<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-27842
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COLMENA CORP.
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(Exact name of small business issuer as specified in its charter)
Delaware 54-1778587
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
25100 Detroit Road, Westlake, Ohio 44145
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(Address of principal executive offices)
(440) 871-5000
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(Issuer's telephone number)
Not applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: At August 5, 1998,
7,326,736 shares of the Company's common stock were outstanding.
Transitional Small Business Disclosure Format (check one);
Yes ____ No X
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PART 1 - FINANCIAL INFORMATION
PAGE
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ITEM 1. Financial Statements
(a) Combined Balance Sheets as of June 30, 1998 (Unaudited)
and September 30, 1997 (Audited)......................................1
(b) Combined Statements of Operations (Unaudited) - Three and Nine
Month Periods Ended June 30, 1998 and June 30, 1997...................2
(c) Combined Statements of Cash Flows (Unaudited) - Nine
Month Periods Ended June 30, 1998 and June 30, 1997...................3
(d) Notes to Combined Interim Financial Statements........................4
ITEM 2. Management's Discussion and Analysis or Plan of Operation..............5
PART II - OTHER INFORMATION....................................................7
(i)
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<TABLE>
COLMENA CORP.
COMBINED BALANCE SHEETS
<CAPTION>
SEPTEMBER 30,
1997 JUNE 30, 1998
------------------- -----------------
* (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,022 $ 108,404
Trade accounts receivable 459,709 2,642,278
Third party settlement receivable 51,829 55,450
Inventory 0 80,673
Prepaid expenses 200,987 1,194,946
Other assets 0 100,000
Notes receivable 0 0
------------------- -----------------
Total current assets $ 717,547 $ 4,181,751
Non current assets:
Fixed assets 0 256,444
Prepaid consulting fees, net 0 1,662,000
Net assets of discontinued operations 191,669 189,948
Goodwill, net 0 511,069
Organizational costs 0 563,161
Note receivable 0 351,263
------------------- -----------------
$ 909,216 $ 7,715,636
=================== =================
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 212,006 $ 1,046,696
Notes payable to shareholders 461,061 344,818
Notes payable - other 0 222,083
Income taxes payable 0 845,599
Deferred revenue 22,993 -
------------------- -----------------
Total current liabilities 696,060 2,459,196
Convertible notes 0 40,000
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696,060 2,499,196
Combined shareholders' interest 213,156 0
Shareholders' Equity
Common stock 0 6,274
Paid in capital 0 3,637,513
Retained earnings 0 1,572,653
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0 5,216,440
------------------- -----------------
$ 909,216 $ 7,715,636
=================== =================
* Derived from audited financial statements.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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<TABLE>
COLMENA CORP.
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- -----------------------------
1997 1998 1997 1998
----------------- --------------- ------------ ----------------
<S> <C> <C> <C> <C>
Revenue $ 0 $ 4,104,009 $ 0 $ 10,050,934
Costs of revenue 0 2,576,876 0 6,178,514
----------------- --------------- ------------ ----------------
Gross profit 0 1,527,133 0 3,872,420
Selling, general and administrative 62,576 763,392 263,942 1,286,886
Other expenses
Loss on disposal of equipment 22,096 0 22,096 0
Loss on disposal of inventory 38,455 0 38,455 0
----------------- --------------- ------------ ----------------
Total expenses 123,127 763,392 324,493 1,286,886
Income (Loss) from continuing
operations before taxes (123,127) 763,741 (324,493) 2,585,534
Tax provision (benefit) 0 221,945 0 845,599
----------------- --------------- ------------ ----------------
Income (loss) from continuing
operations (123,127) 541,796 (324,493) 1,739,935
Loss from discontinued
operations 0 110,962 0 158,951
----------------- --------------- ------------ ----------------
Net income (loss) $ (123,127) $ 430,834 $(324,493) $ 1,580,984
================= =============== ============ ================
Earnings per share from continuing
operations $ (0.02) $ 0.07 $ (0.05) $ 0.24
================= =============== ============ ================
Shares used in computation 5,981,923 7,280,236 5,981,923 7,280,236
================= =============== ============ ================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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<TABLE>
COLMENA CORP.
