<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 December 31, 1997
-----------------
[ ] 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
----------
COLMENA CORP.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 54-1778587
- --------------------------------- --------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
25100 Detroit Road, Westlake, Ohio 44145
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(440) 871-5000
---------------------------
(Issuer's telephone number)
Not applicable
- -------------------------------------------------------------------------------
(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 No X
--- ---
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: At February 24, 1998,
6,489,886 shares of the Company's common stock were outstanding.
Transitional Small Business Disclosure Format (check one);
Yes No X
--- ---
<PAGE>
PART 1 - FINANCIAL INFORMATION
PAGE
ITEM 1. Financial Statements ----
(a) Combined Balance Sheet - December 31, 1997 (Unaudited).............1
(b) Combined Statements of Operations (Unaudited) - Three
Month Periods Ended December 31, 1997 and December 31, 1996........2
(c) Combined Statements of Cash Flows (Unaudited) - Three
Month Periods Ended December 31, 1997 and December 31, 1996........3
(d) Notes to Unaudited Financial Statements............................4
ITEM 2. Management's Discussion and Analysis or Plan of Operation............6
PART II - OTHER INFORMATION...................................................8
i
<PAGE>
COLMENA CORP.
COMBINED BALANCE SHEET
(UNAUDITED)
ASSETS
DECEMBER 31, 1997
------------------
Current assets:
Cash and cash equivalents $ 10,299
Deposits 9,624
Inventory 131,945
Trade accounts receivable 915,105
Note receivable - CTI 10,400
------------------
Total Current Assets $ 1,077,303
------------------
Fixed Assets
Equipment Purchased 30,840
------------------
Total Fixed Assets $ 30,840
------------------
Other Assets
Amortizable customer base 886,974
------------------
Total Other Assets $ 886,974
------------------
Total Assets $ 1,995,117
==================
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 481,483
Provision for federal income tax 100,000
------------------
Notes payable to shareholders 774,301
------------------
Total Current Liabilities $ 1,355,784
------------------
Equity
Paid in capital 1,000
Common stock 1,000
Retained earnings 420,672
Current income (loss) 216,661
------------------
Total Equity 639,333
------------------
Total Liabilities and Equity $ 1,995,117
==================
1
<PAGE>
COLMENA CORP.
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
THREE MONTHS ENDED ENDED
DEC. 31, 1997 DEC. 31, 1996
------------------ ------------------
<S> <C> <C>
Total Revenue $ 1,346,026 $ 0
Cost of revenue 954,552 0
------------------ ------------------
Gross Profit $ 391,474 $ 0
------------------ ------------------
Expenses
Selling, general and administrative 74,813 0
Professional fees 0 58,000
Wages 0 2,417
Payroll taxes 0 1,259
Office expenses 0 503
Legal fees 0 12,287
Telephone expense 0 1,057
Rent expense 0 10,000
Travel expenses 0 2,148
Auto expenses 0 2,464
Interest expense 0 6,529
Executive compensation 0 24,000
License and fees 0 1,985
Meals and entertainment 0 956
Testing 0 1,740
Depreciation 0 1,576
Equipment rental 0 435
Dues and subscriptions 0 274
Miscellaneous 0 145
Utilities 0 161
------------------ ------------------
Total Expenses 74,813 128,169
------------------ ------------------
Net income (Loss) $ 316,661 $ (128,169)
================== ==================
Provision for taxes (100,000) -
------------------ ------------------
Tax provision Net Income $ 216,661 $ -
================== ==================
Pro forma earnings per share $.04 -
------------------
Shares used in computation 4,996,830 -
</TABLE>
2
<PAGE>
COLMENA CORP.
