------  -------- --------- -------- -------- ---------  --------  ----------
Balance at December 31, 1996           31,817     32   243,757       --    (2,456)    (133)      --   (116,911)             124,289
 Issuance of common stock:
  Employee stock purchase plan             45     --       128       --        --       --       --         --        --        128
  Exercise of options                       1     --         5       --        --       --       --         --        --          5
 Cancellation of accrued
  stock options                            --     --     1,809       --        --       --       --         --        --      1,809
 Purchase of treasury stock              (682)    --        --   (2,064)       --       --       --         --        --     (2,064)
 Charge-off of advertising credits         --     --        --       --     2,456       --       --         --        --      2,456
 Compensation expense                      --     --        --       --        --      115       --         --        --        115
 Unrealized gains on investments           --     --        --       --        --       --      425         --       425        425
 Net loss                                  --     --        --       --        --       --       --    (90,094)  (90,094)   (90,094)
                                                                                                                --------
 Comprehensive loss                                                                                              (89,699)          
                                       ------ ------  --------  -------- --------- -------- -------- ---------  --------  ----------
Balance at December 31, 1997           31,181     32   245,699   (2,064)       --      (18)     425   (207,005)              37,069
 Issuance of common stock:
  Employee stock purchase plan             68     --        67       --        --       --       --         --        --         67
  Exercise of options                     300     --       294       --        --       --       --         --        --        294
 Issuance of restricted stock             156     --       462       --        --     (462)      --         --        --         --
 Cancellation of restricted stock         (53)    --      (159)      --        --      159       --         --        --         --
 Cancellation of common stock             (40)    --        --       --        --       --       --         --        --         --
 Cancellation of accrued stock options     --     --       996       --        --       --       --         --        --        996
 Compensation expense                      --     --        --       --        --      169       --         --        --        169
 Recognized gain on investments            --     --        --       --        --       --     (425)        --      (425)      (425)
 Net loss                                  --     --        --       --        --       --       --    (37,839)  (37,839)   (37,839)
                                                                                                                --------
 Comprehensive loss                                                                                             $(38,264)          
                                       ------ ------  --------  -------- --------- -------- -------- ---------  --------  ----------
Balance at December 31, 1998           31,612 $   32  $247,359  $(2,064) $     --  $  (152) $    --  $(244,844)           $     331 
                                       ====== ======  ========  ======== ========= ======== ======== =========            ==========

</TABLE>

          See accompanying notes to consolidated financial statements.
<PAGE>
                       INTELIDATA TECHNOLOGIES CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                                 (in thousands)
<TABLE>
                                                                       1998              1997             1996      
                                                                    -----------       -----------      -----------
<S>                                                                 <C>               <C>              <C>
Cash flows from operating activities
  Net loss                                                          $  (37,839)       $  (90,094)      $  (95,727)
  Adjustments to reconcile net loss to net cash used in
      operating activities:
  Loss from discontinued operations                                     18,049            78,931           79,133
  Loss on disposal of discontinued operations                           16,174                --               --
  Impairment of advertising credits                                         --             2,456               --
  In-process research and development                                       --                --            4,914
  Depreciation and amortization                                          1,567             3,331            2,103
  Provision for losses on accounts receivable                               21                --               --
  Equity in loss of long-term investments                                   --                --            2,801
  Deferred compensation expense                                            169               115              128
  Other non-cash activities                                               (425)              425             (101)
  Changes in certain assets and liabilities, net of effects
      of non-cash transactions including acquisitions:
    Accounts receivable                                                   (825)              998           (1,261)
    Prepaid expenses and other current assets                               22               884             (147)
    Other assets                                                            71             1,833            3,391
    Accounts payable                                                       588              (200)            (739)
    Accrued expenses                                                    (2,325)             (169)           3,581
    Deferred revenue                                                    (1,590)            4,253              388
                                                                    -----------       -----------      -----------
     Net cash (used in) provided by operating activities                (6,343)            2,763           (1,536)
                                                                    -----------       -----------      -----------

Cash provided by (used in) operating activities of
 discontinued operations                                                 4,268           (26,612)          (7,301)
                                                                    -----------       -----------      -----------

Cash flows from investing activities
  Purchase of short-term investments                                        --                --          (12,418)
  Purchases of property and equipment-continuing operations                (95)             (516)          (2,194)
  Purchases of property and equipment-discontinued operations               --              (907)            (110)
  Change in restricted cash                                                 --                --            3,309
  Proceeds from sale of other assets, net                                   --                --              231
  Sale of short-term investments                                         9,304             3,114               --
  Acquisitions, net of cash acquired                                        --                --           17,578
                                                                    -----------       -----------      -----------

     Net cash provided by investing activities                           9,209             1,691            6,396
                                                                    -----------       -----------      -----------

Cash flows from financing activities
  Proceeds (payments) related to borrowings-discontinued operations     (1,500)             (500)           2,000
  Proceeds from issuances of common stock, net of discount                 361               133            2,177
  Payments to acquire treasury stock                                        --            (2,064)              --
  Other financing activities                                                --                --             (212)
                                                                    -----------       -----------      -----------

     Net cash (used in) provided by financing activities                (1,139)           (2,431)           3,965
                                                                    -----------       -----------      -----------

     Increase (decrease) in cash and cash equivalents                    5,995           (24,589)           1,524

Cash and cash equivalents, beginning of year                             2,055            26,644           25,120
                                                                    -----------       -----------      -----------

Cash and cash equivalents, end of year                              $    8,050        $    2,055       $   26,644
                                                                    ===========       ===========      ===========
</TABLE>
          See accompanying notes to consolidated financial statements.
<PAGE>
                       INTELIDATA TECHNOLOGIES CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


(1)      ORGANIZATION

         InteliData Technologies Corporation ("InteliData" or the "Company"), is
engaged in developing software products and services for financial  institutions
to assist in Internet  Banking and  electronic  bill  payment  initiatives.  The
Company is registered in the State of Delaware and operates  primarily  from its
corporate headquarters in Herndon, Virginia.

(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Consolidation - The consolidated  financial  statements include the accounts
of the Company after elimination of all intercompany  balances and transactions.
Certain items from the 1997 and 1996 financial statements have been reclassified
to conform to the 1998 financial statement presentation.

(b) Accounting Estimates - The preparation of financial statements in conformity
with  generally  accepted  accounting  principles  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. Actual results could differ from those estimates. The Company
considers  the  impairment  of  long-lived  assets based on an assessment of the
asset's  ability  to  contribute  to  the  profitability  of the  Company  using
estimates  of  expected  future  undiscounted  cash flows.  The Company  records
inventory reserves based on current market conditions.

(c) Revenue  Recognition  - Revenue for  off-the-shelf  product is recorded when
products are shipped and title passes to the customer. Lease revenue is recorded
based on the units in service at the end of the prior month  since these  leases
are cancelable at any time.  Revenue from consulting and  maintenance  contracts
are  recognized  as services are provided.  Beginning in 1998,  the Company sold
integrated   solutions  that  bundle  software   products  with   customization,
installation and training services.  These arrangements are recognized using the
percentage of completion method of accounting.  Losses on uncompleted  contracts
are recorded when such amounts become determinable.

(d) Cash and Cash Equivalents - The Company considers all non-restricted  highly
liquid  investments with original  maturities of three months or less to be cash
equivalents.  Cash and cash equivalents are stated at cost,  which  approximates
market.

(e) Short-term  Investments - The Company reports its short-term  investments in
marketable securities as  available-for-sale  with any unrealized gains (losses)
reflected,  net of tax, as other comprehensive income (loss).  Realized gains or
losses are determined on the first-in, first-out
<PAGE>
method and are reflected in net income.  Short-term  investments are reported at
cost which approximates fair value.

(f) Property  and  Equipment  -  Property  and  equipment  is  stated  at  cost.
Depreciation  of property and  equipment is calculated  using the  straight-line
method over the  estimated  useful  lives of the assets.  Office  equipment  and
furniture and fixtures are depreciated over 3 to 7 years.

(g) Net (Liabilities) Assets of Discontinued Operations - Under various disposal
plans adopted in 1997 and 1998, the Company has either  completed or planned the
divestiture  of  all  of  its   telecommunications   and  interactive   services
businesses,  excluding Caller ID adjunct leasing  activities.  See Note 5 to the
financial  statements.   These  businesses  were  reclassified  as  Discontinued
Operations in 1998. As a result, certain financial information previously issued
has been  reclassified to give effect to the  classification of these businesses
as discontinued  operations in accordance with Accounting Principles Board (APB)
Opinion No. 30,  "Reporting the Results of  Operations-Reporting  the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions."

