SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) or the
Securities Exchange Act of 1934
Columbia Capital Corp.
(Exact Name of Registrant as Specified in its Charter)
Delaware 11-3210792
(State of Incorporation) (I.R.S. Employer
Identification No.)
3020 N. W. 33rd Ave., Ft. Lauderdale, Fla. 33311
(Address of Executive Offices) (Zip Code)
Registrant's Telephone Number (915) 674-3100
Securities to be registered under Section 12(b) of the Act:
Common Stock, Par Value $.001 Per Share - NASD Electronic Bulletin Board
(Title of Class) (Exchange)
Blank Check Preferred Stock - NONE
Securities Registered to be registered under Section 12(g)of the Act:
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TABLE OF CONTENTS
PAGE
PART I 3
ITEM 1. Description of Business 3
ITEM 2. Management's Discussion and Analysis
or Plan of Operation 12
ITEM 3. Description of Property 14
ITEM 4. Security Ownership of Certain
Beneficial Owners and Management 14
ITEM 5. Directors, Executive Officers,
Promoters and Control Persons 16
ITEM 6. Executive Compensation 17
ITEM 7. Certain Relationships and Related Transactions 17
ITEM 8. Description of Securities 18
PART II 20
ITEM 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters 20
ITEM 2. Legal Proceedings 22
ITEM 3. Changes in and Disagreements with Accountants 22
ITEM 4. Recent Sales of Unregistered Securities 22
ITEM 5. Indemnification of Directors and Officers 23
PART F/S 23
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PART I
ITEM 1. Description of Business
The Company's Organization and Purpose
The Company was organized under the laws of the State of Delaware on
February 5, 1993, for the purpose of creating a vehicle to obtain capital and to
seek out, investigate and acquire interests in products and businesses with the
potential for profit. In connection with its organization, the Company issued an
aggregate of 2,175,000 shares of restricted common stock to its original
officers and directors for $12,500. In 1993, the Company completed a private
offering of 325,000 shares of common stock at an offering price of $.20 per
share, from which the Company realized gross proceeds of $65,000. The offering
was conducted pursuant to an exemption from the registration requirements of the
Securities Act of 1933 provided by Regulation D promulgated thereunder.
At inception, the Company's business plan was to seek investments and
to form wholly-owned subsidiaries and distribute their securities to the
Company's shareholders in an attempt to diversify the potential acquisitions
which could be made on behalf of the Company's shareholders. The Company
subsequently abandoned its efforts to form subsidiary corporations and/or to
spin-off the stock of such subsidiaries to its shareholders.
The Company, on September 23, 1997, acquired FICI through the
acquisition of all the issued and outstanding common stock of FICI.
The Acquisition
The Company acquired FICI, (the "Acquisition") as a wholly-owned
subsidiary through the issuance of shares of its common stock to the
shareholders of FICI in a stock for stock, tax free exchange.
FICI provides financial data processing, document management and
related services in the credit card industry. See "Business".
Reverse Stock Split
As a negotiated term of the Acquisition the board of directors has
approved and shareholders owning in excess of a majority of the Company's
outstanding common stock consented to a reverse split of the issued and
outstanding shares of the Company's common stock on a 1 for 2 basis, so that
shareholders received one share of the Company's $.001 par value common stock
(hereinafter the "Consolidated common stock") for each two shares of common
stock held by them. No fractional shares were issued in connection with the
reverse split and any fractional interests were rounded up to the next whole
share. Mr. Lynn Dixon, a shareholder of the Company agreed to contribute
sufficient shares to the Company to offset whole shares issued in lieu of
fractional shares.
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In connection with the Columbia Reverse Split the 2,500,000 shares of
common stock were converted to 1,250,000 shares of Consolidated common stock.
The Columbia Reverse Split did not result in any modification of the rights of
shareholders and had no effect on the shareholders' equity in the Company except
for a transfer of $1,250 from stated capital to paid-in capital.
The Columbia Reverse Split increased the number of authorized and
unissued shares of the Company's common stock available for future issuances.
The Company originally had issued 2,500,000 shares of its 50,000,000 shares of
authorized common stock. Upon completion of the Columbia Reverse Split and the
acquisition, the Company had 12,500,000 shares of common stock issued and
outstanding. The board of directors have the authority to issue all or any
portion of the remaining authorized shares of common stock and 5,000,000 shares
of preferred stock for such purposes as it determines to be in the best interest
of the Company without the need for shareholder approval.
The Columbia Reverse Split was a negotiated term of the Acquisition
taking into account the percentages of ownership various groups would have after
the Acquisition, potential stock trading prices and the overall number of shares
to be outstanding.
The Columbia Reverse Split decreased the number of shares of Columbia
common stock outstanding as of September 1, 1997, but did not reflect in the
trading of the shares until the effective date of the split, which was September
23, 1997.
Terms of the Acquisition
Subject to the satisfaction of certain conditions (except to the extent
waived by the benefitted party), the following matters, along with other related
matters, where effectuated as part of the Acquisition and at the closing of said
Acquisition (the "Closing"). FICI was acquired as a wholly-owned subsidiary by
the Company (the "Parent Corporation") and in connection therewith the current
equity owners of FICI (the "FICI Stockholders") received shares of common stock
of the Company in exchange for their interest in FICI as described below. The
persons then serving as management of FICI, for the most part, became management
of the Parent Corporation. At the Closing, (a) the 1,250,000 shares of the
Company's common stock previously outstanding at the Closing (as adjusted for
the Columbia Reverse Split) remained outstanding as shares of the Parent
Corporation; and (b) the Company issued 11,250,000 shares of its common stock to
FICI stockholders pursuant to the terms of the Acquisition Agreement. All
references to "Columbia" or the "Company" after the Closing have been deemed to
refer to the Company and FICI on a consolidated basis.
Upon completion of the Acquisition, the Company had the following
shares of common stock outstanding:
Class of Shareholder Shares of Common Stock Percentage
- - - -------------------- ---------------------- ----------
FICI Stockholders 11,250,000 90%
Existing Columbia Shareholders 1,250,000 10%
---------- ----
Total 12,500,000 100%
---------- ----
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The Company's common stock issued in the Acquisition to the FICI
stockholders were "restricted securities" as defined in Rule 144 under the
Securities Act of 1933 (the "Act"). An appropriate legend was placed on the
certificates representing such securities, and stop transfer orders were placed
against them.
Purpose of the Acquisition
The Acquisition was pursued by management of the Company because
management believed that the acquisition of FICI is consistent with the business
plan of the Company. Further, management of the Company believes the interest in
FICI that the Company received upon consummation of the Acquisition and the
potential future success of FICI will enhance the value of the Company and the
share holdings of the Company's shareholders. The Acquisition was designed to
provide FICI with a public market for its stock for the future benefit of its
current stockholders, may enable FICI to more effectively compensate its
employees with stock or options to purchase stock and may enhance FICI's ability
to seek future funding of its operations.
Effective Date
The Acquisition became effective September 23, 1997.
Conditions to the Acquisition
The obligations of the Company, FICI and the FICI stockholders to
consummate the Acquisition were subject to certain conditions, including the
following:
(a) The execution of a definitive Acquisition Agreement by the
Company, FICI and the FICI stockholders.
(b) The representations and warranties made by or on behalf of
each of the parties in the Acquisition Agreement or in any certificate
or document delivered by a party pursuant to the provisions of the
Acquisition Agreement shall be true in all material respects at and as
of the Closing as though such representations and warranties were made
at and as of such time.
(c.) The parties shall each have performed and complied with
all covenants, agreements and conditions required by the Acquisition
Agreement to be performed or complied with prior to or at the Closing.
(d) The present board of directors of the Company shall cause
the appointment of all FICI nominees to the board of directors of the
Company as directed by FICI and shall have arranged for the resignation
of the existing sole officer and director of the Company.
(e) All instruments and documents delivered to a party
pursuant to the provisions of the Acquisition Agreement shall be
reasonably satisfactory to counsel for the other parties.
(f) The FICI stockholders shall each deliver to the Company a
letter commonly known as an "investment letter" acknowledging that the
shares of Company common stock being issued in exchange for the FICI
stock are being acquired for investment purposes.
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Representations and Warranties
The Company and FICI have made certain representations and warranties
to each other with respect to, among other things, the organization and good
standing of each of the Company and FICI, authorization of the Acquisition
Agreement, capitalization, stock ownership, validity and legality of stock,
ownership of assets, contractual and other commitments, liabilities, financial
statements, absence of material adverse changes, disclosure of material facts,
availability of certain documents and records, accuracy of certain documents,
and legal and other proceedings. Each party verified the accuracy of these
representations up through the Closing of the Acquisition.
Expenses
All of the Company's expenses relating to the Acquisition in excess of
cash in the Company at the time of Closing was paid by shareholders of the
Company as a contribution to the capital of the Company.
Accounting Treatment
The acquisition gave Mr. Gallant and Mr. Baetz, having a controlling interest in
FICI, a controlling interest in the Company. Therefore, the acquisition has been
accounted for in a manner similar to a pooling of interest.
Regulatory Approval
No specific federal or state regulatory approvals were obtained by the
Company in order to consummate the Acquisition other than general compliance
with applicable corporation law and state and federal securities laws.
Termination
At any time prior to the consummation of the Acquisition,
notwithstanding the execution and delivery of the Acquisition Agreement and the
approval of the Acquisition Agreement by the stockholders of either or both of
the Company and FICI, the Acquisition Agreement could be terminated and the
Acquisition abandoned by the mutual consent of the management of the Company and
FICI. There was no reason(s) presented for the abandonment of the Acquisition.
Lack of Change of Corporate Name
The Company retained its current name and continues business with the
name Columbia Capital Corp.
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Directors
Glenn M. Gallant, Douglas R. Baetz, Kenneth A. Klotz, Olan Beard and Charles
LaMontagne, were elected to serve as the directors of the Company upon
completion of the Acquisition. See "Management".
Rights of Dissenting Stockholders
Shareholders of the Company were not entitled to dissenters rights with
respect to the Acquisition.
Vote Required and Obtained
The holders of a majority of the shares of the outstanding common stock
approved the Acquisition and the terms and conditions by written shareholder
consent. Accordingly, sufficient shareholder approval was received and no
further approval was sought.
Business Strategy
The objective of First Independent Computers, Inc. ("First
Independent") is to develop a multi-faceted information service organization
dedicated to the provision of financial data processing, document management,
electronic commerce services and customer service.
First Independent seeks to serve as the essential link between
consumers, merchants and financial institutions, concentrating particularly on
(1) the fulfillment of a niche market consisting of small to medium-sized
accounts that have not achieved adequate economy of scale to operate their own
in-house programs and systems and (2) seeking strategic alliances with
appropriate service companies whose advantage depends upon successful data
management.
History and Background
First Independent was acquired in May 1997 by Glenn Gallant and Douglas
Baetz from Security Shares, Inc., of Abilene, Texas. As an operating
organization, First Independent was started in 1968 as Data Processing Center,
Inc., owned by First State Bank of Abilene and began its operation processing
the financial records for several Abilene banks.
