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UNITED STATES
SECURITIES AND EXCHANGE COMMISION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT: February 1, 1999
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Date of the earliest event reported)
Columbia Capital Corp.
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(Exact name of Registrant as specified in its charter)
Delaware 001-13749 11-3210792
(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) identification
Number)
1157 North 5th Street Abilene, Texas 79601
(Address of principal executive offices) (Zip Code)
915/674-3110
Registrant's telephone number, including area code
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Item 5. Other Events
As previously disclosed, Columbia Capital Corp., through its wholly
owned subsidiary First Independent Computers, Inc., (collectively, the
"Company"), derives a substantial portion of its revenue by processing
certain credit card accounts (the "Accounts") for the Federal Deposit
Insurance Corporation ("FDIC"), as Receiver for BestBank of Boulder,
Colorado. On July 23, 1998, BestBank was declared insolvent by the Colorado
State Banking Commissioner, and the FDIC was appointed Receiver and, as
such, continued to operate certain of BestBank's business activities,
including its credit card accounts. The Company performs such services
pursuant to a contract entered into with BestBank as of October 1, 1997. As
of September 30, 1998, the revenues derived by the Company from such
services were approximately $ 7,999,968, which constitute
approximately 84% of the Company's total gross revenue for the nine months
ended September 30, 1998. Both the Receiver and the Company continued to
abide by the terms and conditions of the Processing Agreement up through
January 29, 1999.
On November 3, 1998, the FDIC announced a sealed-bid auction for the
sale of the Accounts. On December 24, 1998, RRI Credit Corporation
("RRICC"), which is not affiliated with the Company, was awarded the
contract to purchase the Accounts from the FDIC. The purchase and sale
agreement between RRICC and the FDIC, dated December 24, 1998 ("Amended
Purchase and Sale Agreement") called for a one million dollar ($1,000,000)
non refundable deposit to be paid by RRICC and set a closing date of January
29, 1999, at which time the transfer of the Accounts was to take place.
On December 14, 1998, and as amended on January 15, 1999, the Company
entered into an initial processing services agreement ("RRICC Processing
Agreement") with RRICC for the processing of the Accounts should RRICC's bid
be accepted. The term of the RRICC Processing Agreement begins on the date of
the closing of the purchase of the Accounts by RRICC, and terminates on the
date on which the principal and interest of a certain planned financing in
connection with the purchase of the Portfolio have been paid in full. At that
time, the parties intend that a second agreement for the processing of the
Accounts shall immediately become effective for a term of no less than ten
(10) years and shall provide for fees from the processing of no fewer that
three hundred thousand (300,000) credit card accounts at normal and customary
rates. In consideration for the initial processing agreement, the Company
agreed to and did lend RRICC, on a non-recourse basis unless returned by the
FDIC, the principal sum of one million dollars ($1,000,000) at ten percent
(10%) per annum, which in turn was paid to the FDIC by RRICC as a
non-refundable deposit under the Amended Purchase and Sale Agreement.
Due to certain circumstances RRICC was unable to meet certain conditions
to close the purchase by January 29, 1999, and, as of January 29, 1999, RRICC
and FDIC agreed to a second amendment, ("Amendment No. 2"), which extends
the closing date to February 22, 1999. The Company agreed that during the
extension period it will continue to process the Accounts pursuant to the
terms of the Processing Agreement and will forego receipt of fees and
reimbursement of expenses, which will have the effect of reducing the
Company's anticipated income during the extension period of approximately $
250,000 per week. If the Amended Purchase and Sale Agreement closes, then the
amount of the fees foregone by the Company will be applied toward payment of
the purchase price for the Accounts. On or before that time, the Company
intends to enter into an arrangement with RRICC whereby the Company recoups
the amount foregone. However, no assurance can be given that a satisfactory
arrangement will be arrived at. If the Amended Purchase and Sale Agreement
does not close, the Company will receive no payment at all for processing
services during the extension period, which could have a material adverse
effect on the Company's financial condition. In addition, the inability of
RRICC to close the Amended Purchase and Sale Agreement may result in the loss
of the $1,000,000 non-refundable deposit. Such a loss could result in the
Company's subsequent charge-off of the note receivable from RRICC and would
have a material adverse effect on the Company's 1998 fourth quarter and year
end and the 1999 first quarter results of operations.
RRICC has advised the Company that if the purchase of the accounts
closes, it intends to charge off a significant number of Accounts currently
being processed by the Company. This would likely result in a material
decline in the monthly credit card processing revenue generated by the
Company. This may result in the Company's showing net operating losses until
such time as the Company is able to effectively cut its operating costs or
generate sufficient additional revenue.
The parties to the Amended Purchase and Sale Agreement intend to close
on or before February 22, 1999. If the Amended Purchase and Sale Agreement
does not close at such time, and if the parties have not agreed to extend the
time for closing, then the FDIC intends to cease operating the Accounts as an
ongoing business and to sell the Accounts to one or more collection
companies. The effect of this action would be to eliminate approximately 88%
of the Company's monthly revenues from processing. While management of the
Company would attempt to replace this lost business, no assurance can be
given that it would be able to do so in a timely manner and on terms and
conditions satisfactory to the Company, or at all. Management of the Company
believes that the Processing Agreement may give the Company rights to certain
payments from the FDIC upon such termination, but no assurance can be given
that any money will ever be received from the FDIC as a result of such
claimed rights. The loss of the revenue from processing the Accounts would
have a material adverse effect on the Company's business.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Columbia Capital Corp.
Dated: February 16, 1999 By: /s/ Chuck LaMontagne
Chuck LaMontagne
Executive Vice President and
Chief Financial Officer