COMBINED STATEMENTS OF CASH FLOWS
DECEMBER 31, 1997
INCREASE (DECREASE) IN CASH OR CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
DEC. 31, 1997 DEC. 31, 1996
------------------ ------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) $ 316,661 $ (128,169)
Adjustments to reconcile net cash
used in operating activities
Amortization 93,443 0
Depreciation 0 1,576
Changes in:
Deposits (9,624) 0
Inventory (131,945) (11,010)
Trade accounts receivable (1,140,861) 0
Other current assets 225,755 0
Note receivable - CTI (10,400) 0
Accounts payable 368,958 27,320
Other payables 0 10,355
Accrued expenses 106,525 7,788
Prepaid expenses 0 (5,632)
Short term note - PDN 6,000 0
------------------ -----------------
Net cash provided (used) in operating activities: (492,149) (97,772)
------------------ -----------------
Cash Flows from Investing Activities
Sales (Purchases) of Assets
Equipment purchased (30,840) 3,880
Amortizable customer base (978,016) 0
Deposits 0 (11,670)
------------------ -----------------
Net cash provided (used) in investing activities: (1,011,257) (7,790)
------------------ -----------------
Cash flows from Financing Activities
Issuance of common stock 1,000 63,500
Borrowings from shareholder 0 23,296
Loans - others 697,825 0
Other 496,149 0
Repayments of borrowings from shareholders 0 (3,700)
------------------ -----------------
Net cash provided (used) by
financing activities: 1,194,974 83,096
------------------ -----------------
Net increase (decrease) in cash 8,231 (22,466)
------------------ -----------------
Cash at Beginning of Period 0 22,832
------------------ -----------------
Cash at End of Period $ 8,231 $ 366
================== =================
</TABLE>
3
<PAGE>
COLMENA CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(UNAUDITED)
A. THE COMPANY
-----------
The accompanying financial statements of Colmena Corp. (the "Company")
represent the combined financial statements of RCP Enterprises Group, Inc.
("RCP") and Tio Mariano Cigar Corp. ("Tio"). RCP is a newly formed entity
engaged in the marketing and distribution of long distance telephone service
calling cards and was organized on October 1, 1997 under the laws of the state
of Delaware. RCP had a profit for the period of October 1, 1997 to December 31,
1997 of approximately $255,634. Tio is a newly formed entity engaged in the
business of manufacturing and distributing premium hand-rolled cigars and was
incorporated on October 1, 1997. Tio, a discontinued operations, incurred a loss
for the period of October 1, 1997 to December 31, 1997 of approximately $38,973.
The acquisitions of Tio and RCP took place on November 10, 1997. Consequently,
the results of operations for RCP and Tio include only the results of operations
from November 10, 1997.
The Company utilizes several service bureaus to process calls and
provide administrative support for calls generated by the use of its service
calling. These services are concentrated with one service provider. The Company
could be adversely affected if this service bureau was unable or unwilling to
continue this relationship. Management believes that there are alternative
service bureaus it could use to minimize any adverse impact on the loss of the
existing service bureau.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
INTERIM FINANCIAL STATEMENTS
The accompanying financial statements include all adjustments
(consisting of only normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the results of operations for
the periods presented. Interim results are not necessarily indicative of the
results to be expected for a full year. The financial statements should be read
in conjunction with the financial statements included in the annual report of
the Company on Form 10-KSB for the year ended September 30, 1997.
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
disclosures of contingent assets and liabilities at the date of the financial
statements, and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are composed of highly liquid investments
with an original maturity of three months or less.
-4-
<PAGE>
OTHER ASSETS
Other assets primarily consist of the cost of the customer databases
from which the Company markets its service plans net of related accumulated
amortization. The cost represents billings from the third party responsible for
accumulating this database. These costs are amortized over a twelve month period
on an accelerated basis.
Other assets also consist of the cost of services related to deferred
revenue. Deferred costs of services are expensed as services are utilized by the
customer and, accordingly, are matched with the revenues recognized under the
Company's revenue recognition policy.
REVENUE RECOGNITION AND COST OF REVENUE
The Company recognizes revenue, less an amount for uncollectible
accounts based upon their experience and others in the long distance telephone
service calling cards at the expiration of its use, generally thirty days or
month end. Until the thirty day period has passed, the Company defers all
revenues and costs.
C. RELATED PARTY TRANSACTIONS
--------------------------
As of December 31, 1997, the Company owes its principal shareholder
$111,826 which is due on September 30, 1998 and is noninterest bearing. In
addition, approximately $163,333 is due to the shareholders of Tio Cigars, Inc.,
which is due on various dates from March 31, 1998 through September 23, 1998,
plus interest at a rate of 10%.
Tio has a lease for certain manufacturing facilities located in the
Dominican Republic. The lease is for monthly payments of $1,604 up until May
1998. The principal shareholder has guaranteed the lease.
D. MATERIAL AND SUBSEQUENT EVENTS
------------------------------
On November 10, 1997, RCP Enterprises Group, LLC and Tio Cigars, Inc.
were acquired by Sports-Guard, Inc., a publicly trading company, which had no
operations as of the merger date. Sports-Guard, Inc. issued 3,000,000 shares of
stock to complete the acquisition of RCP and 1,310,000 shares of stock to
complete the acquisition of Tio.