COMBINED STATEMENTS OF CASH FLOWS
JUNE 30, 1998
(UNAUDITED)
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1998
---------------------- ---------------------
<S> <C> <C>
Operating Activities
Income (loss) from continuing operations $ (324,493) $ 1,580,984
Loss from discontinued operations 0 (194,025)
Adjustments to reconcile net income (loss) to net cash
used by operating
activities:
Organizational costs 0 (563,161)
Depreciation 4,820 0
Amortization of prepaid customer base 0 0
Deferred revenue 0 0
Changes in operating assets and liabilities:
Accounts receivable 0 (2,182,569)
Third party settlement receivable 0 3,621
Prepaid customer base and other assets (462) (993,959)
Notes receivable 0 (351,263)
Inventory 27,190 (80,673)
Net assets of discontinued operations 0 19,258
Other assets 0 (3,220)
Accounts payable and other payables 121,005 732,231
Income taxes payable 0 845,599
Accrued Expenses 22,964 0
---------------------- ---------------------
Net cash used by operating activities (148,976) (1,187,177)
Investing Activities
Business acquired, net of cash 0 (29,725)
Purchase of fixed assets (36,599) (150,000)
Disposal of equipment 22,096 0
Deposits 0 (100,000)
---------------------- ---------------------
Net cash used in investing activities: (14,503) (279,725)
Financing Activities
Notes payable to shareholders 0 (116,243)
Notes payable - other 0 222,083
Issuance of common stock 63,500 1,464,444
Borrowings from shareholder 82,872 0
Repayments of borrowings from shareholder (5,334) 0
---------------------- ---------------------
Net cash provided by financing activities 141,038 1,570,284
---------------------- ---------------------
Increase (decrease) in cash (22,441) 103,382
Cash and cash equivalents at beginning of period 22,832 5,022
---------------------- ---------------------
Cash and cash equivalents at end of period $ 391 $ 108,404
====================== =====================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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COLMENA CORP.
NOTES TO COMBINED INTERIM FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited combined financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, the financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
have been included and all adjustments considered necessary for a fair
presentation have been included and such adjustments are of a normal recurring
nature.
Results for interim periods should not be considered indicative of results for a
full year. The year-end consolidated balance sheet was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended September 30, 1997.
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ITEM 2. Management's Discussion and Analysis or Plan of Operation.
This "Management's Discussion and Analysis or Plan of Operation" should
be read in conjunction with the Company's unaudited interim financial statements
for the three and nine month periods ended June 30, 1998, the notes thereto, and
the other financial data included elsewhere herein and includes forward-looking
statements which involve risks and uncertainties which are based upon the
Company's beliefs, as well as assumptions made by and information currently
available to the Company. The Company's actual results may differ materially
from the results predicted by such forward-looking statements due to various
factors, including, but not limited to, those risks and uncertainties which are
discussed below.
PLAN OF OPERATION
The Company was founded in 1997 and since inception has, through its
operating subsidiaries, been engaged primarily in the telecommunications
services industry. The Company's operating subsidiaries include T2U Co. ("T2U"),
Business Technology Systems, Inc. ("BTS"), TechTel Communications, Inc.
("TechTel") and Latin American Telephone Company ("LAPC").
T2U, the Company's first telecommunications venture, operates as a
reseller of residential long-distance service. During its first year of
operations, T2U achieved profitability with over 150,000 billable customers. As
a result of management's belief that other telecommunications ventures provide
better opportunities for future growth, the Company plans to phase out T2U's
current long distance calling card program over the next several months. In
addition, the Company is currently liquidating the assets of BTS, its computer
sales division, in order to focus management and financial resources on the
telecommunications industry.
As of the date of this report, the Company has a number of business
opportunities which it is looking into as potential acquisitions or investment
vehicles.