First Independent has been actively involved in the development of the
data processing industry since the practical beginning of electronic data
management in the 1960's, and in the actual testing and research of leading
software products.
This fundamental experience is set against the backdrop of the banking
service and finance industry, which allowed for the development of a unique and
well-rounded operational methodology for First Independent.
Focusing on software servicing the financial sector, in the early
1970's, Data Processing Center formed an alliance with Florida Software, a
leader in banking services software and served as a beta site for the
development and eventual implementation of their flagship software product by
the same name.
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After affiliated personnel of Florida Software created Kirchman
Corporation in 1975, Data Processing Center established a relationship with
Kirchman and implemented the use of Florida Software, a bank transaction
processing package.
In 1980, principals of Kirchman and First Independent saw the need for
credit card processing software to facilitate the increasing trend of consumer
credit card transactions. In response to this need they created Credit Card
Software Technologies, Inc. (CCS) and developed CardPac(R) in 1982, and Data
Processing Center served as the beta site and development partner for this
product which became an industry leader in credit card processing software. In
1984, First State Bank spun off Data Processing Center, Inc., to create First
Independent Computers, Inc.
In 1987, a majority interest in First Independent was purchased by CCS
in an effort to develop a service bureau subsidiary and operational processing
arm for the leader in credit card processing software.
In late 1988, Affiliated Computer Systems, Inc., (ACS) of Dallas, Texas
acquired First Independent and placed several regional banks into the processing
roster of First Independent, exposing the company to a variety of banking
philosophies and processing technologies.
Amid difficulty associated with their aggressive expansion plans, ACS
sold off some of their holdings, allowing a group of investors from Abilene to
purchase First Independent, including its contracts and obligations in 1992.
In 1994 the investors, also directors and owners of Security State Bank
through their holding company Security Shares, received approval from the
Federal Reserve to merge First Independent into the Security Shares structure as
a subsidiary. This action strengthened the mutual customer-client bond that was
existing by virtue of the service of Security State Bank as First Independent's
VISA credit card settlement bank and the service of First Independent as
Security State Bank's transaction data processor.
Also in 1994, Mr. Kenneth Klotz and a new executive team were brought
in to manage the Company and have played an integral role in focusing the
direction of the company on the credit card component of the business. In line
with this new vision of growth, First Independent participated in a joint
project with CCS and its development company PaySYS International, Inc., to
create VisionPLUS Card Services.
VisionPLUS was introduced in 1996 and is the next generation total
solution credit card processing software that replaces CardPac(R).
First Independent has maintained an aggressive policy of hardware
upgrade and acquisition in order to facilitate the efficient processing required
by the expansion of the credit card business and to create a solid foundation
for the growth of the company. This includes the installation of all the
equipment necessary to the operation of a full-service credit card transaction
processing company.
Business Units
First Independent is comprised of three primary businesses, some of
which draw on similar support functions within the operation of First
Independent: (1) credit card service support and transaction processing, (2)
banking/financial services and data processing, and (3) document management and
distribution services.
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Credit Card Services
The Credit Card Services component of First Independent is focused on
the delivery of full-ranged solutions to the needs of credit card issuers.
Concentrating on the creation of a product that is designed to be efficient and
responsive, but also custom-fitted to the particular needs of the issuer, First
Independent believes that it enjoys an advantage over the bulk of the other
credit card processing companies in the industry. The general focus of most
other companies is on the service of large high-volume accounts. While this
market focus has its definite advantages, the effect on the typical card issuer
account is to be treated with a substantial degree of anonymity and
inflexibility.
However, the small and medium-sized card issuers account for nearly 30%
of the nearly 250 million accounts today, which collectively comprise the credit
card industry in the United States. With its personalized and customer-service
oriented approach, First Independent intends to aggressively approach this
market and expects to earn a substantial number of new customers and customer
conversions in this growing industry. Additionally, First Independent places
priority on providing continuing satisfaction to its existing accounts.
Banking/Financial Services and Data Processing
The Banking/Financial Services and Data Processing component of First
Independent is equipped and experienced to perform the "back room" operations of
banks, thrifts, credit unions, insurance companies, merchants, utilities,
government agencies and others.
First Independent is suited to tasks including:
- Database creation and maintenance
- DDA (Demand Deposit Account) Processing
- General ledger creation and maintenance
- Item processing and sorting
- Consolidation of data to create statements
Document Management and Distribution Services
The Document Management and Distribution Services unit of First
Independent will utilize the latest generation of digital document technology
with the acquisition of its imaging item sorters and COLD (Computer Output to
Laser Disks) product laser storage units. This is designed to enable First
Independent to process inbound paper items by computer at rates and volumes
impossible using mechanical methods.
Besides the advantage of processing efficiency over traditional analog
file storage, the use of COLD storage and retrieval methodologies will have
tremendous application for customer service operations. Through First
Independent, client's Customer Service Representatives will be able not only to
inspect customer statements by line item of data, but will be able to retrieve,
view and reference digitized images of original documents on a real-time basis.
For added customer services, these items may then be reprinted or faxed on
demand. The need for manpower support is, consequently, greatly reduced while
increasing the productivity of customer service personnel. First Independent
maintains and operates a Pitney Bowes System 8000 mail processing center which
streamlines and automates most of the time-intensive steps required to send out
mail in great volume. This system is useful in producing and implementing direct
marketing campaigns and statement distribution.
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In document distribution, the slowest link in the process defines the
speed and efficiency of the entire system. Often, this is the cumbersome
weighing and metering process. Using its System 8000, First Independent is able
to process 240 items per minute of uniform mail or 90 items per minute of
unsorted items of various sized and weights, all the while automatically
capturing the maximum available postal discounts for all items. In terms of raw
processing power the System 8000 sorting, inserting, collation and sealing
operation can deliver over 350 items per minute to the metering unit.
Current Business
First Independent as of September 30, 1997, processed approximately
100,000 credit card accounts, including financial data processing and customer
service. First Independent, under its new ownership, intends to bring its fees
in line with industry standard of approximately $2.00 per account per month for
financial data processing and $3.00 per account per month for customer service.
Additionally, First Independent is doing full "back room" processing
for three banks, including DDA (Demand Deposit Account) maintenance; general
ledger maintenance; and statement consolidation, production and distribution.
Future Development
Mr. Glenn Gallant and Mr. Douglas Baetz have existing business relationships and
affiliations involving entities (collectively referred to as "The Belair Group")
with which First Independent may have future dealings.
The Belair Group owns several businesses in and relating to the credit
card industry. The Belair Group has stated to the Company that these businesses
do not compete with the current business of First Independent. The Belair Group
has stated their intent to examine the feasibility of consolidating its credit
card customer service companies, Berwyn Holdings and Bank Card Center into the
First Independent corporate organizational structure. It is anticipated that
this action would enhance the effective functionality and base of experience for
First Independent. Additionally, the Belair Group believes that this
consolidation would lay a foundation for the creation of a full-service
integrated data processing and servicing organization which may, more fully,
reap the benefits of opportunities presented in the financial data processing
market. Any of such acquisitions, if consummated, would be completed on terms
based on a fairness opinion from an independent investment banker.
Through their affiliate, Century Financial Group, the Belair Group has
been able to refer up to an additional 300,000 existing accounts to the First
Independent data processing and customer service customer base. Current activity
with Century is generating approximately 4,000 new accounts weekly, which are
also being referred to First Independent. These existing accounts were being
processed by a large independent firm.
Competition
The industry in which First Independent's businesses operate is highly
competitive, with features and capabilities, quality of service, price,
reputation and, in some cases convenience to the client being the principal
competitive elements. First Independent's ability to compete effectively may
also depend on available capital.
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Many of First Independent's competitors have access to significant capital and
management resources. First Independent is not aware of any competitor which
provides the same range of services; however, the industry is highly fragmented
and First Independent faces significant competitors in each of its businesses.
First Independent's payment instruments and consumer funds transfer services,
shareholder services, cable services and facilities management activities
require the Company to compete with established competitors. In addition, First
Independent competes with businesses that internally perform data processing or
other services offered by First Independent.
Regulation
Various aspects of First Independent's businesses are subject to
federal and state regulation which, depending on the nature of any
noncompliance, may result in the suspension or revocation of any license or
registration at issue, as well as the imposition of civil fines and criminal
penalties. In particular, many states license issuers of payment instruments and
providers of consumer funds transfer services and require, among other things,
that proceeds from the sales of such instruments and services be invested in
high-quality marketable securities pending encashment. Such licensing laws may
also cover matters such as regulatory approval of agent locations and the filing
of periodic reports by the licensee. To date, First Independent has experienced
no material difficulties in complying with the various laws and regulations
affecting its businesses.
Employees
At September 30, 1997, First Independent employed approximately
sixty-six full-time employees and thirteen part-time employees. These employees
are not represented by any labor organization. First Independent believes its
relations with its employees generally to be good.
Dependence on Key Personnel
FICI is dependent upon the management and leadership skills of Kenneth
A. Klotz and the other members of its management team. No member of management
of First Independent currently has an employment agreement with FICI. There is
intense competition for qualified personnel in the industry relating to FICI's
business, and the loss of key personnel or an inability to attract, retain and
motivate key personnel could adversely affect the Company's business. There is
no assurance that FICI will be able to retain its existing management personnel
or to attract additional qualified personnel.
Office Facilities
First Independent maintains offices at 3020 NW 33rd Avenue, Fort
Lauderdale, Florida 33311, (954) 453-6573, where First Independent is provided
2,500 square feet of office space by its present shareholders at an annual cost
of $47,500 to First Independent. First Independent also leases 52,248 square
feet of office space located at 1157 North 5th, Abilene, Texas 79601. This space
is leased from Security Shares, Inc., at an approximate cost of $32,500 per
month.
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ITEM 2. Management's Discussion and Analysis or Plan of Operation
Columbia Capital Corp. (Columbia) and its wholly owned subsidiary,
First Independent Computers, Inc., (FICI), have been through many changes during
1997. The major change for Columbia during the year was the majority acquisition
by Doug Baetz and Glenn Gallant during August 1997. Although Columbia was a
public concern before this ownership change, the company had no ongoing
operations. It was basically a shell waiting for an occupant. This occupant
became FICI which was reverse merged into Columbia on September 23, 1997. (See
"Description of Business")
Prior to the acquisition, FICI encountered many significant events
during 1997. FICI began the year owned by the Bank Holding Company, Security
Shares, Inc., of Abilene, Texas. FICI was profitable during the early months of
1997 and in fact was profitable for 22 months beginning in October 1995. On May
1, 1997, FICI was purchased by Doug Baetz and Glenn Gallant. Each had a fifty
percent individual ownership position in the Company. Their idea was to have
FICI process the credit card portfolios they owned of approximately 300,000
accounts and growing. After the Baetz/Gallant purchase of FICI, a conversion
plan was put in place to convert their credit card portfolios to the FICI system
on October 25, 1997.