(h) Deferred  Revenues - The Company received $5 million from Visa in the fourth
quarter of 1997, as a result of an agreement whereby the Company surrendered the
right to certain  future  royalty  payments.  The cash  payment was  recorded in
deferred  revenue and is being  recognized  in other  revenues over the two year
period of the arrangement.  Other deferred revenues represents cash received for
services  to be  provided.  Revenue  is  recognized  based  on the  terms of the
contract.

(i) Income Taxes - Income taxes are accounted  for in accordance  with the asset
and liability method. Deferred tax assets and liabilities are recognized for the
future tax  consequences  attributable  to  differences  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective  tax bases.  Deferred tax assets and  liabilities  are measured using
enacted  tax rates  expected  to apply to  taxable  income in the years in which
those temporary  differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. A valuation  allowance is
established  against  deferred tax assets when it is deemed,  based on available
evidence,  that it is more  likely  than not  that  some  portion  or all of the
deferred tax asset will not be realized.

(j) Accounting for  Stock-Based  Compensation - The Company  applies APB Opinion
No. 25 and related  interpretations  in accounting  for its plans.  Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation"
("SFAS 123") was issued by the Financial Accounting Standards Board in 1995 and,
if fully adopted,  changes the methods for  recognition of cost on plans similar
to those of the  Company.  The  Company  has  elected to  continue  to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions
of SFAS 123.

(k) Loss per Common  Share - Basic loss per common share is computed by dividing
net loss, after deducting  preferred stock dividend  requirements,  by the basic
weighted average number of shares of common stock  outstanding  during the year.
Dilutive stock options that were not
<PAGE>
included  in the loss  per  share  computation  because  they  would  have  been
antidilutive for 1998, 1997 and 1996 were approximately 3,000,000; 3,250,000 and
3,000,000, respectively.

(3)      BUSINESS OPERATIONS

         The  accompanying  financial  statements  have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of  liabilities  in the normal  course of  business.  As shown in the  financial
statements  during the years ended December 31, 1998, 1997 and 1996, the Company
incurred  losses from  continuing  operations  of  $3,616,000,  $11,163,000  and
$16,594,000, respectively. Additionally, the Company's revenues have been highly
dependent  on  Caller ID  leasing  revenues  and Visa  Bill-Pay  system  royalty
revenues.  For the year ended  December 31, 1998,  leasing  revenues and royalty
revenues aggregated 79% of the total revenues.

         As of December 31, 1998, the Company reported cash and cash equivalents
of $8,050,000 and negative working capital of $274,000.

         The financial statements do not include any adjustments relating to the
recoverability  and  classification of recorded asset amounts or the amounts and
classification  of  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 to meet its  obligations  on a timely
basis, to obtain additional  financing,  and ultimately to attain profitability.
To that extent,  management has retained an investment banking firm to assist in
investigating additional financing sources.

(4)      ACQUISITIONS

         On November 7, 1996 US Order,  Inc. ("US Order") and Colonial Data were
merged  with  and  into  InteliData  Technologies  Corporation,  a newly  formed
corporation,  through an exchange of stock ("Mergers"). Upon consummation of the
Mergers,  each outstanding share of US Order common stock was converted into one
share of  InteliData  common stock and each  outstanding  share of Colonial Data
common  stock was  converted  into one share of  InteliData  common  stock.  The
transaction was accounted for as a purchase of Colonial Data by US Order.

         During the second quarter of 1998, the Company announced its intentions
to discontinue the telecommunications business, other than the leasing of Caller
ID adjuncts, formerly transacted by Colonial Data.

         Effective September 30, 1996 Braun, Simmons & Co. ("Braun Simmons"),  a
firm specializing in the development of Internet Banking solutions for financial
institutions,  was merged into US Order (the "Braun Simmons Acquisition").  This
merger was accounted  for as a purchase of Braun  Simmons by US Order.  US Order
acquired  all of the  outstanding  stock of Braun  Simmons  for $2  million  and
375,000 shares of the Company's common stock.
<PAGE>
(a)      Unaudited Pro Forma Condensed Consolidated Financial Information

         The unaudited pro forma condensed  consolidated statement of operations
for the year ended  December  31, 1996 gives effect to the Mergers and the Braun
Simmons  Acquisition as if each was completed as of January 1, 1996 and combines
US Order's, Braun Simmons' and Colonial Data's statements of operations for that
year.  Such  statements of operations do not include the combined  effect of the
$77  million  nonrecurring  charges for  in-process  research  and  development.
However,   such  statements  do  reflect  adjustments  for  the  elimination  of
historical  transactions  between US Order,  Braun  Simmons and  Colonial  Data,
amortization of goodwill and related income tax effects.

         The unaudited pro forma condensed consolidated financial information is
provided for illustrative purposes only and is not necessarily indicative of the
consolidated financial information that would have been reported had the mergers
occurred  on the  dates  indicated,  nor do they  represent  a  forecast  of the
consolidated  financial  information  for any future  period.  The unaudited pro
forma condensed consolidated financial information should be read in conjunction
with the historical financial statements and accompanying notes of the Company.

         Shown  below  is  the  unaudited  pro  forma   condensed   consolidated
statements of operations for the combined  businesses of US Order, Braun Simmons
and Colonial Data (in thousands, except per share amounts).

Year Ended December 31, 1996:

<TABLE>
                                                                Pro Forma                                               Pro Forma
                                                   ----------------------------------------                             ----------
                                                   US Order   Braun Simmons   Colonial Data   Adjustments   Reference   InteliData
                                                   --------   -------------   -------------   -----------   ---------   ----------
<S>                                                <C>        <C>             <C>             <C>           <C>         <C>
Revenues....................................       $ 4,227       $ 3,653        $ 63,987       $ (1,894)          (1)    $ 69,973
Cost of revenues............................         3,832         2,272          43,490            101        (1)(2)      49,695 
Gross profit................................           395         1,381          20,497         (1,995)          (2)      20,278 
Operating expenses..........................        19,911         1,284          18,312           2,285          (3)      41,792 
Operating (loss) income.....................       (19,516)           97           2,185          (4,280)      (2)(3)     (21,514)
Net (loss) income...........................       (19,349)           67             688           4,011    (2)(3)(4)     (14,583)
Basic and diluted (loss) income per share...       $ (1.20)                     $   0.04                                 $  (0.46)
</TABLE>

         Pro Forma Adjustments

         The following pro forma adjustments have been made to the unaudited pro
forma condensed consolidated financial information:

(1) Reflects the elimination of intercorporate transactions.

(2) Reflects the  amortization  associated  with an  allocation  of the purchase
price of  Colonial  Data for its lease  base of $1.9  million to  recognize  the
excess of the  estimated  fair  market  value over the  carrying  amount and its
amortization on a straight-line basis over five years.

(3) Reflects  the  allocation  of purchase  price to  developed  technology  and
goodwill.  Such developed  technology is amortized on a straight-line basis over
two years; goodwill is amortized on a straight-line basis over 7 years for Braun
Simmons and 15 years for Colonial Data.
<PAGE>
(4) Reflects the effect of the  combination  of Braun  Simmons',  US Order's and
Colonial  Data's  operations  and the  above  adjustments  on  income  taxes.  A
valuation  allowance  has been  recognized  for the pro forma net  deferred  tax
assets  of  InteliData,  relating  primarily  to  operating  loss  carryforwards
generated  by US Order prior to the Mergers and the Braun  Simmons  Acquisition,
based on an assessment of the likelihood of recoverability of such amounts. As a
result of the Mergers and the Braun Simmons  Acquisition,  the use of US Order's
operating loss carryforwards may be limited in future years.