On January 12, 1998, the Company entered into a nonbinding letter of
intent for the purchase of Business Technology Systems, Inc. for an approximate
price of $100,000 in cash and 100,000 shares of the Company's common stock. The
transaction is expected to close in March 1998.
On February 8, 1998, the Board of Directors made a decision to dispose
of Tio. The Company expects to receive at least the net book value of the assets
on the sale, which mostly consists of inventory of approximately $132,000 and
fixed assets of approximately $50,000. Management expects to complete the
disposition in 1998 by sale to a company engaged in a similar business. The
Company may receive cash or securities as its proceeds. The results of
operations of Tio are shown as a discontinued operation in the accompanying
financial statements.
-5-
<PAGE>
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 financial statements for the
quarter ended December 31, 1997, 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.
GENERAL
Since inception (November 10, 1997), the Company has been a holding
company and currently operates two wholly-owned subsidiaries, RCP Enterprises
Group, Inc. ("RCP") and Tio Mariano Cigar Corp. ("Tio").
RCP, a residential long-distance service reseller, has experienced
continued growth and achieved profitability during the quarter ended December
31, 1997. RCP had earnings before taxes of approximately $1,346,026 for the
first quarter ended December 31, 1997.
RCP acquires its customers via an agreement with The Kaplan Group,
Inc., an independent direct mail marketing organization. Data fulfillment is
performed by Cherskov Technology, Inc. ("CTI"), which is partially owned by
Richard C. Peplin, Jr., the controlling shareholder of the Company. Billing is
performed by ITA, a third party clearing house. The monthly charge of $9.95 is
billed to the customers directly on their telephone bill.
RCP currently has over 150,000 billable customers. The Company's plan
of operations for the next twelve months includes increasing RCP's customer base
to more than 300,000 customers by acquiring companies with similar operations.
As of the date of this report, RCP has a number of business opportunities which
it is looking into as potential acquisitions or investment vehicles. Currently
there are no definitive agreements on the part of any party to sell its assets
to RCP. However, RCP has entered into a letter of intent with Business
Technology Systems, Inc. ("BTS"), a computer reseller, custom software provider
and local phone service reseller, to acquire its assets.
The Company is also in the process of finalizing purchase agreements
and personnel additions which are expected to increase RCP's profitability,
transforming RCP from a reseller of long-distance service to a provider of such
services, expanding its operations in the international market and enhancing its
marketing capabilities. The Company plans to have definitive purchase agreements
in place with CTI and BLJ Communications, Inc., a competitor of RCP owned by the
principals of The Kaplan Group, Inc., in the near future.
The Company also plans to acquire and operate at least three
telecommunications switches in the United States which will be strategically
positioned to serve as international gateways to Europe, South America and Asia.
In addition to this, the Company plans to add the following services: retail
phone debit card sales, 1+ long-distance service and local dial tone sales.
Tio, a cigar manufacturer and wholesaler, has incurred losses of
approximately $38,973 for the first quarter ended December 31, 1997. These
losses are a result of developmental expenses and other factors related to the
cigar industry. Consequently, the Company has elected to divest itself of all of
the Tio assets and plans to focus all of its resources on RCP.
-6-
<PAGE>
The Company plans to make several additions to its personnel over the
course of the next year including, but not limited to, hiring a new president
for RCP with extensive telecommunications experience, as well as a
telecommunications switch technician and code writer. Following the acquisition
of BTS, the Company intends to hire the current president of BTS who will be
responsible for RCP's international business development. Finally, the Company
has entered into several consulting agreements for the provision of direct
marketing, COC switch coordinating services and consulting services related to
international sales, joint ventures, financing and mergers and acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
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 Tio and refocuses its
resources on RCP's activities. The Company expects to incur substantial
administrative expenses in the future. As of December 31, 1997, the Company's
working capital was approximately $495,821. In the absence of significant sales
and profits, the Company may seek to raise additional funds to meet its working
capital needs principally through the sale of its securities. However, there is
no assurance that the Company will be able to obtain sufficient additional funds
when needed, or that such funds, if available, will be obtainable on terms
satisfactory to the Company.
The Company believes that its present working capital is sufficient for
the next twelve months of operations. During the next twelve months, the Company
anticipates incurring approximately $10,000,000 in expenditures for the
acquisition of additional businesses and equipment. Currently, the Company does
not anticipate any significant changes in the number of employees.