The conversion of the majority shareholders' portfolio would be a
significant event in the corporate life of FICI. These portfolios represented
approximately $500,000 per month in revenue to FICI. In the first six months of
1997 FICI averaged $150,000 in credit card revenue and $337,000 in overall
revenues. But the conversion of the majority shareholders' portfolios took on
even more significance beginning in July 1997, because FICI lost a major credit
card portfolio on June 30, 1997. The loss was due to the sale of the portfolio
by its owner to another group who owned their own processing entity. FICI's
processing contract expired on June 30, 1997 and the portfolio was moved. The
loss of the portfolio represented $100,000 a month in revenue to FICI or a
reduction in total revenues of 30%. This event caused FICI to lose money in July
after 22 months of profitability.
The management of FICI knew the Company was headed in the right direction,
even during the dark months of the third quarter when FICI lost over $500,000.
In fact part of this loss was caused by increased expenses due to the build up
for the October 25th conversion of the majority shareholders' portfolio. This
conversion would make Columbia/FICI immediately profitable. The challenge to
management was to bridge the gap from July through October from a liquidity
standpoint. This was accomplished again through the support of our majority
shareholders'. They arranged a $2,000,000 working line of credit for FICI
through Century Financial Group. This line which FICI had borrowed $1,400,000
against through October 31, 1997 provided the liquidity to get FICI through the
loss months.
As of September 30, 1997, Columbia Capital Corp consolidated financial
statements show a loss of $261,033 for the month of September and a loss of
$544,320 for the year. The month of September operating loss was nearly doubled
by a one time brokerage fee of $153,975. This fee is attributable to the merger
of FICI into Columbia. The September 30, 1997 financial statements are presented
in the exhibits. Subsequent to September, with the October 25th owner's
portfolio conversion and associated revenues, the loss for the month of October
was reduced to $37,060 and the month of November was profitable.
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Comparative numbers for past years are not reported for Columbia
because of the May 1, 1997 purchase of FICI. This purchase and subsequent merger
of FICI into Columbia, triggered the restatement of FICI's balance sheet at May
1 for purchase accounting. This means that all assets and liabilities of the
company were restated as of May 1 at their fair market value. The difference in
this fair market value versus the amount paid for the Company became goodwill.
After valuation the $1,600,000 paid for the Company resulted in the recording of
$973,924 in goodwill. Total restated assets were $2,174,670 as of May 1, 1997.
The goodwill is set to be amortized over 40 years. This represents an expense to
the Company from goodwill amortization of $2,029 monthly and $24,348 annually.
Looking forward it is management's belief that 1998 and beyond will be
great years for Columbia. Based on the current processing volume, revenue for
1998 should be a minimum of twelve million dollars. This does not include
several prospective credit card customers which could enhance revenue even more.
The bulk of the revenue generation is in the credit card processing arm of
Columbia operations. Management believes that the current volume of 400,000
credit card accounts processed could reach 1,000,000 accounts by year end 1998.
With the recent computer processing capacity upgrade from 14 million
instructions per second to 35 million instructions per second the organization
is well set for processing the increased volume during the upcoming year.
Management is also looking to aggressively grow the bank processing
business. To facilitate this bank processing growth, a new banking software
system will be installed in 1998. Once this software is installed, bank
processing services will be aggressively marketed by the Company. Management
feels an extra opportunity to bring in bank processing customers exists by
providing a solution to the year 2000 problem. FICI's new banking software will
be fully year 2000 compliant and therefore a solution for bank's facing this
processing crisis.
The question can be asked, why is management confident of future
earnings for the Company? The answer lies not only in the revenue increases
mentioned above but also in the Company's expense base for the future. The
management of FICI retooled the Company over the last three years to meet future
volume demands. In doing so, approximately three million dollars has been
committed through purchases and operating leases for processing equipment to
position FICI to take advantage of increased processing volume opportunities.
Now, the expense base has been set where the increased processing volume adds
incrementally to the bottom line. For every increased dollar of revenue only
twenty to thirty cents of incremental expenses will be needed. Therefore,
profitability is enhanced dramatically. This has become obvious with our month
of November 1997 profitability. Also included in our current expense base are
approximately 80 employees up from 30 three years ago. FICI now occupies 52,000
square feet of the Security State Bank building in downtown Abilene, Texas.
With this filing, Columbia is registering to become an active and
reporting company to the Securities Exchange Commission. This being the original
time to file, reporting financial statements as of September 30, 1997, and as a
newly active public company, there is no comparable previous years data
available for presentation. It is managements opinion that this entity based on
the current operating results and future processing opportunities, is well
situated to be profitable during 1998 and beyond.
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ITEM 3. Description of Property
First Independent maintains offices at 3020 NW 33rd Avenue, Fort
Lauderdale, Florida 33311, (954) 453-6573, where First Independent is provided
2,500 square feet of office space by its present shareholders at an annual cost
of $47,500 to First Independent. First Independent also leases 52,248 square
feet of office space located at 1157 North 5th, Abilene, Texas 79601, (915)
674-3100. This space is leased from Security Shares, Inc., at an approximate
cost of $32,500 per month.
ITEM 4. Security Ownership of Certain Beneficial Owners and Management
The Company presently has two classes of capital stock authorized,
namely: 50,000,000 shares of $.001 par value common stock, and 5,000,000 shares
of $.001 par value preferred stock. There are no shares of preferred stock
outstanding. There were 2,500,000 shares of common stock issued and outstanding
as of September 1, 1997, which became 1,250,000 shares after giving effect to
Columbia Reverse Split.
The following table sets forth certain information, as of September 1,
1997, both before and after giving effect to the consummation of the Acquisition
of FICI by the Company, in each case giving effect to the Columbia Reverse
Split, with respect to the beneficial ownership of the Company's common stock by
each director of the Company, by each beneficial owner of more than five percent
(5%) or more of the Company's outstanding common stock by, all current directors
of the Company as a group:
Beneficial Ownership Beneficial Ownership of
Common Stock as of Common Stock After
September 1, 1997 (1) Acquisition (2)
------------------ ---------------
Name of Shares % of Shares % of Current Positions
Beneficial Owner Owned Class Owned Class With the Company
- - - ---------------- ------ ----- ----- ----- ----------------
Lynn Dixon 1,050,000(4) 84% -- --
Douglas R. Baetz -- -- 5,315,625 42.5% Officer and Director
Glenn M. Gallant -- -- 5,325,625 42.6% Officer and Director
Olan Beard -- -- -- -- Officer and Director
Kenneth A. Klotz -- -- -- -- Officer and Director
Charles LaMontagne -- -- -- -- Officer and Director
All Directors as 1,050,000 84% 10,641,250 85.1%
a group (1 person; ---------- ----
5 persons as adjusted)
(1) These numbers give effect to the Columbia Reverse Split and
are therefore based on an aggregate of the 1,250,000 shares of
the Company's common stock outstanding without giving effect
to the other transactions completed in the Acquisition.
-14-
<PAGE>
(2) Based on an aggregate 12,500,000 shares of the Company's
common stock outstanding, giving effect to the Acquisition and
related transactions.
(3) This number includes shares held of record by a private
corporation owned and controlled by Mr. Dixon and which are
deemed to be beneficially owned by Mr. Dixon. It was the
intent of Mr. Dixon to sell a significant portion of these
shares subsequent to Closing to persons not expected to be
affiliated with the Company or FICI. However, Mr. Dixon has
not entered any written agreement in this regard.
(4) After the Acquisition, approximately 1,250,000 of the
12,500,000 outstanding shares held by the previous
shareholders of the Company were free trading shares or shares
eligible for sale under Rule 144. The shares issued to the
FICI stockholders were "restricted securities" as that term is
defined in Rule 144 promulgated under the Act. In general,
under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned
restricted securities shares for at least one year, including
persons who may be deemed "affiliates" of the Company, as that
term is defined under the Act, would be entitled to sell
within any three month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares or the
average weekly trading volume of shares during the four
calendar weeks preceding such sale. Sales under Rule 144 are
also subject to certain manner-of-sale provisions, notice
requirements and the availability of current public
information about the Company. A person who has not been an
affiliate of the Company at any time during the three months
preceding a sale, and who has beneficially owned his shares
for at least one year, would be entitled under Rule 144 to
sell such shares without regard to any volume limitations
under Rule 144.
The sale, or availability for sale, of substantial amounts of
common stock could adversely affect the market price of the
common stock and could impair the Company's ability to raise
additional capital through the sale of its equity securities
or debt financing. The future availability of Rule 144 to the
holders of restricted securities of the Company would be
conditioned on, among other factors, the availability of
certain public information concerning the Company.
-15-
<PAGE>
ITEM 5. Directors, Executive Officers, Promoters and Control Persons
The following table sets forth the persons elected as the directors and
executive officers of the Company at Closing. Directors are elected for a period
of one year and thereafter serve until the next annual meeting at which their
successors are duly elected by the stockholders. Officers and other employees
serve at the will of the board of directors.
Name Age Positions
Glenn M. Gallant 43 Secretary, Chairman and Director
Douglas R. Baetz 46 Director
Kenneth A. Klotz 52 President and Director
Charles LaMontagne 44 Treasurer and Director
Olan Beard 43 Vice President and Director
A brief business resume' for each of these persons is set forth
below:
Glenn M. Gallant. Mr. Gallant, along with Mr. Douglas Baetz purchased First
Independent Computers, Inc. on May 1, 1997. Mr. Gallant is a financier with
years of experience in development and management in a wide range of industries.
Together with Douglas Baetz, Mr. Gallant owns and supervises the management of
New SeaEscape Cruises, Inc., a cruise line operating from South Florida and
TravelMax International, Inc., a publicly-held sales organization that markets
various travel products. In addition, Mr. Gallant owns and supervises the
operations for Berwyn Holdings, Inc., a credit card service company and Century
Financial Group, a credit card issuing company.
Douglas R. Baetz. Mr. Baetz is a financier with years of experience in
development and management in a wide range of industries. Together with Glenn
Gallant, Mr. Baetz owns and supervises the management of New SeaEscape Cruises,
Inc., a cruise line operation from South Florida and TravelMax International,
Inc., a publicly-held sales organization that markets travel products. In
addition, Mr. Baetz owns and supervises the operations for Berwyn Holdings,
Inc., a credit card service company and Century Financial Group, a credit card
issuing company.
Kenneth A. Klotz. Mr. Klotz joined First Independent Computers, Inc. in 1994 as
President and Chief Executive Officer. Prior to that, Mr. Klotz had worked
extensively in the computer data processing industry for over thirty years,
generally focusing on the management of information systems using mainframe
computer equipment. Mr. Klotz has served in key executive roles for the last
fourteen years.
Charles LaMontagne. Mr. LaMontagne joined First Independent Computers, Inc. in
1994 as Senior Vice President of Banking Services and Chief Financial Officer.
Prior to that, Mr. LaMontagne worked in a variety of Texas banks and refining
companies for over nineteen years, generally focusing on controller
responsibilities. Mr. LaMontagne has extensive experience in a wide array of
issues pertaining to financial control and budgeting.