(b)  Purchase Accounting (in thousands)

     The purchase amount of Braun Simmons was:

              Fair value of common stock issued                          $4,170 
              Cash consideration                                          2,000
              US Order transaction costs                                    913
                                                                         ------
                       Total                                             $7,083
                                                                         ======

     The purchase amount was allocated for Braun Simmons as follows:

              Current assets                                             $  700 
              Equipment and other                                           286 
              In-process research and development                         4,914 
              Goodwill                                                    1,898 
              Liabilities assumed                                          (715)
                                                                         ------
                       Total                                             $7,083
                                                                         ======

     The purchase amount of Colonial Data was:

              Fair value of common stock issued                        $179,118
              Fair value of employee stock options and warrants           2,805
              Cost of previous investment in Colonial Data                3,393
              US Order transaction costs                                  1,309
                                                                       --------
              Total                                                    $186,625
                                                                       ========

     The purchase amount was allocated for Colonial Data as follows:

              Current assets                                           $ 60,488 
              Lease base                                                  3,747 
              Equipment and other                                         5,754 
              In-process research and development                        72,300 
              Developed technology                                        1,418 
              Goodwill                                                   49,483 
              Liabilities assumed                                        (6,565)
                                                                       --------
                       Total                                           $186,625 
                                                                       ========

         The  allocation  of the  purchase  amounts  to both Braun  Simmons  and
Colonial  Data  tangible  and  identifiable   intangible  assets  was  based  on
independent  appraisals of the estimated  fair value of certain of those assets.
Such  appraisals  indicated  approximately  $5  million  and  $72  million,  for
purchased  in-process  research and  development  for Braun Simmons and Colonial
Data, respectively,  which was expensed by the Company upon each closing, as the
technologies
<PAGE>
had not reached  technological  feasibility and did not have alternative  future
uses. The unaudited pro forma condensed consolidated statements of operations do
not include this  one-time  charge for  purchased  in-process  technology  as it
represents a material nonrecurring charge.

(c)      (Loss) Income Per Share

         The weighted average shares used in the computations of pro forma basic
and  diluted  (loss) income  per share  assumes  that the  shares  issued in the
acquisition  of Braun  Simmons and the total  number of shares  exchanged in the
Mergers  and the  Braun  Simmons  Acquisition,  net of  canceled  intercorporate
investment  shares,  were outstanding for all periods  presented.  The impact of
outstanding  stock options and warrants of the Company has been considered using
the treasury stock method.

(5)      DISCONTINUED OPERATIONS

         During  the  second  quarter  of 1998,  the  Company  adopted a plan to
dispose  of  its  various   telecommunications   divisions   through   sale  and
liquidation. The Company's Caller ID adjunct inventory was sold in May 1998. The
Company's Plexus inventory was sold in December 1998.  Negotiations for the sale
of some or all of the remaining  telecommunications  assets are being  conducted
with various parties.  At December 31, 1998, the net liabilities of discontinued
operations, consisting primarily of trade receivables, warehouse facilities, and
liabilities  associated  with  operations,   have  been  classified  as  current
liabilities at their estimated net realizable value.

Net revenues and loss from discontinued operations are as follows:

                                              Years Ended December 31,
                                   ---------------------------------------------
(in thousands)                         1998             1997              1996
--------------------------------------------------------------------------------
Net revenues                         $ 23,567        $ 47,788           $ 9,104
Cost of revenues                       29,054          48,000             7,686
Operating expenses                     32,803          78,658            83,327
Loss from operations                  (38,290)        (78,870)          (81,909)
Income (benefit) taxes                 (3,628)             61                25
Loss from discontinued operations     (34,223)        (78,931)          (79,133)
--------------------------------------------------------------------------------

Net (liabilities) assets of discontinued operations are as follows:

                                                     December 31,
                                          --------------------------------------
(in thousands)                                          1998              1997
--------------------------------------------------------------------------------
Trade receivables, net                                $   864           $11,779
Inventories and other current assets                      945            23,212
Property, plant and equipment, net                      1,000             4,429
Trade payables                                           (539)           (2,903)
Other current liabilities                              (7,540)           (4,796)
                                                      --------------------------
Net (liabilities) assets of discontinued operations   $(5,270)         $ 31,721
--------------------------------------------------------------------------------
<PAGE>
         Included  within  the  loss on  disposal  was a loss  for  discontinued
operations  aggregating  $4,332,000 for the period from the  measurement  dates,
January  1,  1998 for  interactive  services  division  and June 1, 1998 for the
telecommunications  division, to December 31, 1998. Also included in the loss on
disposal is a pretax provision of $3,301,000 for estimated operating losses from
January 1, 1999 through June 1, 1999.

Summary of Noncash Activities

(in thousands)                                  1998         1997          1996
--------------------------------------------------------------------------------

Loss from discontinued operations:
  Reserve for inventories                    $ 13,784     $ 11,333       $   --
  Provision for bad debt                        3,010        3,891           --
  Depreciation and amortization                   751        4,004          622
                                             -----------------------------------
                                               17,545       19,228          622
Loss on disposal of discontinued operations:
  Write-off of property, plant and equipment    3,539           --           --
  Provision for sales returns                   2,696           --           --
                                             -----------------------------------
                                                6,235           --           --
                                             -----------------------------------
Total noncash activities for
discontinued operations                      $ 23,780     $ 19,228       $  622
--------------------------------------------------------------------------------

Summary of Discontinued Operations

          The  loss  from  operations  of  telecommunications   and  interactive
services divisions (net of income taxes) was $18,049,000 and $78,931,000 for the
years ended  December 31, 1998 and 1997,  respectively.  The loss on disposal of
telecommunications  and interactive  services  divisions was $16,174,000 for the
year ended December 31, 1998.

         During  1998,  the  loss  from  operations  of  telecommunications  and
interactive  services  divisions (net of income taxes)  included  $13,784,000 in
inventory   adjustments.   The  loss  on  disposal  of  telecommunications   and
interactive service divisions consisted of $2,696,000 in expected sales returns,
$3,539,000  in property  adjustments,  $3,010,000  in  provisions  for  customer
accounts and $6,929,000 in actual and expected  losses from  operations from the
measurement date through the date of disposal.

         The Company recorded a provision for corporate restructuring during the
third  quarter of 1997 of  $1,003,000.  This  amount  consists  of  $771,000  in
employee  reduction and related  matters,  $190,000 in obsolete  equipment,  and
$42,000 in facilities  closings.  As of December 31, 1997, the Company  incurred
employee reductions and relocation expenses  aggregating $177,000 and write-down
for obsolete  equipment of  $190,000.  As of December 31, 1997,  the Company has
$636,000 in remaining  restructuring accruals recorded on its books. The Company
incurred  these  costs in 1998.  Additional  accruals  were  posted for  closing
operations during the second and fourth quarters of 1998.

          During the third quarter  of 1997 the  Company  announced  a strategic
repositioning  of the  Company's  telecommunications  division  based on  recent
events  in its  marketplace.  In  connection  with  this  repositioning  and the
aforementioned corporate  restructuring,  the
<PAGE>
Company's  management  evaluated its financial  position and determined  that it
would be appropriate to charge to operations the remaining  unamortized costs of
intangible  assets due to impairment,  adjust inventory  carrying amounts to the
lower of cost or market, and reflect certain additional  restructuring  charges,
including   charges  for  separation   agreements  with  employees  and  charges
associated with the termination of a joint venture agreement. Such third quarter
1997 unusual  charges  aggregated  $49,246,000  for the impairment of intangible
assets;   $11,333,000   for   inventories   and   commitments;   $1,003,000  for
restructuring  charges (see above);  $1,434,000 for separation  agreements;  and
$3,653,000 for assets relating to the joint venture. The impairment was based on
the excess of the carrying value of the assets over the assets' fair values. The
fair value of the assets were  generally  determined  as the estimates of future
discounted cash flows generated by the assets.