The Company's efforts during the next twelve months will be dedicated
principally to transforming the Company from a holding company with two
dissimilar subsidiaries into a profitable, full-service, international
communications and technology company. However, there can be no assurance as to
the success of these efforts.
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.
-7-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
Not applicable
Item 2. Changes in Securities.
----------------------
During the quarter ended December 31, 1997, the Company completed a
one-for-ten reverse stock split of its issued and outstanding common stock, $.01
par value ("Common Stock") which was effected on November 10, 1997.
On November 10, 1997, in connection with the acquisition by merger of
RCP Enterprises Group, LLC, an Ohio limited liability company, ("RCP") the
Company issued 3,000,000 shares of the Company's post-reverse split Common Stock
to the members of RCP.
On November 10, 1997, in connection with the acquisition by merger of
Tio Cigars, Inc., an Ohio corporation, ("Tio"), the Company issued 1,310,000
shares of the Company's post-reverse split Common Stock to the shareholders of
Tio.
On November 10, 1997, the Company issued an aggregate of 800,000 shares
of Common Stock to certain individuals in connection with certain consulting
agreements. The securities were issued in reliance on the exemption provided in
Section 4(2) of the Securities Act of 1933 because no public offering was
involved.
-8-
<PAGE>
On December 8, 1997, the Company issued in connection with a consulting
agreement, 25,000 shares of Common Stock in consideration for services rendered
to the Company. The securities were issued in reliance on the exemption provided
in Section 4(2) of the Securities Act of 1933 because no public offering was
involved.
On November 20, 1997, the Company issued 50,000 shares of Common Stock
to David DiBenedetto in consideration for services rendered to the Company. The
securities were issued in reliance on the exemption provided in Section 4(2) of
the Securities Act of 1933 because no public offering was involved.
On December 10, 1997, the Company issued an aggregate of 500,000 shares
of Common Stock to certain individuals in consideration for services rendered to
the Company. The securities were issued in reliance on the exemption provided in
Section 4(2) of the Securities Act of 1933 because no public offering was
involved.
Item 3. Defaults Upon Senior Securities.
--------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
On October 31, 1997, a proposal was submitted to the majority
shareholder of the Company, regarding the approval of the merger of Tio-Ohio
into Tio, and the merger of RCP-Ohio into RCP. The majority shareholder approved
the mergers in a Written Consent of the Sole Director and Majority Shareholder
dated October 31, 1997.
Item 5. Other Information.
------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits and Index of Exhibits
------------------------------
2.1* Merger Agreement among Sports-Guard, Inc., Tio
Mariano Cigar Corp. and Tio Cigars, Inc. dated
October 31, 1997.
2.2* Merger Agreement among Sports-Guard, Inc., RCP
Enterprises Group, Inc. and RCP Enterprises Group,
LLC dated October 31, 1997.
3.1** Certificate of Incorporation of the Company dated
July 10, 1995.
3.2* Certificate of Amendment of Certificate of
Incorporation of the Company dated October 31, 1997.
-9-
<PAGE>
3.3** Bylaws of the Company.
3.4* Amended and Restated Bylaws of the Company.
4.1* Specimen Common Stock Certificate
4.2** (Form of) Stock Purchase Warrant
4.3*** (Form of) 10% Convertible Notes
27.1 Financial Data Schedule
99.1 Tio Cigars, Inc. Pro Forma Financial Statements for
the periods ended November 9, 1997 and December 31,
1997.
99.2 RCP Enterprises Group, LLC Pro Forma Financial
Statements for the periods ended November 9, 1997 and
December 31, 1997.
--------------------
* Incorporated herein by reference to the Company's
Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1997, filed on February 26, 1998.
** Incorporated herein by reference to the Company's
Registration Statement on Form 10-SB filed February
23, 1996.
*** Incorporated herein by reference to the Company's
Registration Statement on Form 10-SB/A filed June 3,
1996.
(b) Reports on Form 8-K
-------------------
During the first quarter ended December 31, 1997, the Company
filed a Current Report on Form 8-K on December 1, 1997.
The Company also filed a Current Report on Form 8-K on
February 26, 1998.