-16-
<PAGE>
Olan Beard. Mr. Beard joined First Independent Computers, Inc. in 1994 as Senior
Vice President of Credit Card Services and Chief Operations Officer. Prior to
that, Mr. Beard worked in a variety of Texas banks for over twenty years,
gradually ascending the line of command, and serving in key executive positions
for the past sixteen years. Mr. Beard has extensive experience in operations
generally and in credit card operations particularly.
ITEM 6. Executive Compensation
The present cash compensation paid by the Company to members of
management is as follows:
Name and Other Annual
Principal Position Year Salary($) Bonus($) Compensation SAR's Etc(1)
- - - ------------------ ---- -------- ------- ------------ -----------
Kenneth A. Klotz 1997 $86,400 $0 $2,400 $0
President & Director
Charles LaMontagne 1997 $65,000 $0 $2,400 $0
Treasurer & Director
Olan Beard 1997 $65,000 $0 $2,400 $0
Vice President & Director
(1) Stock Option Plan - The Company intends to adopt an incentive
stock option plan in the future in order to be able to
attract, retain, and compensate qualified employees,
consultants and other persons.
ITEM 7. Certain Relationships and Related Transactions
Mr. Glenn Gallant and Mr. Douglas Baetz have existing business relationships and
affiliations involving entities (collectively referred to as "The Belair Group")
with which First Independent has current dealings.
The Belair Group owns several businesses in and relating to the credit
card industry. The Belair Group has stated to the Company that these businesses
do not compete with the current business of First Independent. The Belair Group
has stated their intent to examine the feasibility of consolidating its credit
card customer service companies, Berwyn Holdings and BankCard Center into the
First Independent corporate organizational structure. It is anticipated that
this action would enhance the effective functionality and base of experience for
First Independent. Additionally, the Belair Group believes that this
consolidation would lay a foundation for the creation of a full-service
integrated data processing and servicing organization which may, more fully,
reap the benefits of opportunities presented in the financial data processing
market. Any of such acquisitions, if consummated, would be completed on terms
based on a fairness opinion from an independent investment banker.
-17-
<PAGE>
Through their affiliate Century Financial Group, the Belair Group has
referred an additional 300,000 existing accounts to the First Independent data
processing and customer service base. In addition Century is generating
approximately 4,000 new accounts weekly, which are also referred to First
Independent. The existing accounts were previously processed by a large
independent firm.
The Company and the Belair Group regarding the above related
transactions, have attempted to deal on terms that are competitive in the market
and on the same terms that either party would deal with a third person.
It is management's objective to resolve any conflicts of interest that
may arise in favor of the Company. In addition, it recognizes failure to do so
could result in fiduciary liability of management.
ITEM 8. Description of Securities
Common Stock
The Company is presently authorized to issue 50,000,000 shares of $.001
par value common stock. The Company had 2,500,000 shares of common stock
outstanding which was adjusted pursuant to the Columbia Reverse Split to become
1,250,000 shares prior to the Acquisition.
The holders of common stock of the Company are entitled to equal
dividends and distributions per share with respect to the common stock when, as
and if, declared by the board of directors from funds legally available
therefor. No holder of any shares of common stock has a pre-emptive right to
subscribe for any securities of the Company nor are any common shares subject to
redemption or convertible into other securities of the Company. Upon
liquidation, dissolution or winding up of the Company, and after payment of
creditors and preferred stockholders, if any, the assets will be divided
pro-rata on a share-for-share basis among the holders of the shares of common
stock. Each share of common stock is entitled to one vote with respect to the
election of any director or any other matter upon which shareholders are
required or permitted to vote. Holders of the Company's common stock do not have
cumulative voting rights, so that the holders of more than 50% of the combined
shares voting for the election of directors may elect all of the directors, if
they choose to do so and, in that event, the holders of the remaining shares
will not be able to elect any members to the board of directors.
Blank Check Preferred Stock
The Company's articles of incorporation authorizes the issuance of up
to 5,000,000 shares of $.001 par value preferred stock. The Company's board of
directors shall have the power, without further action by the holders of common
stock, to designate the relative rights and preferences of the preferred stock,
and to issue the preferred stock in such one or more series as designated by the
board of directors. The designation of rights and preferences could include
preferences as to liquidation, redemption and conversion rights, voting rights,
dividends or other preferences, any of which may be dilutive of the interest of
the holders of the common stock or the preferred stock of any other series. The
issuance of preferred stock may have the effect of delaying or preventing a
change in control of the Company without further shareholder action and may
adversely affect the rights and powers, including voting rights, of the holders
of common stock. In certain circumstances, the issuance of preferred stock could
depress the market price of the common stock. The board of directors effects a
designation of each series of preferred stock by filing with the Delaware
Secretary of State a certificate of designation defining the rights and
preferences of each such series.
-18-
<PAGE>
Documents so filed are matters of public record and may be examined in
accordance with procedures of the Delaware Secretary of State, or copies thereof
may be obtained from the Company.
-19-
<PAGE>
PART II
ITEM 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
Market for Common Stock
The Company's common stock is currently eligible for quotation on the
NASD Electronic Bulletin Board under the Symbol ("CLCK").
During the last two years prior to the Acquisition there was no regular
established trading market for the Company's common stock; however after the
Acquisition on September 23, 1997, the bid-offer price has fluctuated $2.50 at
$4.50 quoted on the Electronic Bulletin Board.
As of the Acquisition date, the Company had 200 shareholders of record.
Description of Securities
The following statements do not purport to be complete and are
qualified in their entirety by reference to the detailed provisions of the
Company's certificate of incorporation and by-laws, copies of which will be
furnished to shareholders upon written request therefor. See "Further
Information."
Common Stock
The Company is presently authorized to issue 50,000,000 shares of $.001
par value common stock. The Company had 2,500,000 shares of common stock
outstanding which was adjusted pursuant to the Columbia Reverse Split to become
1,250,000 shares prior to the Acquisition.
The holders of common stock of the Company are entitled to equal
dividends and distributions per share with respect to the common stock when, as
and if, declared by the board of directors from funds legally available
therefor. No holder of any shares of common stock has a pre-emptive right to
subscribe for any securities of the Company nor are any common shares subject to
redemption or convertible into other securities of the Company. Upon
liquidation, dissolution or winding up of the Company, and after payment of
creditors and preferred stockholders, if any, the assets will be divided
pro-rata on a share-for-share basis among the holders of the shares of common
stock. Each share of common stock is entitled to one vote with respect to the
election of any director or any other matter upon which shareholders are
required or permitted to vote. Holders of the Company's common stock do not have
cumulative voting rights, so that the holders of more than 50% of the combined
shares voting for the election of directors may elect all of the directors, if
they choose to do so and, in that event, the holders of the remaining shares
will not be able to elect any members to the board of directors.
-20-
<PAGE>
Blank Check Preferred Stock
The Company's articles of incorporation authorizes the issuance of up
to 5,000,000 shares of $.001 par value preferred stock. The Company's board of
directors shall have the power, without further action by the holders of common
stock, to designate the relative rights and preferences of the preferred stock,
and to issue the preferred stock in such one or more series as designated by the
board of directors. The designation of rights and preferences could include
preferences as to liquidation, redemption and conversion rights, voting rights,
dividends or other preferences, any of which may be dilutive of the interest of
the holders of the common stock or the preferred stock of any other series. The
issuance of preferred stock may have the effect of delaying or preventing a
change in control of the Company without further shareholder action and may
adversely affect the rights and powers, including voting rights, of the holders
of common stock. In certain circumstances, the issuance of preferred stock could
depress the market price of the common stock. The board of directors effects a
designation of each series of preferred stock by filing with the Delaware
Secretary of State a certificate of designation defining the rights and
preferences of each such series. Documents so filed are matters of public record
and may be examined in accordance with procedures of the Delaware Secretary of
State, or copies thereof may be obtained from the Company.
Transfer Agent
The transfer agent for the Company is Interwest Stock Transfer Co.,
Inc., 1981 East 4800 South, Salt Lake City, Utah 84117.
Annual Reports
The Company intends to furnish annual reports to shareholders which
will contain financial statements examined by independent certified public
accountants and such other interim reports as the Company may determine.
Dividend Policy
The Company has not paid any dividends on common stock to date and does
not anticipate paying dividends on common stock in the foreseeable future. The
Company intends for the foreseeable future to follow a policy of retaining all
of its earnings, if any, to finance the development and expansion of its
business.
Shares Eligible for Future Sale
Upon completion of the Acquisition the Company had outstanding
12,500,000 share of common stock.
Upon completion of the Acquisition, approximately 1,250,000 of the
12,500,000 outstanding shares held by the present shareholders of the Company
were free trading shares or shares eligible for sale under Rule 144.
-21-
<PAGE>
The shares issued to the FICI stockholders are "restricted securities" as that
term is defined in Rule 144 promulgated under the Act. In general, under Rule
144 as currently in effect, a person (or persons whose shares are aggregated)
who has beneficially owned restricted securities shares for a least one year,
including persons who may be deemed "affiliates" of the Company, as that term is
defined under the Act, would be entitled to sell within any three month period a
number of shares that does not exceed the greater of 1% of the then outstanding
shares or the average weekly trading volume of shares during the four calendar
weeks preceding such sale. Sales under Rule 144 are also subject to certain
manner-of-sale provisions, notice requirements and the availability of current
public information about the Company. A person who has not been an affiliate of
the Company at any time during the three months preceding a sale, and who has
beneficially owned his shares for at least one year, would be entitled under
Rule 144 to see such shares without regard to any volume limitations under Rule
144.
The sale, or availability for sale, of substantial amounts of common
stock could adversely affect the market price of the common stock and could
impair the Company's ability to raise additional capital through the sale of its
equity securities or debt financing. The future availability of Rule 144 to the
holders of restricted securities of the Company would be conditioned on, among
other factors, the availability of certain public information concerning the
Company.
Further Information
Any shareholder or advisor and any perspective shareholder may, during
normal business hours, contact Martin E. Janis & Company, Inc., at the address
of 919 North Michigan Avenue, Chicago, Illinois 60611 (312) 943-1100 for further
information. In addition management will seek to provide answers and such
information to the extent possessed by management or obtainable by them without
unreasonable effort or expense.
ITEM 2. Legal Proceedings
To the knowledge of management, there is no material litigation pending
or threatened against the Company or FICI.
ITEM 3. Changes in and Disagreements with Accountants
With the acquisition of First Independent Computers Inc., the Company
has elected to engage the professional services of Davis, Kinard & Co., P.C.,
400 Pine, Suite 600, Abilene, Texas 79604, as their primary accountants. Davis,
Kinard & Co., P.C. was the primary accounting firm for First Independent
Computers Inc.
There have been no disagreements with accountants.
ITEM 4. Recent Sales of Unregistered Securities
To the knowledge of management, there have been no securities sold
within the past three years without registering the securities under the
Securities Act.