(6)      SEGMENT REPORTING

         The Company  maintains  operations in two primary  operating  segments:
Internet Banking and leasing.  The basis for determining the Company's operating
segments is the manner in which financial  information is used by the Company in
its operations.  Management  operates and organizes itself according to business
units which comprise  unique  products and services.  Intersegment  sales do not
exist.  Operating (loss) income in these two market  divisions  represents total
revenues  less  operating  expenses,  and excludes  other income and expense and
income taxes.  Identifiable  assets are those assets  employed by each segment's
operation. Segment financial information is as follows (in thousands):

                                     Internet
                                      Banking       Leasing       Consolidated
--------------------------------------------------------------------------------
1998
Revenues                               $ 4,683      $ 5,344           $ 10,027
Operating (loss) income                 (7,796)       3,306             (4,490)
Identifiable assets                     10,050          861             10,911
Depreciation and amortization            1,361          206              1,567
Capital expenditures                        95           --                 95

1997
Revenues                               $ 3,951      $ 8,570           $ 12,521
Operating (loss) income                (16,286)       3,852            (12,434)
Identifiable assets (1)                 13,466        1,515             14,981
Depreciation and amortization            1,345        1,986              3,331
Capital expenditures                       516           --                516

1996
Revenues                               $ 2,957      $ 1,838            $ 4,795
Operating (loss) income                (14,936)         733            (14,203)
Identifiable assets                     46,052        3,054             49,106
Depreciation and amortization            1,241          862              2,103
Capital expenditures                     2,194           --              2,194

--------------------------------------------------------------------------------

(1)  Identifiable  assets do not  include  net  current  assets of  discontinued
     operations of $27,289,000 and noncurrent assets of discontinued  operations
     of $4,432,000. Total assets of the consolidated Company equal $46,702,000.
<PAGE>
(7)      PROPERTY AND EQUIPMENT

         Property  and  equipment  consists of the  following at December 31 (in
thousands):

                                                1998           1997   
                                               ------         -------
          Leased product                       $ 2,182        $ 3,053
          Office equipment                       1,040          2,678
          Furniture and fixtures                   139            397
                                               -------        -------
                                                 3,361          6,128
          Accumulated depreciation              (3,013)        (4,308)
                                               -------        -------
                                               $   348        $ 1,820
                                               =======        =======

(8)      ACCRUED EXPENSES AND OTHER LIABILITIES

         Accrued  expenses  and other liabilities  consists of the  following at
December 31 (in thousands):

                                                 1998          1997
                                               -------        -------
          Accrued compensation                 $   293        $ 1,069
          Accrued professional fees                181          1,014
          Accrued stock options                     --            996
          Accrued tax liabilities                  276            399
          Accrued selling expenses                  --            350
          Accrued insurance                        142            308
          Other liabilities                         18             95
                                               -------        -------
                                               $   910        $ 4,231
                                               =======        =======

(9)      RELATED-PARTY TRANSACTIONS

(a)      Strategic Business Partner

         In August 1994,  the Company sold its  electronic  banking and bill pay
operations  (the  "Visa  Bill-Pay   System")  to  Visa.  As  part  of  the  Visa
transaction,  the  Company's  president  was  appointed  to,  and the  Company's
chairman was named an advisor to, the board of  directors  of Visa  InterActive.
Included in service fee revenues are $751,000 and  $1,219,000  in 1997 and 1996,
respectively,  related to services  provided by the Company to Visa  InterActive
and  Visa  banks/members.  In  August  1997,  Visa  InterActive  was  sold to an
unrelated party and the Company's  officers resigned from their Visa InterActive
board positions.

(b)      Primary Investor

         The  chairman of the board of directors of the Company is a director of
WorldCorp,  Inc.  ("WorldCorp"),  the  Company's  primary  investor.  One  other
director  of the Company is also the chief  executive  officer and a director of
WorldCorp. WorldCorp owned approximately 29% of the Company's outstanding voting
stock as of December  31,  1996.  During  1996,  WorldCorp  paid  certain of the
Company's personnel costs including salary, benefits, business and other related
costs for which the Company was billed on a  cost-reimbursed  basis. In November
1996, the Company  terminated this relationship with WorldCorp.  During the year
ended  December 31,
<PAGE>
1996,  the  Company  paid  WorldCorp  approximately  $439,000  related  to these
arrangements.  At December  31, 1998 and 1997,  the Company was not  indebted to
WorldCorp.

(c)      Long-term Investments

         On October 18, 1995,  the Company  acquired an equity  interest in Home
Financial  Network,  Inc.  ("HFN"),  a newly formed,  development stage personal
computer  software  company  that  planned to  develop  and  deliver  electronic
financial  products and services to  consumers.  In 1996,  the Company  recorded
losses  in its  investment  in HFN  of  $2,801,000.  The  Company  believes  its
investment was impaired based on the history of losses of HFN, and as a  result,
the Company's investment in HFN is carried at zero.

(10)     STOCKHOLDERS' EQUITY

(a)      Stock Options

         The Company  sponsors  the  following  stock  option  plans which cover
substantially  all  employees  and  certain  directors:  the US Order 1991 Stock
Option Plan ("1991  Plan"),  the Colonial  Data 1994  Long-Term  Incentive  Plan
("Colonial Data Plan"),  the US Order 1995 Incentive Plan ("1995 Plan"),  the US
Order 1995 Non-Employee  Directors' Stock Option Plan ("1995 Directors'  Plan"),
the  InteliData   1996  Incentive  Plan  ("1996  Plan"),   the  InteliData  1996
Non-Employee Directors' Stock Option Plan ("1996 Non-Employee Directors' Plan"),
the InteliData 1997 Executive Plan, and Additional Plans.

         1991 Plan
         ---------

         The  Company  had  reserved  3,000,000  shares of common  stock for the
exercise of options  under this plan.  Options are granted for  purchases of the
same number of shares of the Company's common stock. For the 1991 Plan,  options
typically  vest  monthly  over a period of three to five years and expire  after
eight years.  However,  no vesting occurs until after the employee has completed
one year of service with the Company.  The 1991 Plan was terminated in May 1995.
As of December 31, 1998, there were 852,194 shares vested and exercisable  under
the 1991 Plan.

         Colonial Data Plan
         ------------------

         Colonial  Data's board of directors  authorized the issuance of options
for purchase of common stock for key employees.  The options  entitle the holder
to purchase the  Company's  common stock at the fair market value at the date of
grant.  Colonial  Data's  board  of  directors  as  part of its  1994  Long-Term
Incentive  Plan  authorized  500,000 shares of stock to be available for grants.
The options vest  periodically  through 2000 and expire in 2006 and expire after
10 years  from the date of  grant.  The  Colonial  Data Plan was  terminated  in
November  1996.  As of December 31, 1998,  there were 48,331  shares  vested and
exercisable under the Colonial Data Plan.
<PAGE>
         1995 Plan
         ---------

         The  Company  had  reserved  1,000,000  shares of common  stock for the
exercise of options  under this plan.  Options are granted for  purchases of the
same number of shares of the Company's common stock. For the 1995 Plan,  options
typically  vest  monthly  over a period of three to five years and expire  after
eight years from the date of grant.  However,  no vesting occurs until after the
employee has completed  one year of service with the Company.  The 1995 Plan was
terminated in November  1996. As of December 31, 1998,  there were 89,206 shares
vested and exercisable under the 1995 Plan.

         1995 Directors' Plan
         --------------------

         The  Company  had  reserved  250,000  shares  of  common  stock for the
exercise of options  under this plan.  Options were granted for purchases of the
same number of shares of the  Company's  common stock.  For the 1995  Directors'
Plan,  options vest  monthly  over a three year period  beginning on the date of
grant and expire ten years  subsequent to the date of grant. The grant price for
the plan was based on the  average of the  closing  Nasdaq  market  price of the
Company's stock on the thirty trading days preceding the date of the grant.  The
1995  Directors'  Plan was terminated in November 1996. As of December 31, 1998,
there were 6,458 shares vested and exercisable under the 1995 Directors' Plan.

         1996 Plan
         ---------

         The  Company  had  reserved  1,500,000  shares of common  stock for the
exercise of options  under this plan.  Options are granted for  purchases of the
same number of shares of the Company's  common stock. The exercise price of each
option shall not be less than eighty-five percent (85%) of the fair market value
of the Company's  common stock on the date the option is granted and an option's
maximum  term is 10 years.  Options for  existing  employees  are granted by the
board of directors and typically vest ratably over four years.  Options  granted
to new hires are  awarded  at the  discretion  of the  Company's  management  in
accordance  with  guidelines  approved  by  the  board  of  directors.  However,
typically,  no vesting occurs until after the employee has completed one year of
service with the Company.  As of December  31,  1998,  there were 55,666  shares
vested and exercisable under the 1996 Plan.