-10-
<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: March 6, 1998 By:/s/ Richard C. Peplin
-----------------------------------
Richard C. Peplin, Jr., President
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 10229
<SECURITIES> 0
<RECEIVABLES> 915105
<ALLOWANCES> 0
<INVENTORY> 131945
<CURRENT-ASSETS> 1077303
<PP&E> 30840
<DEPRECIATION> 0
<TOTAL-ASSETS> 1995117
<CURRENT-LIABILITIES> 1355784
<BONDS> 0
0
0
<COMMON> 1000
<OTHER-SE> 638333
<TOTAL-LIABILITY-AND-EQUITY> 1995117
<SALES> 1346026
<TOTAL-REVENUES> 1346026
<CGS> 954552
<TOTAL-COSTS> 74813
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 316661
<INCOME-TAX> 100000
<INCOME-CONTINUING> 216661
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 216661
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
<PAGE>
EXHIBIT 99.1
TIO CIGARS, INC.
PRO FORMA FINANCIAL STATEMENTS
<PAGE>
INDEX TO FINANCIAL STATEMENTS
TIO CIGARS, INC.
Balance Sheet for November 9, 1997 (Unaudited)................................1
Statement of Operations for Two Months and
Eleven Months Ended November 9, 1997 (Unaudited).....................2
Statement of Cash Flows for November 9, 1997 -
Increase (Decrease) in Cash or Cash Equivalents (Unaudited)..........3
COLMENA CORPORATION
Balance Sheet - Division 2 - Tio Cigars, Inc.
December 31, 1997 (Unaudited)........................................4
Statement of Operations - Division 2 - Tio Cigars, Inc.
for Two Months and Eleven Months Ended
December 31, 1997 (Unaudited)........................................5
i
<PAGE>
EXHIBIT 99.1 - TIO CIGARS, INC. PRO FORMA FINANCIAL STATEMENTS
TIO CIGARS, INC.
BALANCE SHEET
(UNAUDITED)
ASSETS
NOVEMBER 9, 1997
------------------
Current assets:
KeyBank - Operating account $ 2,706
Deposits 9,624
Inventory 131,945
------------------
Total Current Assets $ 144,274
------------------
Fixed Assets
Office Equipment $ 27,481
------------------
Total Fixed Assets 27,481
------------------
Total Assets $ 171,756
==================
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 9,424
Accrued FICA 1,240
Accrued Medicare 290
Accrued FIT 862
Accrued FUTA 56
Accrued SUTA 288
Accrued SIT - Ohio 396
Accrued CIT - Westlake 244
Short Term Loan - RCP Enterprises 24,500
Short Term Loan - PDN 6,000
RCP Jr. Loan 111,826
Additional paid in capital 1,000
LMC Loan 30,000
Loans - Others 163,333
------------------
Total Current Liabilities $ 349,459
------------------
Equity
Current income (loss) (177,703)
------------------
Total Equity (177,703)
------------------
Total Liabilities and Equity $ 171,756
==================
1
<PAGE>
<TABLE>
TIO CIGARS, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
2 MONTHS ENDED 11 MONTHS ENDED
------------------ ------------------
NOV. 9, 1997 NOV. 9, 1997
------------------ ------------------
<S> <C> <C>
Revenue
Sales - Cigars $ 6,000 $ 11,287
------------------ ------------------
Total Revenue 6,000 11,287
------------------ ------------------
Operating Expenses
Materials purchased 8,250 45,249
Supplies 373 68,047
Wages & salaries 10,000 18,350
Payroll taxes 859 1,587
Bank charges 0 611
Travel expenses 0 2,017
Shipping 3,609 6,798
Telephone 237 631
Rent 0 1,607
Insurance 0 700
Advertising 15,000 25,000
Auto expense 26 26
Investment expenses 4,540 12,540
Travel advance 3,827 5,827
------------------ ------------------
Total Expenses 46,722 188,990
------------------ ------------------
Net Income (Loss) $ (40,722) $ 177,703
================== ==================
</TABLE>
2
<PAGE>
<TABLE>
TIO CIGARS, INC.