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<PAGE>
ITEM 5. Indemnification of Directors and Officers
The Company has adopted provisions in its Articles of Incorporation
which limit the liability of its officers and directors and provisions in its
by-laws which provide for indemnification by the Company of its officers and
directors to the full extent permitted by the Delaware corporate law. The
Company's Articles of Incorporation generally provides that its officers and
directors shall have no personal liability to the Company or its stockholders
for monetary damages for breaches of their fiduciary duties as officers or
directors, except for breaches of their duties of loyalty, acts or omissions not
in good faith or which involve intentional misconduct or knowing violation of
law, acts involving unlawful payment of dividends or unlawful stock purchases or
redemptions, or any transaction from which a director derives an improper
personal benefit. Such provisions substantially limit the shareholders' ability
to hold officers and directors liable for breaches of fiduciary duty.
The Company may also adopt provisions in its by-laws which provide for
indemnification to the full extent permitted under law which includes all
liability, damages and costs or expenses arising from or in connection with
service for, employment by, or other affiliation with the Company to the maximum
extent and under all circumstances permitted by law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions or otherwise the Company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
PART F/S
The following financial statements are provided:
- - - - Consolidated Financial Statements of Columbia Capital Corp. as of and for the
nine months ended September 30, 1997 (Unaudited)
- - - - Consolidated Financial Statements of Columbia Capital Corp. as of and for the
years ended December 31, 1996, and 1995, and from inception (February 5, 1993)
to December 31, 1996 (Audited)
- - - - Financial Statements for First Independent Computers, Inc. as of April 30,
1997, December 31, 1996 and 1995 and for the four months and years then ended
(Audited)
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<PAGE>
COLUMBIA CAPITAL CORP.
CONSOLIDATED FINANCIAL STATEMENTS - (Unaudited)
Nine months ended September 30, 1997
<PAGE>
COLUMBIA CAPITAL CORP.
Consolidated Balance Sheet (Unaudited)
September 30, 1997
ASSETS
Current assets
Cash and cash equivalents ............................... $ 255,713
Interest bearing deposits with banks .................... 102,578
Accounts receivable trade, net .......................... 273,179
Due from parent company ................................. --
Prepaid expenses and other assets ....................... 381,807
-----------
Total current assets ............................. 1,013,277
Premises and equipment ......................................... 322,395
Less accumulated depreciation .............................. 26,380
Net property and equipment .......................... 296,015
Other assets
Deferred tax asset ......................................... 323,369
Investment in subsidiary ................................... --
Goodwill, net .............................................. 963,778
-----------
Total other assets .................................. 1,287,147
Total assets ................................... $2,596,439
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accrued expenses and other liabilities ..................... $ 229,400
Due to subsidiary .......................................... --
Notes payable .............................................. 1,300,000
-----------
Total liabilities ................................... 1,529,400
Shareholders' equity
Preferred Stock - 5,000,000 shares
authorized, no shares issued and outstanding ............. --
Common stock - 50,000,000 shares
authorized, 12,500,000 issued and outstanding ............ 12,500
Capital surplus ............................................ 1,656,230
Undivided loss subsidiary .................................. (435,200)
Retained earnings .......................................... (166,491)
-----------
Total shareholders' equity .......................... 1,067,039
Total liabilities and shareholders' equity ..... $2,596,439
===========
The accompanying notes are an integral part of these consolidated statements.
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<PAGE>
COLUMBIA CAPITAL CORP.
Consolidated Income Statement (Unaudited)
Nine Months Ended September 30, 1997
REVENUES
Pride revenue ............................................ $ 301,600
Credit card revenue ...................................... 406,281
Banking revenue .......................................... 385,592
Mail operating revenue ................................... 89,975
Courier revenue .......................................... 40,825
Other .................................................... 12,863
-----------
Total revenues .................................... 1,237,135
EXPENSES
Salaries and employee benefits ........................... 831,152
Auto lease ............................................... --
Auto maintenance ......................................... 9,457
Travel and entertainment ................................. 37,401
Equipment lease .......................................... 373,775
Equipment maintenance .................................... 186,631
Facilities rent .......................................... 101,694
Facilities maintenance ................................... 10,707
Depreciation ............................................. 22,059
Amortization of goodwill ................................. 10,146
Insurance ................................................ 15,760
Computer and office supplies ............................. 78,802
Postage and delivery fees ................................ 12,480
Telephone ................................................ 36,181
Professional and outside services ........................ 18,746
Taxes .................................................... 15,748
Stockholder costs and fees ............................... 581
Costs related to acquisition ............................. 161,921
Other operating .......................................... 77,176
-----------
Total expenses .................................... 2,000,417
OTHER INCOME (EXPENSE)
Interest ................................................. (14,591)
Nonrecurring ............................................. (24,432)
Total other income (expense) ...................... (39,023)
INCOME BEFORE FEDERAL INCOME TAXES ........................... (802,305)
PROVISION FOR FEDERAL INCOME TAXES
Income tax benefit ....................................... (257,985)
-----------
Total provision for federal income taxes .......... (257,985)
-----------
NET LOSS ..................................................... $ (544,320)
NET LOSS PER SHARE ........................................... $ (0.04)
===========
The accompanying notes are an integral part of these consolidated statements.
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<PAGE>
COLUMBIA CAPITAL CORP.
Consolidated Statement of Changes in Shareholders' Equity (Unaudited)
September 30, 1997
<TABLE>
<CAPTION>
Undivided
Common Paid-In Profit (loss) Retained
Stock Capital Subsidiary Earnings Total
<S> <C> <C> <C> <C> <C>
BALANCES - December 31, 1996 $ 2,500 $ 66,230 $ - $ (57,371) $ 11,359
Reverse stock split (1,250) 1,250 - - -
Acquisition of subsidiary 11,250 1,588,750 - - 1,600,000
Net income - - (435,200) (109,120) (544,320)
-------- ----------- --------- --------- -----------
BALANCES - April 30, 1997 $ 12,500 $ 1,656,230 $(435,200) $(166,491) $ 1,067,039
======== =========== ========= ========= ===========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
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<PAGE>
COLUMBIA CAPITAL CORP.
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .............................................. $(544,320)
Adjustments to reconcile net income to
net cash provided by operations
Depreciation and amortization ................... 32,205
(Increase) decrease in
Accounts receivable ............................. 303,369
Deposits and prepaid expenses ................... (87,805)
Other assets .................................... 484
Increase (decrease) in
Accruals and accounts payable ................... (35,715)
Deferred income taxes ........................... (322,812)
Net cash used by operating activities ......................... (654,594)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets ................................ (96,755)
Net cash used by investing activities ......................... (96,755)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit, net ....................... 963,000
Net cash provided by financing activities ..................... 963,000
NET INCREASE IN CASH AND CASH EQUIVALENTS ..................... 211,651
Cash and cash equivalents at beginning of period .............. 44,062
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................... $ 255,713
=========
OTHER DISCLOSURES
Interest paid ........................................... $ 14,591
Taxes paid .............................................. 24,432
The accompanying notes are an integral part of these consolidated statements.
-27-
<PAGE>
COLUMBIA CAPITAL CORP.
Notes to Financial Statements
NOTE 1: Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include both the accounts of
the Company and its wholly-owned subsidiary. Intercompany accounts
and transactions have been eliminated.
Organization
Columbia Capital Corp. (the Company) was organized under the laws
of the State of Delaware on February 5, 1993. It completed a private
offering of its common stock in November 1993 (See Note 2).
Central Capital Corp. (a former Subsidiary) was organized under the
laws of the State of Delaware on February 5, 1993. Central Capital
Corp. (a former Subsidiary) was organized under the laws of the State
of Delaware on May 17, 1994. (See Note 3)
First Independent Computers, Inc. (the Subsidiary) was incorporated
on October 21, 1983, pursuant to the provisions of the Texas Business
Corporation Act. The Subsidiary's business activities include the
processing of credit card purchases for numerous businesses in
various industries throughout the United States and data processing
for various banks. (See Note 5)
Cash and Cash Equivalents
The Company considers investments with an original maturity of three
months or less to be cash equivalents.
Use of Estimates in the Preparation of Financial Statements
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.
Actual results could differ from those estimates.
Accounts Receivable
The Company utilizes the allowance method for uncollectible accounts
receivable. Management estimates the uncollectible accounts and
provides for them in the allowance. The balance of the allowance for
uncollectible accounts was $20,000 at September 30, 1997.
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<PAGE>
NOTE 1: Summary of Significant Accounting Policies - continued
Revenue Recognition
The Company recognizes revenue when services have been provided to
the customer.
Property, Plant and Equipment
Fixed assets of the Company are reported at historical cost.
Depreciation and amortization on assets purchased are computed by the
following methods and useful lives:
Furniture and fixtures ...... Straight-line 5 years
Electronic equipment ........ Straight-line 5-7 years
Automobiles ................. Straight-line 3-5 years
Office equipment ............ Straight-line 5 years
Computer Software ........... Straight-line 3 years
Depreciation is computed using the straight line method over the
estimated useful lives for financial statement purposes and an
accelerated method of cost recovery over statutory recovery periods
for tax purposes. Repairs and maintenance are expensed, whereas
additions and improvements are capitalized.
Prepaid Assets
The Company has expenditures which benefit future periods which are
recorded as prepaid assets or deferred costs and are amortized on a
straight-line basis over the estimated or known period of benefit.
Such prepaid assets and deferred costs include prepaid insurance,
maintenance contracts, certain software licenses and supplies used in
the normal operation of business.
Federal Income Taxes
Deferred tax assets and liabilities are recognized for deductible and
taxable temporary differences respectively. Temporary differences are
the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets may be reduced
by a valuation allowance when and if, in the opinion of management,
the tax asset will, in part or in all, not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
Earnings Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding during the applicable
period. The number of common shares has been retroactively adjusted
to reflect the one for two reverse stock split which became effective
on September 1, 1997.
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<PAGE>
NOTE 2: Private Offerings of Common Stock
The Company offered shares of its Common stock, $.001 par value, to a
limited number qualified investors in 1993. The company sold 325,000
shares of common stock, at a price of $.20 per share for a total of
$65,000. The investors subscribed to a minimum of 1,000 shares. There
was no minimum offering amount and there was no escrow of any funds
received from the offering and such funds were utilized by the
Company as they were received. Proceeds from the offering were used
to provide working capital to the Company.
NOTE 3: Disposition of Former Subsidiaries Central Capital Corp. and Hudson
Resources, Inc.
On February 28, 1997, the Company determined that its two
subsidiary corporations, Central Capital Corp. and Hudson Resources,
Inc. had no value and would hinder the Company in looking for an
acquisition. Therefore, the two companies were sold to the Company's
principal shareholder, Mr. Lynn Dixon for nominal value.
For accounting purposes the Company has treated the sold subsidiaries
as discontinued operations, effective February 28, 1997. The results
of the subsidiaries have been reported separately as a component of
discontinued operations in the income statement. The Company's
investment in subsidiaries was sold for current book value of $1,361
recognizing no gain or loss. Details of the net assets and operations
for the subsidiaries are presented below.