         1996 Non-Employee Directors' Plan
         ---------------------------------

         The Company reserved 200,000 shares of common stock for the exercise of
options under this plan. Options are granted for each non-employee  director who
qualifies for  participation  under the plan.  The exercise price of each option
shall be the fair market  value as defined in the plan of the  Company's  common
stock  and an  option's  maximum  term is 10  years.  For the 1996  Non-Employee
Directors' Plan,  options vest monthly over a period of one year. As of December
31,  1998,  there  were  30,000  shares  vested and  exercisable  under the 1996
Non-Employee Directors' Plan.
<PAGE>
         1997 Executive Plan
         -------------------

         The  Company's  Compensation  Committee  approved  the  reservation  of
1,425,000  shares of common stock for the exercise of options in connection with
a newly hired  officer's  agreeing to be employed by the Company under this plan
subject  to the  approval  of the board of  directors.  The  board of  directors
approved  this plan in  February  1998.  Options  were  granted  by the board of
directors  and vested  according to different  schedules:  925,000  options were
vested in equal annual  increments  over three years;  500,000 options vested at
the end of eight years but may have been  accelerated  with certain  performance
milestones.  During 1998, the Company terminated and canceled all options in the
Plan. As of December 31, 1998, there were no shares vested and exercisable under
the 1997 Executive Plan.

         Additional Plans
         ----------------

         In  addition  to  options  issued in 1995  under both the 1991 and 1995
Plans,  the Company  issued  15,000  options to three of its five  non-affiliate
directors  and 25,000  options to a  non-affiliate  who  helped in  arranging  a
placement of Series C preferred stock. Each of these grants has a $7.13 exercise
price. The 45,000 options issued to non-affiliate  directors vest monthly over a
three-year  period,  and the 25,000 options granted to the non-affiliate  vested
immediately.  As of December 31, 1998, of these 70,000  options,  55,000 options
have  been  canceled,  and  15,000  options,  associated  with  a  non-affiliate
director, are vested and exercisable under the plan.

         Stock Option Repricing
         ----------------------

         In order to motivate and retain employees, on June 9, 1998, the Company
offered  employees  participating  in  the  Company's  Stock  Option  Plans  the
opportunity to cancel the exercisable and unexercisable  portions of their stock
options as of June 9, 1998,  previously a portion of which were  repriced in May
1997,  and replace them with an equal number of options at an exercise  price of
$1.00,  which was the  closing  market  price on such date.  The Company did not
offer this  opportunity to the then President and Chief Executive  Officer,  but
offered this  opportunity  to  employees  as an incentive to encourage  employee
retention. Approximately 945,235 stock options with exercise prices ranging from
$1.25 to $23.75 were  replaced.  The  replacement  options vest as follows:  the
number  of  previously  granted  options  exercisable  on  June 9,  1998  became
exercisable  on December 9, 1998; and the number of previously  granted  options
unexercisable  as of June 9, 1998 will become  exercisable over three years from
June 9,  1998 in  equal  annual  increments.  As  part  of the  process  for the
Company's  recruitment  of a senior  executive  officer in  December  1997,  the
Company's  then President and Chief  Executive  Officer agreed to cancel 425,000
options  with  an  exercise  price  of  $3.00  previously  granted  to  him.  In
consideration of this cancellation of options, the Compensation Committee of the
board of directors  repriced 850,000 options previously granted to the executive
(of which  750,000 were  vested) from an exercise  price of $7.13 to an exercise
price of $1.80.  The vesting  schedule for the repriced options was also changed
to provide that 425,000  options are vested and the  remaining  425,000  options
will  vest  in  2002,  but  will  accelerate  upon  certain  stock   performance
milestones. The Compensation Committee approved the repricing in February 1998.
<PAGE>
         A summary of the  changes in stock  options  for each of the  Company's
stock option plans is as follows:

                                Exercise Prices
                               ------------------        Number
     Description               Minimum    Maximum      of Options
     -----------               -------    -------    -------------
   December 31, 1995            $0.98      $23.75      2,441,705
     Acquired in Mergers        $0.21      $20.38        474,800
     Granted                    $7.00      $23.50        756,530
     Exercised                  $0.98      $18.75       (353,182)
     Canceled                   $0.98      $23.13       (195,294)
                                                     -------------
   December 31, 1996            $0.21      $23.75      3,124,559
     Granted                    $1.63       $6.00      2,916,450
     Exercised                  $4.50       $4.50         (1,000)
     Canceled                   $0.21      $23.75     (1,305,796)
                                                     -------------
   December 31, 1997            $0.21      $23.75      4,734,213
     Granted                    $0.63       $1.78        893,650
     Exercised                  $0.98       $0.98       (300,000)
     Canceled                   $1.00      $20.38     (2,346,600)
                                                     -------------
   December 31, 1998            $0.63      $18.86      2,981,263
                                                     =============

         During 1998, 1997 and 1996, the Company  recognized  $18,000,  $115,000
and $128,000 of compensation expense,  respectively,  in connection with options
granted prior to 1996, at exercise  prices below the estimated fair market value
of the Company's common stock at the date of grant.

(b)      Stock Compensation Plans

         At December 31, 1998,  the Company had seven  stock-based  compensation
plans.  The  Company  applies  Accounting  Principles  Board  Opinion No. 25 and
related  Interpretations in accounting for stock options granted under the stock
compensation  plans. Had compensation cost for the Company's stock  compensation
plans been  determined  based on the fair value at the grant dates for the 1998,
1997 and 1996 awards under those plans,  the  Company's  net loss and basic loss
per share for the years ended  December 31, 1998,  1997 and 1996 would have been
$38,437,000  and  $1.22  per  share;   $95,180,000  and  $3.01  per  share;  and
$99,341,000 and $5.41 per share, respectively.

         The weighted  average fair value of options  granted during 1998,  1997
and 1996 was $1.15, $2.57 and $16.69 per share, respectively.  The fair value of
options  granted  was  estimated  on the date of grant  using the  Black-Scholes
option  pricing  model  with the  following  weighted  average  assumptions:  no
dividend  yield,  expected  volatility of 136%, and a risk free interest rate of
5.28% per annum.
<PAGE>
<TABLE>
                                                      Options Outstanding           Options Exercisable
                                               ---------------------------------   ----------------------
                                                                        Weighted                 Weighted
                                                            Weighted    Average                  Average
                                Range of         Number     Average     Exercise   Number of     Exercise
Plan Description            Exercise Prices    Of Options   Life        Price      Options       Price
-----------------------     ---------------    ----------   --------    --------   ---------     --------
<S>                         <C>                <C>          <C>         <C>        <C>           <C>
1991 Plan                    $0.98 - $7.13      1,307,535   4.5 years      $2.52     852,194        $2.93
Colonial Data Plan           $1.00 - $8.50         79,000   7.4 years      $1.84      48,331        $2.44
1995 Plan                    $1.00 - $18.00       167,912   5.9 years      $4.00      89,206        $6.36
1995 Directors' Plan        $18.86 - $18.86         7,500   9.8 years     $18.86       6,458       $18.86
1996 Plan                    $0.63 - $3.00      1,365,316   7.7 years      $1.28      55,666        $1.01
1996 Non-Employee
     Directors' Plan         $1.78 - $5.03         39,000   10.0 years     $3.45      30,000        $3.95
Additional Plans             $7.13 - $7.13         15,000   7.0 years      $7.13      15,000        $7.13

</TABLE>

         The Company has options  outstanding  and  exercisable in varying price
ranges. The schedule below details the Company's options by price range:

<TABLE>
                                   Options Outstanding                  Options Exercisable
                           -----------------------------------------    --------------------
                                                            Weighted                Weighted
                                           Weighted         Average                 Average
         Range of            Number        Average          Exercise    Number of   Exercise
     Exercise Prices       of Options      Life             Price       Options     Price
     ---------------       ----------      ---------        --------    ---------   --------
     <S>                   <C>             <C>              <C>         <C>         <C>
      $0.62 - $0.99           198,235      4.0 years          $0.90      100,435      $0.98
      $1.00 - $1.50         1,381,950      6.8 years          $1.02      216,677      $1.00
      $1.51 - $2.00           872,500      5.6 years          $1.80      435,875      $1.80
      $2.01 - $18.86          528,578      5.2 years          $5.80      343,868      $7.18
</TABLE>

(c)      Employee Stock Purchase Plan

         Under the Employee Stock  Purchase Plan,  approved in 1996, the Company
is  authorized  to issue up to 500,000  shares of common stock to its  full-time
employees,  nearly all of whom are eligible to  participate.  Under the terms of
the Plan, employees can choose each period to have up to twenty percent of their
annual base  earnings  withheld to purchase  the  Company's  common  stock.  The
purchase   price   of  the   stock   is  85   percent   of  the   lower  of  its
beginning-of-period  or end-of-period  market price. The Employee Stock Purchase
Plan's first period began  January 2, 1997.  During the year ended  December 31,
1998, the Company issued 68,056 shares of stock under the plan.  During the year
ended  December 31, 1997,  the Company  issued  44,307 shares of stock under the
plan. The Company had an employee stock purchase plan in existence  during 1996,
however,  there was not a  significant  number of shares of stock sold under the
Plan in 1996.