STATEMENT OF CASH FLOWS
NOVEMBER 9, 1997
INCREASE (DECREASE) IN CASH OR CASH EQUIVALENTS
(UNAUDITED)
<CAPTION>
2 MONTHS ENDED 11 MONTHS ENDED
NOV. 9, 1997 NOV. 9, 1997
------------------ ------------------
<S> <C> <C>
Cash Flow from Operating Activities
Net income (loss) $ (40,722) $ (177,703)
Adjustments to reconcile cash flow
Decrease (Increase) in Current Assets
Inventory 0 (131,945)
Decrease (increase) in current liabilities
Accounts payable 0 9,424
Accrued FICA 1,240 1,240
Accrued Medicare 290 290
Accrued FIT 862 862
Accrued FUTA 6 56
Accrued SUTA 88 288
Accrued SIT - Ohio 148 396
Accrued City - Westlake 150 243
Short Term Loan - RCP Enterprises 23,500 24,500
Short Term Loan - PDN 5,000 6,000
RCP Jr. Loan 2,000 111,826
Additional paid in Capital 0 1,000
LMC Loan 0 30,000
Loans - Others 0 163,333
------------------ ------------------
Total Adjustments 33,285 217,513
------------------ ------------------
Cash provided (used) by operations (7,437) 39,810
------------------ ------------------
Cash Flow from Investing Activities
Sales (Purchases) of Assets
Office Equipment 0 ( 27,481)
------------------ ------------------
Cash Provided (Used) by Investing 0 (27,481)
------------------ ------------------
Cash Flow from Financing Activities Cash (Used) or provided by:
Net Increase (Decrease) in Cash (7,437) 12,329
------------------ ------------------
Cash at Beginning of Period 19,766 0
------------------ ------------------
Cash at End of Period $ 12,329 $ 12,329
================== ==================
</TABLE>
3
<PAGE>
COLMENA CORP.
BALANCE SHEET - DIVISION 2 - TIO CIGARS, INC.
(UNAUDITED)
ASSETS
DECEMBER 31, 1997
------------------
Current assets:
KeyBank - Operating account $ 7,586
Cash on hand 30
Deposits 9,624
Inventory 131,945
------------------
Total Current Assets $ 149,185
------------------
Fixed Assets
Equipment purchased 30,241
------------------
Total Fixed Assets 30,241
------------------
Total Assets $ 179,426
==================
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 9,424
Accrued FICA - Medicare (0)
Accrued FIT 0
Accrued FUTA 82
Accrued SUTA 456
Accrued SIT 643
Accrued CIT - Westlake 338
Note payable 6,000
------------------
Total Current Liabilities $ 16,943
------------------
Long Term Liabilities
Divisional transfer 73,000
RCP, Jr. Note Payable 111,826
Additional paid in capital 1,000
LMC note payable 30,000
Loans - others 163,333
------------------
Total Long Term Liabilities $ 379,159
------------------
Equity
Common stock (177,703)
Current income (loss) (38,973)
------------------
Total Equity (216,676)
------------------
Total Liabilities and Equity $ 179,426
==================
4
<PAGE>
<TABLE>
COLMENA CORP.
STATEMENT OF OPERATIONS - DIVISION 2 - TIO CIGARS, INC.
DECEMBER 31, 1997
(UNAUDITED)
<CAPTION>
3 MONTHS ENDED 12 MONTHS ENDED
----------------- -----------------
DEC. 31, 1997 DEC. 31, 1997
----------------- -----------------
<S> <C> <C>
Revenue
Total Revenue $ 0 $ 0
----------------- -----------------
Operating Expenses
Dominican payroll 2,000 2,000
Supplies 2,400 2,400
Wages 6,250 6,250
Payroll taxes 672 672
Bank charges 528 528
Shipping 99 99
Legal fees 309 309
Insurance expense 1,400 1,400
Telephone expense 2,790 2,790
Outside services 10,238 10,238
Rent expense 992 992
Auto lease 1,866 1,866
Advertising expense 9,429 9,429
----------------- -----------------
Total Expenses 38,973 38,973
----------------- -----------------
Net income (loss) $ (38,973) $ (38,973)
================= =================
</TABLE>
5
<PAGE>
EXHIBIT 99.2
RCP ENTERPRISES GROUP, LLC
PRO FORMA FINANCIAL STATEMENTS
<PAGE>
INDEX TO FINANCIAL STATEMENTS
RCP ENTERPRISES GROUP, LLC
Balance Sheet for November 9, 1997 (Unaudited).................................1
Statement of Operations for Two Months and
Eleven Months Ended November 9, 1997 (Unaudited)......................2
Statement of Cash Flows for Two Months and Eleven Months Ended
November 9, 1997 - Increase (Decrease) in Cash or Cash
Equivalents (Unaudited)...............................................3
COLMENA CORPORATION
Balance Sheet - Division 1 - RCP Enterprises Group, Inc.,
December 31, 1997 (Unaudited).........................................4
Statement of Operations - Division 1 - RCP Enterprises Group,
Inc., for Three Months and Twelve Months Ended December
31, 1997 (Unaudited)..................................................5
i
<PAGE>
RCP ENTERPRISES GROUP, LLC
BALANCE SHEET
(UNAUDITED)
ASSETS
NOVEMBER 9, 1997
------------------