Former Subsidiaries Assets and Liabilities:
February 28,
1997
-----------
Cash $ 1,109
Organization costs, net 252
-----------
Total Assets $ 1,361
===========
Common stock $ 5,000
Contributed capital 23,609
Retained earnings (27,248)
-----------
Total Liabilities and Stockholder's Equity $ 1,361
===========
Subsidiaries Operations:
Legal and professional $ 1,400
Amortization Expense 32
-----------
Net loss related to discontinued operations $ (1,432)
===========
-30-
<PAGE>
NOTE 4: Amendment to the Company's Articles of Incorporation
In a September 19, 1997 Certificate of Amendment to Certificate of
Incorporation, the Company effectuated a 1 for 2 reverse stock split
as to its shares of common stock outstanding as of September 1, 1997,
which decreases said shares from 2,500,000 shares to 1,250,000
shares. The Certificate of Amendment also resolved that the
Corporation shall, as amended, have the authority to issue fifty
million (50,000,000) shares of common stock with par value of $.001
each, amounting in total to fifty thousand dollars ($50,000) and five
million (5,000,000) shares of preferred stock with par value of $.001
each, amounting in total to five thousand dollars ($5,000). The board
of directors is authorized, subject to limitations prescribed by law
and the provisions of this Article, to provide for the issuance of
the shares of preferred stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish
from time to time the number of shares to be included in each such
series, and to fix the designations, powers, preferences and rights
of the shares of each such series and the qualifications, limitations
or restrictions thereof.
NOTE 5: Acquisition of First Independent Computers Inc.
On April 30, 1997 Mr. Glenn M. Gallant and Mr. Douglas R. Baetz
purchased all of the issued and outstanding stock of First
Independent Computers, Inc. then owned by Security Shares, Inc., a
bank holding company. The transaction was accounted for by the
purchase method of accounting. The excess of the total acquisition
cost over the fair value of net assets acquired was recorded as
goodwill and is being amortized over 40 years.
On September 23, 1997 the Company acquired all of the common stock of
FICI, a Texas corporation, for 11,250,000 restricted shares of the
Company's common stock. The transaction gave Mr. Gallant and Mr.
Baetz, having a controlling interest in FICI, a controlling interest
in the Company. Therefore, the transaction has been accounted for in
a manner similar to a pooling of interest. The consolidated Statement
of Operations includes FICI's results of operations for the period
May 1, 1997 through September 30, 1997.
The following unaudited pro-forma consolidated results of operations
assume that the above acquisitions occurred on January 1, 1997 and
reflect the historical operations of the acquired business adjusted
for amortization of goodwill.
Nine months ended
September 30, 1997
------------------
Net revenues $ 1,237,135
Net earnings (loss) (552,436)
Net earnings (loss) per share $ (.04)
The pro-forma results of operations are not necessarily indicative of
the actual results of operations that would have occurred had the
acquisition actually occurred on January 1, 1997, or of results which
may occur in the future.
-31-
<PAGE>
NOTE 6: Long Term Obligations Under Capital Leases and Operating Leases
The Company, as of September 30, 1997, recognizes all of its current
lease agreements as operating leases only and does not intend to
capitalize on any options for the future purchase of such leased
items. The leases are secured by the leased item. The following are
future minimum payments for leased items for each of the next four
years ending December 31, 2000. The minimum commitments under these
noncancellable lease agreements as of September 30, 1997 are as
follows:
Remaining 1997 $ 141,550
1998 566,190
1999 270,690
2000 147,242
-----------
Lease obligation $ 1,125,672
===========
NOTE 7: Notes Payable to Shareholders
Notes payable represent the assumption by the Company of loans made
by stockholders Gallant and Baetz to First Independent Computers Inc.
The loans were used primarily to provide working capital for the
Subsidiary and to provide funds for capital expenditures in
preparation of expected growth.
NOTE 8: Income Taxes
The Company files a consolidated federal income tax return. The
income tax benefit as of September 30, 1997 is comprised of $323,369
of deferred federal income tax.
The provision for income tax benefit, as a percentage of pretax
earnings, differs from the statutory federal income tax rate at
September 30, 1997 as follows:
Statutory federal income tax rate 34.00%
Reduction in tax rate resulting from
the amortization of goodwill which
is non-deductible for income tax purposes (1.26%)
Other (0.58%)
------
Effective income tax rate 32.16%
The tax effects of temporary differences that gave rise to a deferred
tax asset as of September 30, 1997:
Net operating loss $ 257,985
Depreciation and amortization 65,384
-----------
Total deferred tax asset $ 323,369
===========
-32-
<PAGE>
NOTE 8: Income Taxes - continued
The Company has determined that it is more likely than not that the
net operating loss carryforward will be utilized; therefore, no
valuation allowance has been provided.
The Company has available at September 30, 1997 combined net
operating loss carryforwards for Federal Income tax purposes of
$574,325 which will expire as shown below.
Year Amount
2008 $ 804
2009 4,297
2010 21,545
2011 3,359
2012 534,174
-33-
<PAGE>
COLUMBIA CAPITAL CORP.
(Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS-
(Unaudited)
with
INDEPENDENT AUDITOR'S REPORT
Years ended December 31, 1996 and 1995
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
COLUMBIA CAPITAL CORP.
Salt Lake City, Utah
I have audited the accompanying balance sheets of Columbia Capital Corp.
(development stage company) as of December 31, 1996 and 1995, and the related
statements of operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Columbia Capital Corp. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
As discussed in Note 1, under Organization, the Company has been in the
development stage since its inception. Realization of a major portion of the
assets is dependent upon the Company's ability to meet its future financing
requirements, and the success of future operations. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements from inception (February 5, 1993) to December 31, 1996,
were audited by me and in my audit I included an explanatory paragraph which
described conditions that raised substantial doubt about the Company's ability
to continue as a going concern in my report dated February 24, 1997, but, I have
not performed any auditing procedures since that date.
David T. Thompson, P.C.
Salt Lake City, Utah
February 24, 1997
-34-
<PAGE>
COLUMBIA CAPITAL CORP.
(Development Stage Company)
Balance Sheets
For the Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
----------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 9,758 $ 15,310
Note receivable - -
Net current assets of discontinued operations 1,293 1,874
----------- ----------
Total Current Assets 11,051 17,184
----------- ----------
OTHER ASSETS:
Organization costs, less accumulated
amortization of $1,594, $1,405 and $1,026 484 863
----------- ----------
TOTAL ASSETS $ 11,535 $ 18,047
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ - $ -
Franchise tax payable 176 206
----------- ----------
Total Current Liabilities 176 206
----------- ----------
STOCKHOLDERS' EQUITY
Preferred stock; $.001 par value - 5,000,000 shares
authorized, no shares issued and outstanding - -
Common stock; $.001 par value - 50,000,000 shares
authorized, 2,500,000 shares issued and outstanding
all periods 2,500 2,500
Capital in excess of par value 66,230 66,230
Deficit accumulated during the development stage (57,371) (50,889)
----------- ----------
Total Stockholders' Equity 11,359 17,841
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,535 $ 18,047
=========== ==========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
-35-
<PAGE>
COLUMBIA CAPITAL CORP.
(Development Stage Company)
Statements of Operations
For the Years Ended December 31, 1996 and 1995 and
From Inception (February 5, 1993) to December 31, 1994
<TABLE>
<CAPTION>
Cumulative
During the
December 31, December 31, Development
1996 1995 Inception
--------------- ---------------- ----------------
(Unaudited)
<S> <C> <C> <C>
REVENUE
Interest income $ - $ - $ 190
--------------- ---------------- ----------------
EXPENSES
Stockholder costs and fees 1,081 628 4,320
Interest - - 7
Legal and professional 1,438 19,968 23,619
Amortization expense 379 302 1,594
Bank fees 284 259 1,125
Office expense - 182 378
Franchise taxes 176 206 1,184
--------------- ---------------- ----------------
3,358 21,545 32,227
--------------- ---------------- ----------------
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS (3,358) (21,545) (32,037)
DISCONTINUED OPERATIONS
Net loss from discontinued operations (3,124) (4,181) (28,747)
--------------- ---------------- ----------------
NET INCOME (LOSS) $ (6,482) $ (25,726) $ (60,784)
=============== ================ ================
EARNINGS (LOSS) PER SHARE
Continuing operations $ (0.00) $ (0.01) $ (0.01)
=============== ================ ================
Discontinued operations $ (0.00) $ (0.00) $ (0.01)
=============== ================ ================
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
-36-
<PAGE>
COLUMBIA CAPITAL CORP.
(Development Stage Company)
Statement of Stockholders' Equity
For the Years Ended December 31, 1996 and 1995 and
From Inception (February 5, 1993) to December 31, 1994
<TABLE>
<CAPTION>
Cumulative
Capital in During the
Common Stock Excess of Development
Shares Amount Par Value Stage
---------- ------ -------- ---------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994 2,500,000 2,500 66,230 (25,163)
Net loss for the year ended
December 31, 1995 - - - (25,726)
---------- ------ ------- --------
BALANCE, December 31, 1995 2,500,000 2,500 66,230 (50,889)
Net loss for the year ended
December 31, 1996 - - - (6,482)
---------- ------ ------- --------
BALANCE, December 31, 1996 2,500,000 2,500 66,230 (57,371)
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
-37-
<PAGE>
COLUMBIA CAPITAL CORP.
(Development Stage Company)
Statements of Cash Flows
For the Years Ended December 31, 1996 and 1995 and
From Inception (February 5, 1993) to December 31, 1994
<TABLE>
<CAPTION>
Cumulative
During the
December 31, December 31, Development
1996 1995 Stage
-------------- -------------- --------------
(Unaudited)
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES
Interest income $ - $ - $ 190
Expenses (5,346) (23,567) (59,457)
Franchise taxes paid (206) (420) (1,184)
Organization Costs - - (1,889)
-------------- -------------- --------------
Net Cash (Used) by Operating Activities (5,552) (23,987) (62,340)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES - - -
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock - - 77,500
Direct costs of stock sale - - (8,770)
-------------- -------------- --------------
Net Cash Flows Provided by Financing Activities - - 68,730
-------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH (5,552) (23,987) 6,390
CASH - BEGINNING OF PERIOD 15,310 39 297 -
-------------- -------------- --------------
CASH - END OF PERIOD $ 9,758 $ 15,310 $ 6,390
-------------- -------------- --------------
RECONCILIATION OF NET INCOME (LOSS) TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
NET INCOME (LOSS) $ (6,482) $ (25,726) $ (60,784)
-------------- -------------- --------------
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities
Discontinued operations activities - net 581 1,651 -
Amortization of organization costs 379 302 1,594
Change in assets and liabilities
Note receivable - - (1,361)
Organization costs - - (1,889)
Accounts payable - - 100
Franchise tax payable (30) (214) -
-------------- -------------- --------------
Total Adjustments 930 1,739 (1,556)
-------------- -------------- --------------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES $ (5,552) $ (23,987) $ (62,340)
============== ============== ==============
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
-38-
<PAGE>
COLUMBIA CAPITAL CORP.