(d)      Treasury Stock

         On August 12, 1997,  the Company  announced that its board of directors
authorized  a stock  repurchase  program  whereby the Company is  authorized  to
repurchase  from time to time up to two million  shares of the Company's  common
stock from the open  market.  As of  December  31,  1997,  the  Company had paid
$2,064,000 to repurchase 681,500 shares of its common stock. The Company did not
repurchase any shares in 1998.
<PAGE>
(e)      Stockholder Rights Plan

         In January  1998,  the Company  announced  that its Board of  Directors
adopted a  Stockholder  Rights Plan.  The rights are designed to assure that all
the Company's  stockholders receive fair and equal treatment in the event of any
proposed  takeover of the Company and to guard against  partial  tender  offers,
open  market  accumulations  and other  tactics to gain  control of the  Company
without paying all stockholders a control premium.

         Terms  of  the   Stockholder   Rights  Plan   provide  for  a  dividend
distribution of one right for each share of common stock to holders of record at
the close of business on February 6, 1998. Shareholders will be able to exercise
the rights  only in the event,  with  certain  exceptions,  an  acquiring  party
accumulates 20 percent or more of the Company's  voting stock, or if a party (an
acquiring person) announces an offer to acquire 20 percent or more without prior
approval of the Company's Board of Directors.  The rights will expire on January
21, 2008. Each right initially will entitle the holder to buy one one-thousandth
of a share of a new series of preferred stock at a price of $13.

         In addition,  upon the  occurrence  of certain  events,  holders of the
rights will be entitled to purchase either the Company's  common stock or shares
in an acquiring  person at half of market  value.  Further,  at any time after a
person or group acquires 20 percent or more of the Company's  outstanding voting
stock,  the board of directors  may, at its option,  exchange part or all of the
rights (other than rights held by the acquiring person,  which will become void)
for shares of the Company's common stock on a one-for-one basis. The rights will
therefore  cause  substantial  dilution  to a person or group that  acquires  20
percent  or more of the  Company's  common  stock on terms not  approved  by the
board.

(11)     UNUSUAL CHARGES

         During the third quarter of 1997, the Company assessed and adjusted the
carrying value of goodwill associated with its acquisition of Braun Simmons. The
charge  aggregated  $2,035,000  for the  impairment  of intangible  assets.  The
impairment  was based on the excess of the carrying value of the assets over the
assets' fair values.  The fair value of the assets were generally  determined as
the estimates of future discounted cash flows generated by the assets.

         The Company  recorded  unusual charges  aggregating  $5,771,000 for the
year ended December 31, 1996.  Unusual  charges were  associated with facilities
consolidations and charges  associated with in-process  research and development
from the Braun  Simmons  Acquisition.  The  Company  recorded  a  provision  for
facilities  consolidations during the fourth quarter of 1996 of $857,000. During
1997, the Company  incurred  $301,000 in facilities  consolidation  costs in the
second  quarter when it closed its customer  service  location in Virginia.  The
remaining  accrual for facilities  consolidations  did not occur because of cost
savings associated with employee severance and closing costs. Accordingly, these
expenses were  reversed  back into income during the second  quarter of 1997. In
connection  with the Braun Simmons  Acquisition  in September  1996, the Company
charged in-process  research and development  expenses for purchased  in-process
technology that had not reached technological  feasibility as of the date of the
Braun
<PAGE>
Simmons Acquisition and did not have alternative future uses. Amounts charged to
in-process  research and development were based on an independent  appraisal and
totaled $4,914,000.

(12)     EMPLOYEE 401(k) SAVINGS PLAN

         The Company adopted a defined contribution plan ("Plan") that qualifies
for  preferential  tax treatment  under Section  401(a) of the Internal  Revenue
Code.  Participation  in the Plan is  available  to  employees  who are at least
twenty-one years of age and have three months of service.  Company contributions
to the Plan are based on a  percentage  of employee  contributions  and were not
significant. Administrative expenses for the Plan were paid by the Company.

(13)     INCOME TAXES

         A reconciliation of taxes computed at the statutory federal tax rate on
loss  before  income  taxes to the actual  income tax  expense is as follows (in
thousands):

<TABLE>
                                                                    Years ended December 31,
                                                         ------------------------------------------- 
                                                            1998            1997             1996
                                                         ---------        ---------       ---------
<S>                                                      <C>              <C>             <C>
Income tax benefit computed at the statutory rate        $ (13,244)       $ (31,512)      $ (33,496)
Book expenses not deductible for tax purposes               12,547           27,190          28,378
Generation of net operating loss carryforwards                 697            4,322           5,118
State income tax net of federal benefit                         --               61              25
Income taxes related to discontinued operations                 --              (61)            (25)
                                                         ---------        ---------       ---------

        Income taxes                                     $      --        $      --       $      --
                                                         =========        =========       =========
</TABLE>

         The tax effects of temporary  differences that give rise to significant
portions of the  deferred  tax assets and  liabilities  at December 31, 1998 and
1997, are as follows (in thousands):

                                                        1998             1997
                                                      --------         --------
    Deferred tax assets:
    Net operating loss carryforwards                  $ 62,758         $ 20,469
    Accounts receivable and inventory revaluation        6,730            9,811
    Equipment, property and intangible assets           15,268              122
    General business credit carryforward                   489              489
    Alternative minimum tax carryforward                    60               60
                                                      --------         --------
         Total gross deferred tax asset                 85,305           30,951
    Valuation allowance                                (85,305)         (30,951)
                                                      --------         --------
         Net deferred tax assets                            --               --

    Deferred tax liability:
    Accounts payable and accrued liabilities                --               --
                                                      --------         --------

    Net deferred taxes                                $     --         $     --
                                                      ========         ========

         The net changes in the total  valuation  allowance  for the years ended
December  31,  1998 and 1997 were an  increase  of  $52,689,000  and  $8,741,000
respectively.  A valuation allowance was established for deferred tax assets for
the years  ended  December  31, 1998 and 1997  because it was  deemed,  based on
available evidence, that it is more likely than not that all of the deferred tax
asset will not be realized.
<PAGE>
         At December 31, 1998, the Company had net operating loss  carryforwards
for federal income tax purposes of  approximately  $63 million,  which expire in
2007 through 2013, general business tax credits of approximately $489,000, which
expire in 2005 through 2010, and an alternative  minimum tax credit carryforward
of approximately  $60,000, which may be carried forward indefinitely and used to
offset future regular  taxable  income.  Included in the Company's net operating
loss carryforward is approximately $3,521,000,  related to exercises of employee
stock options,  which, if utilized in the future to reduce taxable income,  will
be credited directly to additional  paid-in capital.  Cash paid for income taxes
was not significant in 1998, 1997 and 1996.

(14)     MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK

         Financial  instruments that  potentially  subject the Company to credit
risk consist  principally of trade  receivables.  The Company sells its products
primarily  to  financial  institutions  in  the  United  States  and  leases  to
individual consumers. The Company believes that the concentration of credit risk
in its trade  receivables is  substantially  mitigated by the Company's  ongoing
credit evaluation  process.  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.  Historically,  the Company has not  incurred any
significant credit related losses.

         Revenues  from US West lease  customers  and the Visa  Bill-Pay  System
royalties  represented 53% and 26% of total revenues for the year ended December
31, 1998, respectively. Revenues from US West lease customers represented 68% of
total revenues for the year ended December 31, 1997. Revenues from US West lease
customers and Visa  InterActive  were 38% and 26% of total revenues for the year
ended December 31, 1996.

         Accounts  receivable from US West lease customers,  Branch Bank & Trust
Co.,  and  Summit  Services  Corp.  represented  41%,  15% and 12% of the  total
accounts receivable as of December 31, 1998,  respectively.  Accounts receivable
from US West lease customers represented 94% of the total accounts receivable at
December 31, 1997.