Current assets:
KeyBank - Operating account $ 15,788
Accounts receivable - ITA 658,887
A/R Reserves - ITA 524,117
Accounts receivable - Viatech 69,412
Reserve for bad debt (664,691)
Accounts receivable - Tio Cigar 24,500
Note receivable - CTI 10,400
------------------
Total Current Assets $ 638,413
------------------
Other Assets
Amortizable customer base 477,757
Accumulated amortization (113,336)
------------------
Total Other Assets $ 364,421
------------------
Total Assets $ 1,002,834
==================
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 200,464
Accrued expenses 81,246
Accrued FICA - SS 371
Accrued FICA - Medicare 96
Accrued FIT 357
Accrued FUTA 83
Accrued SUTA 294
Accrued SIT 893
Accrued CIT - Westlake 453
------------------
Total Current Liabilities $ 284,257
------------------
Long Term Liabilities
Syndicate payable - RCP Sr. 40,000
Syndicate payable - Wiseman Trust 10,000
RCP, Jr. note payable (1,998)
LMC note payable 71,200
------------------
Total Long Term Liabilities $ 119,202
------------------
Equity
Common stock 1,000
Current income (loss) 598,375
------------------
Total Equity 599,375
------------------
Total Liabilities and Equity $ 1,002,834
==================
1
<PAGE>
<TABLE>
RCP ENTERPRISES GROUP, LLC
STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
2 MONTHS ENDED 11 MONTHS ENDED
NOV. 9, 1997 NOV. 9, 1997
------------------ ------------------
<S> <C> <C>
Revenue
Fees - Billed $ 727,713 $ 2,010,477
Fees - Returned 0 (16,350)
------------------ ------------------
Total Revenue $ 727,713 $ 1,994,127
------------------ ------------------
Operating Expenses
Professional fees 0 11,000
Long distance fees (443) (5)
Card costs 20,078 89,587
LEC holdback (ITA) 53,797 305,675
Billing fees 31,814 91,751
Validation fees (ITA) 5,119 17,350
Billing fees - Viatech 11,300 32,750
Inquiry fees 0 132,626
Amortization 38,545 146,667
Bad debt expense 276,531 519,682
Wages 16,596 33,414
Payroll taxes 1,287 2,932
Bank charges 78 147
Office expenses 0 22
Mailing services 0 9,965
Legal fees 692 692
Travel expenses 1,500 1,500
------------------ ------------------
Total Expenses 456,894 1,395,755
------------------ ------------------
Operating Income 270,819 598,372
------------------ ------------------
Interest Income $ 0 $ 3
------------------ ------------------
Total other income 0 3
------------------ ------------------
Net Income (Loss) $ 270,819 $ 598,375
================== ==================
</TABLE>
2
<PAGE>
<TABLE>
RCP ENTERPRISES GROUP, LLC
STATEMENT OF CASH FLOWS
NOVEMBER 9, 1997
INCREASE (DECREASE) IN CASH OR CASH EQUIVALENTS
(UNAUDITED)
<CAPTION>
2 MONTHS ENDED 11 MONTHS ENDED
NOV. 9, 1997 NOV. 9, 1997
------------------ ------------------
<S> <C> <C>
Cash Flow from Operating Activities
Net income (loss) $ 270,819 $ 598,375
Adjustments to reconcile cash flow
Amortization 38,545 146,667
Decrease (increase) in current assets
KeyBank - Operating Account (13,662) (15,788)
Accounts receivable - ITA (91,406) (658,886)
A/R Reserves - ITA (212,692) (524,116)
Accounts receivable - Viatech (48,619) (69,412)
Reserve for bad debt 276,531 664,691
Accounts receivable - Tio Cigar (23,500) (24,500)
Note receivable - CTI (10,400) (10,400)
Increase (Decrease) in Current Liabilities
Accounts payable 7,940 200,464
Accrued expenses 18,817 81,246
Accrued FICA - SS 371 370
Accrued FICA - Medicare 96 96
Accrued FIT 300 357
Accrued FUTA 12 83
Accrued SUTA 6 294
Accrued SIT 1 892
Accrued CIT - Westlake 228 453
------------------ -----------------
Total Adjustments (57,432) (207,489)
------------------ -----------------
Cash Provided (Used) by Operations 213,387 390,886
------------------ ------------------
Cash Flow from Investing Activities
Sales (Purchases) of Assets
------------------ ------------------
Amortizable customer base (107,940) (511,088)
------------------ ------------------
Cash Provided (Used) by investing (107,940) (511,088)
------------------ ------------------
Cash Flow from Financing Activities Cash (Used) or provided by:
Syndicate payable - RCP Sr. 40,000 40,000
Syndicate payable - Wiseman Trust 10,000 10,000
RCP, Jr. Note Payable (155,447) (1,998)
LMC note payable 0 71,200
Common Stock 0 1,000
------------------ ------------------
Cash provided (used) by financing (105,447) 120,202
------------------ ------------------
Cash at beginning of period 2,126 0
------------------ ------------------
Cash at End of Period $ 2,126 $ 0
================== ==================
</TABLE>
3
<PAGE>
COLMENA CORP.