(Development Stage Company)
Notes to Financial Statements
NOTE 1: Nature of Business and Summary of Significant Accounting Policies
Organization
Columbia Capital Corp. (the Company) was organized under the laws of the
State of Delaware on February 5, 1993. It completed a private offering of
its common stock in November 1993 (See Note 2). Central Capital Corp. (a
former Subsidiary) was organized under the laws of the State of Delaware on
February 5, 1993. Hudson Resources, Inc. (a former Subsidiary) was
organized under the laws of the State of Delaware on May 17, 1994. Neither
the Company nor its subsidiaries prior to disposition (See Note 6) have
commenced or did commence planned principle operations. Further, the
Company is considered a development stage company as defined in SFAS No. 7.
The Company has, at the present time, not paid any dividends and any
dividends that may be paid in the future will depend upon the financial
requirements of the Company and other relevant factors.
Organization Costs
The Company is amortizing organization costs, which reflect amounts
expended to organize the Company, over sixty (60) months using the
straight-line method.
Earnings Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding during the applicable period.
Income Taxes
Deferred income taxes are reported using the liability method. Deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects
of changes in tax laws and rates on the date of enactment.
Cash Equivalents
For the purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with maturity of three months or less
to be cash equivalents. During the periods ended December 31, 1996 and 1995
the Company did not have non cash investing and financing activities.
Use of 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 reporting period. Actual results could differ from those
estimates.
-39-
<PAGE>
COLUMBIA CAPITAL CORP.
(Development Stage Company)
Notes to Financial Statements
NOTE 2: Private Offering of Common Stock
The Company offered shares of its Common stock, $.001 par value, to a
limited number of qualified investors in 1993. The company sold
325,000 shares of common stock, at a price of $.20 per share for a
total of $65,000. The investors subscribed to a minimum of 1,000
shares. There was no minimum offering amount and there was no escrow
of any funds received from the offering and such funds were utilized
by the Company as they were received. Proceeds from the offering were
used to provide working capital of the Company and in connection with
the formation of the subsidiaries.
NOTE 3: Related Party Transactions
Office Space
The Company has no operations or employees and therefore has no need
for office space. The mailing address of the Company is provided
without charge by an officer of the Company. Management of the
Company estimate that such arrangements will be adequate for the
foreseeable needs of the Company unless and until the Company
participates in a business opportunity.
Management Compensation
Related parties participating in the management of the Company has
not drawn nor accrued salaries for past services. Salaries to be paid
to management of the Company in the future, if any, will be derived
from operational income.
NOTE 4: Distribution of Subsidiary Common Stock
Central Capital Corp. (Central) was formed as a wholly-owned
subsidiary of Columbia Capital Corp. (Company) through the issuance
of 2,500,000 shares of common stock to the Company for $2,500. On May
17, 1994 Hudson Resources, Inc. (Hudson) was formed as a wholly-owned
subsidiary of Columbia Capital Corp. through the issuance of
2,500,000 shares of common stock to the Company for $2,500. Central
along with Hudson filed a registration statement through which it
proposed to distribute to the shareholders of the Company 2,500,000
shares of Central's common stock and 2,500,000 shares of Hudson's
common stock. The registration statement was subsequently withdrawn
and the Company has no intent to distribute the shares of its
subsidiaries to its shareholders. The costs of the registration
attempt was paid for by Columbia Capital Corp.
NOTE 5: Income Taxes
For December 31, 1996 and 1995 the Company had no income tax
liabilities or deferred tax liabilities. For tax purposes the Company
has available at December 31, 1996 and 1995 combined net operating
loss carryforwards for Federal Income tax purposes of approximately
$30,005 and $26,646 which will expire as shown below.
-40-
<PAGE>
A combined valuation allowance of $4,501 and $3,997 has been established
for those tax credits which are not expected to be realized for December
31, 1996 and 1995 respectively. The change in the allowance for each year
was $504 and $3,232.
Year Amount
---- ---------
2008 $ 804
2009 $ 4,297
2010 $ 21,545
2011 $ 3,359
NOTE 6: Disposition of Subsidiaries - Unaudited
On February 28, 1997, the Company determined that its two subsidiary
corporations, Hudson Resources, Inc. and Central Capital Corp. had no value
and would hinder the Company in looking for an acquisition. Therefore, the
two companies were sold to the Company's principal shareholder, Mr. Lynn
Dixon for nominal value. For accounting purposes the Company has treated
the sold subsidiaries as discontinued operations, effective February 28,
1997. The results of the subsidiaries have been reported separately as a
component of discontinued operations in the statement of operations for the
periods presented. Prior years consolidated financial statements have been
restated to present the subsidiaries as discontinued operations. The
Company's investment in subsidiaries was sold for $1,361 with no gain or
loss. Details of the net assets and operations for the subsidiaries are
presented below.
Subsidiaries Assets and Liabilities:
February 28, December 31, December 31,
1997 1996 1995
--------- ---------- ----------
Cash $ 1,109 $ 1,109 $ 1,512
Prepaid taxes - - 22
Organization costs, net 252 284 440
Franchise tax payable - (100) (100)
--------- ---------- ----------
Net assets $ 1,361 $ 1,293 $ 1,874
========= ========== ==========
-41-
<PAGE>
Subsidiaries Operations:
February 28, December 31, December 31,
1997 1996 1995
--------- ---------- ----------
REVENUE $ - $ - $ -
--------- ---------- ----------
EXPENSES
Stockholder costs
and fees - 478 250
Interest - - -
Legal and professional 1,400 2,390 3,170
Amortization expense 32 156 156
Bank fees - - 108
Office expense - - 397
Franchise taxes - 100 100
--------- ---------- ----------
1,432 3,124 4,181
--------- ---------- ----------
NET LOSS RELATED TO
DISCONTINUED
OPERATIONS $ (1,432) $ (3,124) $ (4,181)
========= ========== ==========
NOTE 7: Subsequent Event - Unaudited
In July 1997, the Company entered into a letter of intent to acquire
First Independent Computers, Inc. in exchange for common stock of the
Company. The proposed transaction contemplates a 1 for 2 reverse
split of the Company's outstanding common shares, the issuance of a
controlling block of the Company's common shares, a change of
management and related matters.
-42-
<PAGE>
FIRST INDEPENDENT
COMPUTERS, INC.
FINANCIAL STATEMENTS
and
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
Four months ended April 30, 1997
and
Years ended December 31, 1996 and 1995
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
First Independent Computers, Inc.
We have audited the accompanying balance sheets of First Independent Computers,
Inc. (a Texas corporation) as of April 30, 1997, December 31, 1996 and 1995, and
the related statements of income, changes in shareholders' equity, and cash
flows for the periods then ended. These financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these 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, the financial statements referred to above present fairly, in
all material respects, the financial position of First Independent Computers,
Inc. as of April 30, 1997, December 31, 1996 and 1995, and results of its
operations and its cash flows for the periods then ended in conformity with
generally accepted accounting principles.
DAVIS, KINARD & CO., P.C.
June 27, 1997
Abilene, Texas
-43-
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
Balance Sheets
Four Months Ended April 30, 1997 and
Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
April 30,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 34,304 $ - $ 36,767
Interest bearing deposits with banks 102,578 100,000 100,000
Accounts receivable, net 576,548 715,618 588,835
Prepaid expenses and other assets 226,627 187,551 158,189
----------- ----------- -----------
Total Current Assets 940,057 1,003,169 883,792
Premises and equipment 911,428 960,372 719,594
Less accumulated depreciation 492,334 615,168 504,820
----------- ----------- -----------
Net property and equipment 419,094 345,204 214,774
Other assets
Non-compete agreement, net of amortization - - 2,542
Deposits 2,563 2,563 2,563
----------- ----------- -----------
Total other assets 2,563 2,563 5 ,105
----------- ----------- -----------
Total assets $ 1,361,714 $ 1,350,936 $ 1,103,670
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Bank overdraft $ - $ 31,557 $ -
Accrued expenses and other liabilities 273,669 440,300 464,072
Notes payable 337,000 131,420 43,739
----------- ----------- -----------
Total liabilities 610,669 603,277 507,811
Shareholders's equity
Common stock - 1,000 shares
authorized, issued and outstanding 1,000 1,000 1,000
Capital surplus 497,500 497,500 497,500
Retained earnings 252,545 249,159 97,360
----------- ----------- -----------
Total shareholders' equity 751,045 747,659 595,860
----------- ----------- -----------
Total liabilities and shareholders' equity $ 1,361,714 $ 1,350,936 $ 1,103,670
=========== =========== ===========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
-44-
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
Income Statements
Four Months Ended April 30, 1997 and
Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
April 30,
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
REVENUES
Pride revenue $ 263,900 $ 804,000 $ 828,763
Credit card revenue 639,700 1,955,911 942,522
Banking revenue 316,115 927,747 830,615
Mail operations revenue 96,670 292,074 105,659
Courier revenue 31,900 86,050 66,747
Other 13,908 62,803 121,600
------------ ------------ -----------
Total revenues 1,362,192 4,128,586 2,895,905
EXPENSES
Salaries and employee benefits 578,820 1,644,534 1,450,631
Auto lease - - 6,780
Auto maintenance 8,060 25,171 25,782
Equipment lease 288,683 855,156 329,190
Equipment maintenance 148,209 473,066 409,143
Facilities rent 48,400 138,200 103,200
Facilities maintenance 904 1,243 4,121
Depreciation and amortization 30,223 111,447 116,658
Travel and entertainment 22,589 46,581 29,158
Insurance 12,209 37,550 27,673
Computer and office supplies 92,971 279,157 247,019
Postage and delivery fees 20,687 28,473 99,647
Telephone 45,240 143,986 104,300
Professional and outside services 30,422 79,866 116,299
Taxes 12,515 30,683 5,778
Other operating 10,867 25,902 20,584
------------ ------------ -----------
Total expenses 1,350,798 3,921,014 3,095,964
OTHER INCOME (EXPENSE)
Interest (6,263) (15,684) (11,116)
-----------
Nonrecurring - 23,971 (14,982)
------------ ------------ -----------
Total other income (expense) (6,263) 8,287 (26,098)
------------ ------------ -----------
INCOME BEFORE FEDERAL INCOME TAXES 5,131 215,859 (226,157)
PROVISION FOR FEDERAL INCOME TAXES
Income tax expense (benefit) 1,745 64,060 (69,365)
------------ ------------ -----------
Total provision for federal income taxes 1,745 64,060 (69,365)
------------ ------------ -----------
NET INCOME $ 3,386 $ 151,799 $ (156,793)
============ ============ ===========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
-45-
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
Statements of Changes in Shareholders' Equity
Four Months Ended April 30, 1997 and
Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Common Paid-In Retained
Stock Capital Earnings Total
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
BALANCES - December 31, 1994 $ 1,000 $ 197,500 $ 254,153 $ 452,653
Shareholder contribution - 300,000 - 300,000
Net income - - (156,793) (156,793)
-------------- -------------- -------------- --------------
BALANCES - December 31, 1995 1,000 497,500 97,360 595,860
Net income - - 151,799 151,799
-------------- -------------- -------------- --------------
BALANCES - December 31, 1996 1,000 497,500 249,159 747,659
Net income - - 3,386 3,386
-------------- -------------- -------------- --------------
BALANCES - April 30, 1997 $ 1,000 $ 497,500 $ 252,545 $ 751,045
============== ============== ============== ==============
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
-46-
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
Statements of Cash Flows
Four Months Ended April 30, 1997 and
Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
April 30,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,386 $ 151,799 $ (156,793)
Adjustments to reconcile net income to
net cash provided by operations
Depreciation and amortization 30,224 111,447 116,658
(Increase) decrease in
Accounts receivable 139,070 (126,783) (408,890)
Deposits and prepaid expenses (39,076) (29,362) (89,597)
Other assets - - (1,463)
Increase (decrease) in
Accruals and accounts payable (166,631) (23,772) 358,743
Accrued income taxes - - (1,583)
------------- ------------- -------------
Net cash provided (used) by operating activities (33,028) 83,330 (182,925)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (104,114) (239,335) (68,564)
Investment in interest bearing deposit (2,578) - (100,000)
------------- ------------- -------------
Net cash used by investing activities (106,692) (239,335) (168,564)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit, net 205,580 87,681 -
Payments on short-term debt, net - - (35,921)
Shareholder contribution - - 300,000
Change in bank overdraft (31,557) 31,557 -
------------- ------------- -------------
Net cash used by financing activities 174,023 119,238 264,079
------------- ------------- -------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 34,304 (36,768) (87,410)
Cash and cash equivalents at beginning of year - 36,767 124,178
------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 34,304 $ - $ 36,767
============= ============= =============
OTHER DISCLOSURES
Interest paid $ 6,263 $ 15,684 $ 11,116
Taxes paid 12,515 30,683 5,778
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
-47-
<PAGE>
FIRST INDEPENDENT COMPUTERS, INC.