On May 19, 1998, the Company entered into a definitive asset purchase
agreement for the acquisition of a telecommunications switch and related
equipment. Closing is anticipated within the next few weeks. The purchase price
for the assets will consist of $100,000 in cash (which has already been
deposited with the seller), a promissory note in the principal amount of
$250,000 and 300,000 shares of the Company's common stock.
In June 1998, the Company entered into a letter of intent for the
acquisition of North American Communications Control, Inc. ("NACC"), a
full-service telecommunications carrier and provider of communication facilities
and support for local, long-distance and international services. Representatives
of the Company and NACC are currently negotiating a definitive agreement.
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<PAGE>
The Company is also in the process of finalizing purchase agreements and
personnel additions which are expected to increase profitability, establishing
the Company as a provider of long distance services, expanding operations in the
international market and enhancing its marketing capabilities. The Company also
plans to acquire and operate at least four telecommunications switches in the
United States which will be strategically positioned to serve as international
gateways to Europe, South America and Asia. In addition, the Company intends to
add the following services: retail phone debit card sales, 1+ long-distance
service and local dial tone sales.
The Company has generated revenues from the sale of its long-distance
services and loans from shareholders. The Company expects to increase its
revenues in the near future as it divests itself of BTS and refocuses its
resources on the activities of Techtel and LAPC. The Company has, an expects to
continue to, incur substantial administrative expenses over the next twelve
months in connection with the expansion of its operations.
The Company anticipates that additional infusions of debt or equity
financing may be required to support existing operations over the next twelve
months. In addition, the Company anticipates making significant capital
expenditures for the acquisition of additional businesses and equipment.
Depending on the nature, size and timing of future acquisitions, the Company may
be required to obtain additional debt or equity financing in connection with
such future acquisitions. There can be no assurance, however, that additional
financing will be available to the Company, when and if needed, on acceptable
terms or at all.
The Company's efforts during the next twelve months will be dedicated
principally to transforming the Company into a full-service, international
communications and technology company. However, there can be no assurance as to
the success of these efforts.
No meaningful comparison can be made to the three and nine month periods
ended June 30, 1997 in that during that period the activities of the Company's
predecessor were unrelated.
YEAR 2000 COMPLIANCE
The Company uses a packaged accounting software system which the Company
believes will be Year 2000 compliant in 1998. If the vendor does not have a Year
2000 compliant version ready when necessary, the Company believes they can
readily purchase replacement software. The Company is monitoring its service
bureau and vendors and expects them to be Year 2000 compliant in 1998. There can
be no assurance that the Company or vendors will meet these plans.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
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Not applicable
Item 2. Changes in Securities.
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Not applicable.
Item 3. Defaults Upon Senior Securities.
--------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
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Not applicable.
Item 5. Other Information.
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Not applicable.
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Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits and Index of Exhibits
------------------------------
27.1 Financial Data Schedule.
_____________________
(b) Reports on Form 8-K
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Inapplicable.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
COLMENA CORP.
(Registrant)
Dated: August 14, 1998 By: /s/ Richard C. Peplin, Jr.
-----------------------------
Richard C. Peplin, Jr., President
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 108,404
<SECURITIES> 0
<RECEIVABLES> 2,642,278
<ALLOWANCES> 0
<INVENTORY> 80,673
<CURRENT-ASSETS> 4,181,751
<PP&E> 256,444
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,715,636
<CURRENT-LIABILITIES> 2,459,196
<BONDS> 0
0
0
<COMMON> 6,274
<OTHER-SE> 5,210,166
<TOTAL-LIABILITY-AND-EQUITY> 7,715,636
<SALES> 10,050,934
<TOTAL-REVENUES> 10,050,934
<CGS> 6,178,514
<TOTAL-COSTS> 7,465,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,585,534
<INCOME-TAX> 845,599
<INCOME-CONTINUING> 1,739,935
<DISCONTINUED> (158,951)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,580,984
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