BALANCE SHEET - DIVISION 1 - RCP ENTERPRISES GROUP, INC.
DECEMBER 31, 1997
(UNAUDITED)
ASSETS
DECEMBER 31, 1997
------------------
Current assets:
KeyBank - Operating account $ 2,614
Accounts receivable - ITA 1,022,456
A/R Reserves - ITA 950,425
Accounts receivable - Viatech 118,404
Reserve for bad debt (1,176,181)
Note receivable - CTI 10,400
------------------
Total Current Assets $ 928,119
------------------
Fixed Assets
Equipment purchased 599
------------------
Total Fixed Assets 599
------------------
Other Assets
Amortizable customer base 978,016
Accumulated amortization (91,043)
------------------
Total Other Assets $ 886,973
------------------
Total Assets $ 1,815,691
==================
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 359,534
Accrued expenses 99,713
Accrued FICA - SS 526
Accrued FICA - Medicare 132
Accrued FIT 465
Accrued FUTA 179
Accrued SUTA 741
Accrued SIT 2,389
Accrued CIT - Westlake 860
Provision for federal income tax 100,000
------------------
Total Current Liabilities $ 564,539
------------------
Long Term Liabilities
Syndicate payable - RCP SR 37,496
Syndicate payable - Wiseman Trust 8,411
Syndicate payable - Robert C. Roosen 18,565
Syndicate payable - T Zafer 282,154
Note payable - LMC PS Trust 100,000
Divisional transfers (68,000)
LMC note payable 221,200
------------------
Total Long Term Liabilities $ 599,826
------------------
Equity
Common stock 1,000
Retained earnings 598,374
Shareholder draw against earnings (203,683)
Current income (loss) 255,634
------------------
Total Equity 651,326
------------------
Total Liabilities and Equity $ 1,815,691
==================
4
<PAGE>
<TABLE>
COLMENA CORP.
STATEMENT OF OPERATIONS - DIVISION 1 - RCP ENTERPRISES GROUP, INC.
DECEMBER 31, 1997
(UNAUDITED)
<CAPTION>
3 MONTHS ENDED 12 MONTHS ENDED
DEC. 31, 1997 DEC. 31, 1997
------------------ ------------------
<S> <C> <C>
Revenue
Fees - Billed $ 1,346,026 $ 1,346,026
------------------ ------------------
Total Revenue $ 1,346,026 $ 1,346,026
------------------ ------------------
Operating Expenses
Professional fees 66,465 66,464
Long distance fees (223) (223)
Card costs 80,165 80,164
LEC holdback (ITA) 105,373 105,373
Billing fees 53,845 53,845
Validation fees (ITA) 9,469 9,469
Billing fees - Viatech 10,937 10,937
Amortization 91,043 91,043
Bad debt expense 511,490 511,489
Wages 28,974 28,974
Payroll taxes 2,759 2,759
Bank charges 52 52
Office expenses 1,989 1,988
Mailing services 8,175 8,174
Insurance expense 583 583
Telephone expense 1,195 1,194
Travel expenses 3,043 3,042
Auto lease 2,110 2,110
Interest expense 12,948 12,948
------------------ ------------------
Total Expenses 990,392 990,392
------------------ ------------------
Operating Income 355,634 355,634)
Provision for taxes (100,000) (100,000)
------------------ ------------------
Net income (loss) $ 255,634 $ 255,634
================== ==================
</TABLE>
5