Notes to Financial Statements
NOTE 1: Summary of Significant Accounting Policies
Organization
First Independent Computers, Inc. (The Company) was incorporated on
October 21, 1983, pursuant to the provisions of the Texas Business
Corporation Act. The Corporation was authorized to issue 1,000 shares
of no par value, Common Stock.
First Independent Computers Inc.'s business activity includes the
processing of credit card purchases for numerous businesses in
various industries throughout the United States and data processing
for various banks.
The shareholders of First Independent Computers, Inc. entered
into an agreement with Security Shares, Inc. to exchange First
Independent Computers, Inc. shares for common shares of Security
Shares, Inc. The exchange was effective with the close of business on
May 31, 1994. The exchange is for all of the issued and
outstanding shares of First Independent Computers, Inc. Security
Shares, Inc. entered into a purchase/sale agreement with Glenn M.
Gallant and Douglas R. Baetz for the purchase of all of First
Independent Computers, Inc.'s issued and outstanding stock
currently owned by Security Shares, Inc. The sale was to be effective
with the close of business on April 30, 1997.
Cash and Cash Equivalents
The Company considers investments with an original maturity of three
months or less to be cash equivalents.
Use of Estimates in the Preparation of Financial Statements
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.
Actual results could differ from those estimates.
Accounts Receivable
The Company does not utilize the allowance method for uncollectible
accounts receivable. If management determines that a receivable is
potentially uncollectible, a liability is recorded to account for the
potential loss. The balance of the liability account related to
potentially uncollectible accounts was $20,000 at April 30, 1997.
Revenue Recognition
The Company recognizes revenue when services have been provided to
the customer.
-48-
<PAGE>
NOTE 1: Summary of Significant Accounting Policies - continued
Property, Plant and Equipment
Fixed assets of the Company are reported at historical cost.
Depreciation and amortization on assets purchased are computed by the
following methods and useful lives:
Furniture and fixtures Straight-line 5 years
Electronic equipment Straight-line 5-7 years
Automobiles Straight-line 3-5 years
Office equipment Straight-line 5 years
Computer Software Straight-line 3 years
Depreciation is computed using the straight line method over the
estimated useful lives for book purposes and an accelerated method of
cost recovery over statutory recovery periods for tax purposes.
Repairs and maintenance are expensed, whereas additions and
improvements are capitalized.
Prepaid Assets
The Company has expenditures which benefit future periods which are
recorded as prepaid assets or deferred costs and are amortized on a
straight-line basis over the estimated or known period of benefit.
Such prepaid assets and deferred costs include prepaid insurance,
maintenance contracts, certain software licenses and supplies used in
the normal operation of business.
Federal Income Taxes
The Company has recorded deferred taxes due to the differences in
recording depreciation and amortization related to fixed assets for
tax and financial statement purposes.
NOTE 2: Long Term Obligations Under Capital Leases and Operating Leases
The Company acquired computer software under a capital lease. The
liability for the capital lease was recorded as a note payable. The
book value of this software included in Property and Equipment -
Software at December 31, 1996 and 1995, is as follows:
1996 1995
--------- ----------
Cost $ 157,784 $ 157,784
Accumulated Depreciation (157,784) (126,227)
---------- ----------
Net Book Value $ - $ 31,557
========== ==========
-49-
<PAGE>
NOTE 2: Long Term Obligations Under Capital Leases and Operating Leases
- continued
The afore mentioned software recorded under capital lease was
replaced and written off the Company's books as of 04/30/97. The
Company, as of 4/30/97, recognizes all of its current lease
agreements as operating leases only and does not intend to capitalize
on any options for the future purchase of such leased items. The
following are future minimum payments for leased items for each of
the next four years ending December 31, 2000. The leases are secured
by the lease item. The minimum commitments under noncancellable lease
agreements as of April 30, 1997 are as follows:
Remaining 1997 $ 377,460
1998 566,190
1999 270,690
2000 147,242
-----------
Lease Obligation $ 1,361,582
===========
NOTE 3: Notes Payable
Notes payable consisted of the following at April 30, 1997, December
31, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ----------- ----------
<S> <C> <C> <C>
The company purchased software under a capital lease and recorded the
liability as a note payable dated 12/13/91 to IBM in the original
amount of $157,783.52 at 16.29%, principal and interest due in 60
monthly installments starting 2/01/92. $ - $ 1,420 $ 43,739
A revolving line of credit dated 5/24/96 to The Peoples State Bank,
commitment of $250,000 at 9.25%, due on demand with final maturity at
5/24/97. The note is secured by accounts receivable. 70,000 130,000 -
A note payable dated 3/31/97 to The Peoples State Bank
in the original amount of $267,000 at 8.5%, principal and
interest due on demand with final maturity at 6/30/97. The
note is secured by a guarantee from Security State Bank. 267,000 - -
---------- ----------- ----------
Total notes payable $ 337,000 $ 131,420 $ 43,739
========= ========== ==========
All notes payable balances were paid as of 5/31/97, resulting in a
notes payable balance of $ 0 at 5/31/97.
</TABLE>
-50-
<PAGE>
NOTE 4: Related Party Transactions
During the period January 1 through December 31, 1995, the Company
recorded revenues of $924,499 billed to Security State Bank (balance
due at December 31, 1995 of $130,845), a related party.
During the period January 1 through December 31, 1996, the Company
recorded revenues of $1,245,119 billed to Security State Bank
(balance due at December 31, 1996 of $128,629), a related party.
During the period January 1 through April 30, 1997, the Company
recorded revenues of $405,619 billed to Security State Bank (balance
due at April 30, 1997 of $104,296), a related party.
In addition, the Company leases its office space from Security State
Bank. Facilities Rent expense was $8,600 per month ($103,200 for the
period of January 1 to December 31, 1995), and for $11,517 per month
($138,200 for the period of January 1 to December 31, 1996), and for
$12,100 per month ($48,400 for the period of January 1 to April 30,
1997).
NOTE 5: Income Taxes
The tax effects of temporary differences that give rise to
significant portions of the deferred tax liabilities as of April 30,
1997, December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Depreciation and amortization $ 30,223 $ 111,447 $ 116,658
----------- ----------- ----------
$ 30,223 $ 111,447 $ 116,658
=========== =========== ==========
</TABLE>
NOTE 6: Concentration Risk
During the period January 1 through December 31, 1995, the Company
recorded revenues of $828,763 billed to Pride Refining, Inc. (balance
due at December 31, 1995 of $59,991), a non-related party, and
$619,662 billed to Clark Refining, Inc. (balance due at December 31,
1995 of $235,702), a non-related party.
During the period January 1 through December 31, 1996, the Company
recorded revenues of $804,000 billed to Pride Refining, Inc. (balance
due at December 31, 1996 of $61,469), a non-related party, and
$1,396,244 billed to Clark Refining, Inc. (balance due at December
31, 1996 of $98,705), a non-related party.
-51-
<PAGE>
NOTE 6: Concentration Risk - continued
During the period January 1 through April 30, 1997, the Company
recorded revenues of $263,900 billed to Pride Refining, Inc. (balance
due at April 30, 1997 of $62,310), a non-related party, and $408,831
billed to Clark Refining, Inc. (balance due at April 30, 1997 of
$515), a non-related party.
NOTE 7: Subsequent Events
As of May 1, 1997, 100% of the Company's issued and outstanding stock
was purchased by Glenn M. Gallant and Douglas R. Baetz from Security
Shares, Inc.
On May 5, 1997, the Company's note payable of $267,000 with accrued
interest to date was paid in full.
On May 24, 1997, the Company's outstanding note payable balance of
$30,000 with accrued interest to date was paid in full.
On May 31, 1997, the Company recorded additional paid in
capital of $250,000 resulting from a cash deposit made by Glenn M.
Gallant and Douglas R. Baetz.
At June 30, 1997 the Company's contract, to provide credit card
processing for Clark Refining, Inc., expired. Clark has indicated
that the contract will not be renewed.
The Company has renewed it's lease agreement with Security State Bank
effective August 1, 1997. The new lease agreement is for a period of
two (2) years consisting of 52,248 square foot of office and parking
space under lease. Total monthly rent, due in advance on the first
day of each month, beginning August 1, 1997, will be $33,447. The
total annual facilities rent expense under the new lease agreement
will be $401,364.
-52-
<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.
Columbia Capital Corp.
(Registrant)
By:/S/ KENNETH A. KLOTZ By:/S/ OLAN BEARD
------------------------- ----------------------------
KENNETH A. KLOTZ, OLAN BEARD,
President and Director Vice President and Director
Date: December 31, 1997
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.
NAME TITLE DATE
- - - ---- -------- -----------------
/S/ DOUGLAS R. BAETZ Director December 31, 1997
- - - ------------------------------
Douglas R. Baetz
/S/ OLAN BEARD Director December 31, 1997
- - - ------------------------------
Olan Beard
/S/ GLENN M. GALLANT Director December 31, 1997
- - - ------------------------------
Glenn M. Gallant
/S/ KENNETH A. KLOTZ Director December 31, 1997
- - - ------------------------------
Kenneth A. Klotz
/S/ CHARLES LAMONTAGNE Director December 31, 1997
- - - ------------------------------
Charles LaMontagne
-53-
<PAGE>