(15)     COMMITMENTS AND CONTINGENCIES

(a)      Leases

         The Company  leases  facilities  and  equipment  under  cancelable  and
noncancellable  operating  lease  agreements.  The facility leases are for terms
from one to five years.  Rent expense was $877,000,  $1,054,000 and $907,000 for
the years ended December 31, 1998, 1997 and 1996, respectively.
<PAGE>
         Future  minimum lease payments under  noncancellable  operating  leases
with initial or remaining terms in excess of one year at December 31, 1998, were
as follows (in thousands):

                                               Year ending December 31,
                                               ------------------------
         1999                                       $        687
         2000                                                551
         2001                                                519
         2002                                                156
         2003                                                156
         2004                                                 13
                                                    ------------
             Total minimum lease payments           $      2,082
                                                    ============
(b)      Patent Matters

         The Company does not believe that its products and services infringe on
the  rights  of  third  parties.   From  time  to  time,  third  parties  assert
infringement claims against InteliData.  There can be no assurance that any such
assertion  will not result in costly  litigation or require the Company to cease
using, or obtain a license to use, intellectual property rights of such parties.

(c)      Litigation

         The Company is not currently a party to any material  litigation.  From
time to time,  the Company is a party to routine  litigation  incidental  to its
business.  Management does not believe that the resolution of any or all of such
routine  litigation  will be likely  to have a  material  adverse  effect on the
Company's financial condition or results of operations.

(16)     VALUATION AND QUALIFYING ACCOUNTS

         The  components  of   significant   valuation  and  qualifying accounts
associated  with accounts  receivable  for the years ended December 31, 1998 and
1997 were as follows (in thousands):

         Balance, December 31, 1996           $  1,788
           Write-offs                              (86)
                                              --------
         Balance, December 31, 1997              1,702
           Recoveries                             (361)
           Charged to costs and expenses            21
           Write-offs                             (770)
                                              --------
         Balance, December 31, 1998           $    592
                                              ========

(17)     UNAUDITED QUARTERLY FINANCIAL DATA

         The  results of the  Company's quarterly operations for the years ended
December 31, 1998 and 1997 were (in thousands, except per share amounts):
<PAGE>
<TABLE>
                                                       First       Second <F1>   Third <F2>  Fourth        Total
                                                   ----------   ----------   ----------   ----------    ---------
     <S>                                           <C>          <C>          <C>          <C>           <C>
     1998
     Revenues                                      $   2,471    $   2,151    $   2,725    $   2,680     $ 10,027
     Operating loss                                     (961)      (1,599)        (793)      (1,137)      (4,490)
     Loss before income taxes                           (825)      (1,049)        (761)        (981)      (3,616)
     Discontinued operations                          (3,997)     (21,720)      (2,825)      (5,681)     (34,223)
     Net loss                                         (4,822)     (22,769)      (3,586)      (6,662)     (37,839)
     Basic and diluted loss from continuing
       operations per common share                 $   (0.03)   $   (0.03)   $   (0.02)   $   (0.03)    $  (0.11)
     Basic and diluted loss from discontinued
        operations per common share                $   (0.12)   $   (0.70)   $   (0.09)   $   (0.18)    $  (1.09)
     Basic and diluted net loss per
        common share                               $   (0.15)   $   (0.73)   $   (0.11)   $   (0.21)    $  (1.20)

     1997
     Revenues                                      $   3,966    $   3,266    $   2,811    $   2,478     $ 12,521
     Operating loss                                     (841)      (1,929)      (7,675)      (1,989)     (12,434)
     Loss before income taxes                           (403)         384       (7,976)      (3,168)     (11,163)
     Discontinued operations                             568       (3,221)     (71,202)      (5,076)     (78,931)
     Net income (loss)                                   165       (2,837)     (79,178)      (8,244)     (90,094)
     Basic (loss) income from continuing
       operations per common share                 $   (0.01)   $    0.01    $   (0.25)   $   (0.10)    $  (0.35)
     Diluted (loss) income from continuing
       operations per common share                 $   (0.01)   $    0.00    $   (0.25)   $   (0.10)    $  (0.35)
     Basic income (loss) from discontinued
       operations per common share                 $    0.02    $   (0.10)   $   (2.26)   $   (0.16)    $  (2.50)
     Diluted income (loss) from discontinued
       operations per common share                 $    0.01    $   (0.09)   $   (2.26)   $   (0.16)    $  (2.50)
     Basic income (loss) per
       common share                                $    0.01    $   (0.09)   $   (2.51)   $   (0.26)    $  (2.85)
     Diluted income (loss) per
       common share <F3>                           $    0.00    $   (0.09)   $   (2.51)   $   (0.26)    $  (2.85)

<FN>
        <F1> During the third quarter of 1997, the Company announced a strategic
             repositioning and determined that it would be appropriate to charge
             to operations the remaining  unamortized costs of intangible assets
             due to impairment,  and inventory  carrying amounts to the lower of
             cost or market, and to reflect certain restructuring  charges. Such
             transactions   resulted  in  aggregate  charges  of  $2,035,000  to
             continuing operations and $65,200,000 to discontinued operations.

        <F2> During the second  quarter of 1998,  the Company  announced that it
             intended to discontinue its  telecommunications  division. The loss
             from the operation of discontinued operations, net of income taxes,
             was  $13,487,000  during  the second  quarter of 1998.  The loss on
             disposal of the  discontinued  operations  was  $8,233,000  for the
             second quarter of 1998.

        <F3> Loss per share number are not  necessarily  additive due to current
             year activities and rounding differences.
</FN>
</TABLE>
<PAGE>
                          INDEPENDENT AUDITORS' REPORT



Board of Directors and Stockholders
InteliData Technologies Corporation
Herndon, Virginia


We have  audited the  accompanying  consolidated  balance  sheets of  InteliData
Technologies  Corporation  and  subsidiaries  (the "Company") as of December 31,
1998  and  1997,  and  the  related   consolidated   statements  of  operations,
stockholders'  equity,  and cash flows for each of the three years in the period
ended  December  31,  1998.  These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated 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,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of InteliData Technologies Corporation
and  subsidiaries  as of December  31,  1998 and 1997,  and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements for the year ended December
31, 1998 have been  prepared  assuming that the Company will continue as a going
concern.  As discussed in Note 3 to the  financial  statements,  the Company has
recurring losses from operations and has negative working capital,  which raises
substantial doubt about its ability to continue as a going concern. Management's
plans  concerning  these  matters are also  described  in Note 3. The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.


/s/ DELOITTE & TOUCHE LLP

McLean, Virginia
February 26, 1999

<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
---------------------------------------------------------
         ACCOUNTING AND FINANCIAL DISCLOSURE
         -----------------------------------

         None.

<PAGE>
                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------------------------------------------------------------

Directors

         The Company incorporates herein by reference the information concerning
directors contained in its Proxy Statement for its 1999 Stockholder's Meeting to
be filed within 120 days after the end of the  Company's  fiscal year (the "1999
Proxy Statement").

Executive Officers

         The  following  table  sets  forth the names and ages of all  executive
officers  of the  Company  and all  positions  and  offices  within the  Company
presently held by such executive officers:

Name                     Age     Position Held
----                     ---     -------------
William F. Gorog          73     Chairman of the Board
Alfred S. Dominick, Jr.   53     President and Chief Executive Officer
E. Philip Hanlon          50     Vice President and Chief Financial Officer
Thomas R. Oxendine        50     Vice President, Engineering and Implementation
                                 Services
Albert N. Wergley         51     Vice President, General Counsel and Secretary

William  F. Gorog has served as  Chairman  and  director  of the  Company  since
November  1996.  Mr.  Gorog had served as  Chairman of US Order from May 1990 to
November 1996.  From October 1987 until founding US Order in May 1990, he served
as chairman of the board of Arbor International,  an investment management firm.
From 1982 to 1987,  he served as president  and chief  executive  officer of the
Magazine  Publishers  of America,  an  association  representing  the  principal
consumer publications in the United States. During the Ford Administration,  Mr.
Gorog served as deputy  assistant  to the  President  for  Economic  Affairs and
Executive  Director of the Council on International  Economic  Policy.  Prior to
that time, he founded and served as chief executive officer of DataCorp.,  which
developed the Lexis and Nexis  information  systems for legal and media research
and which was subsequently sold to the Mead Corporation.  He currently serves as
a director of WorldCorp.

Alfred S. Dominick,  Jr. has served as the President and Chief Executive Officer
of the Company since August 1998. Prior to joining InteliData,  Mr. Dominick had
served as president of the Retail Products  Delivery Group at M&I Data Services.
Prior to joining M&I Data Services in July 1995, he was Executive Vice President
of  Retail  Banking  and a  member  of the  Executive  Committee  for  Boatmen's
Bancshares  Corporation  for  three  years.  Prior to that Mr.  Dominick  was an
Executive  Vice  President  with Bank One Texas,  since 1985.  Prior to Bank One
Texas,  Mr.  Dominick was a Senior Vice  President with Fleet National Bank. Mr.
Dominick currently serves as a director at Home Financial Network, Inc.

E. Philip Hanlon has served as Vice President and Chief Financial Officer of the
Company since November 1998. From 1992 to 1998, he was Chief  Financial  Officer
of Waverly,  Inc.,
<PAGE>
an international  publisher of medical print and electronic  media. From 1985 to
1992, he held other management  positions at Waverly,  including Vice President,
Finance, Vice President,  Marketing-Book  Division, and Controller.  Previously,
Mr. Hanlon held various  financial  management  positions with  Transcontinental
Energy  and  Nabors  Drilling,   Limited.  Mr.  Hanlon  is  a  Certified  Public
Accountant.

Thomas R. Oxendine has served as Vice President,  Engineering and Implementation
Services,  of the Company  since June 1998.  From 1994 to 1998, he was Executive
Vice President,  Banking Systems, for Olivetti North America. From 1991 to 1994,
he served as Vice  President,  Systems  Division,  and from 1988 to 1991, he was
Regional  Manager,  Implementation  and  Support,  for Olivetti  North  America.
Previously  he held  various  management  positions  with  Ericsson  Information
Systems, ISC Systems Corp., and Durango Systems.

Albert N.  Wergley  has  served as Vice  President  and  General  Counsel of the
Company since November  1996.  From May 1995 to November 1996, he served as Vice
President and General  Counsel of US Order.  From 1986 to 1994,  Mr. Wergley was
vice president and general counsel of Verdix  Corporation (now Rational Software
Corporation),  a manufacturer of software development tools. Previous to that he
was associated  with the McLean,  Virginia  office of the law firm of Reed Smith
Shaw & McClay and with the law firm of Howrey & Simon in Washington, D.C.

Beneficial Ownership Reporting

         The Company  incorporates herein by reference the information  required
by Item 405 of Regulation S-K contained in its 1999 Proxy Statement.


ITEM 11. EXECUTIVE COMPENSATION
-------------------------------

         The Company incorporates herein by reference the information concerning
executive compensation contained in the 1999 Proxy Statement.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

         The Company incorporates herein by reference the information concerning
security ownership of certain beneficial owners and management  contained in the
1999 Proxy Statement.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

         The Company incorporates herein by reference the information concerning
certain  relationships  and  related  transactions  contained  in the 1999 Proxy
Statement.

<PAGE>
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------

(a)    1.     FINANCIAL STATEMENTS

              See Item 8 of this Report

       2.     FINANCIAL STATEMENT SCHEDULES

              See Item 8 of this Report

       3.     EXHIBITS (* denotes filed herewith)

              Status of Prior Documents
              InteliData's  Annual  Report  on  Form  10-K  for the  year  ended
              December 31, 1998, at the time of filing with the  Securities  and
              Exchange   Commission,   shall  modify  and  supersede  all  prior
              documents  filed  pursuant  to  Sections  13, 14, and 15(d) of the
              Securities  Exchange  Act of 1934 for  purposes  of any  offers or
              sales of any securities  after the date of such filing pursuant to
              any  Registration  Statement or Prospectus  filed  pursuant to the
              Securities  Act  of  1933,  as  amended,   which  incorporates  by
              reference such Annual Report on Form 10-K.

              3.1     Certificate of  Incorporation  of InteliData  Technologies
                      Corporation.  (Incorporated  herein  by  reference  to the
                      Company's  Registration Statement on Form S-4, File Number
                      333-11081).

              3.2     Bylaws    of    InteliData    Technologies    Corporation.
                      (Incorporated   herein  by  reference  to  the   Company's
                      Registration   Statement   on  Form   S-4,   File   Number
                      333-11081).

              10.1    US Order,  Inc.  1991  Stock  Option  Plan.  (Incorporated
                      herein by reference to the US Order Registration Statement
                      on Form S-1, File Number 33-90978).

              10.2    US Order, Inc. 1995 Incentive Plan.  (Incorporated  herein
                      by  reference  to the US Order  Registration  Statement on
                      Form S-1, File Number 33-90978).

              10.3    US Order,  Inc.  Non-Employee  Directors'  and  Directors'
                      Stock Option Plans.  (Incorporated  herein by reference to
                      the US Order  Registration  Statements  on Form S-8,  File
                      Numbers 333-2348 and 333-2346).

              10.4    InteliData  Technologies  Corporation 1996 Incentive Plan.
                      (Incorporated   herein  by  reference  to  the   Company's
                      Registration   Statement   on  Form   S-8,   File   Number
                      333-16115).
<PAGE>
              10.5    InteliData    Technologies     Corporation    Non-Employee
                      Directors'  Stock  Option  Plan.  (Incorporated  herein by
                      reference to the Company's  Registration Statement on Form
                      S-8, File Number 333-16117).

              10.6    InteliData   Technologies   Corporation   Employee   Stock
                      Purchase  Plan.  (Incorporated  herein by reference to the
                      Company's  Registration Statement on Form S-8, File Number
                      333-16121).

              10.7    Employment   Agreement   dated  August  11,  1997  between
                      InteliData  Technologies  Corporation  and John C. Backus,
                      Jr.  (Incorporated  herein by  reference  to Exhibit 10 to
                      Registrant's  Report  on Form  10-Q of the  quarter  ended
                      September 30, 1997, File Number 000-21685).

              10.8    Employment  and  Non-Competition  Agreement dated December
                      17, 1997  between InteliData Technologies  Corporation and
                      Mark L. Baird.

              10.9    Employment  and  Non-Competition  Agreement dated December
                      17, 1997 between InteliData Technologies  Corporation  and
                      Albert N. Wergley.

           * 10.10    Employment  and  Non-Competition  Agreement dated November
                      3, 1998 between InteliData  Technologies  Corporation  and
                      Thomas R. Oxendine.

           * 10.11    Stock Option Agreement for  the  1991  Stock  Option  Plan
                      dated February 24,  1998  between  InteliData Technologies
                      Corporation and John C. Backus, Jr.

           * 10.12    Stock  Option Agreement for  the 1991  Stock  Option  Plan
                      dated February 24,  1998  between  InteliData Technologies
                      Corporation  and John C.  Backus,  Jr.  Irrevocable  Trust
                      dated April 21, 1995,  John Carlton Backus, Trustee

           * 10.13    Stock Option  Agreement for the 1996 Incentive Plan  dated
                      February   24,  1998  between   InteliData    Technologies
                      Corporation and John C. Backus, Jr.

             21.1     InteliData  Technologies  Corporation  List of Significant
                      Subsidiaries.

             23.1     Consent of Deloitte & Touche LLP.

             27.1     Financial Data Schedule, December 31, 1998.


(b)    REPORTS ON FORM 8-K

       None.

<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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.

                                 INTELIDATA  TECHNOLOGIES CORPORATION

                                 By      /s/ Alfred S. Dominick, Jr.
                                         -------------------------------------
                                         Alfred S. Dominick, Jr.
                                         President and Chief Executive Officer
                                         (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

<TABLE>

Signature                       Title                                     Date
---------                       -----                                     ----
<S>                             <C>                                       <C>
/s/ Alfred S. Dominick, Jr.     President and Chief Executive Officer     March 31, 1999
---------------------------     and Director
Alfred S. Dominick, Jr.         

/s/ William F. Gorog            Chairman of the Board and Director        March 31, 1999
--------------------
William F. Gorog

/s/ E. Philip Hanlon            Vice President and Chief Financial        March 31, 1999
--------------------            Officer
E. Philip Hanlon                

/s/ John C. Backus, Jr.         Director                                  March 31, 1999
-----------------------
John C. Backus, Jr.

/s/ Patrick F. Graham           Director                                  March 31, 1999
---------------------
Patrick F. Graham

/s/ John J. McDonnell, Jr.      Director                                  March 31, 1999
--------------------------
John J. McDonnell, Jr.

/s/ L. William Seidman          Director                                  March 31, 1999
----------------------
L. William Seidman
</TABLE>