<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number: 001-13749
FINITY HOLDINGS, INC., formerly known as COLUMBIA CAPITAL CORP.
--------------------------------------------------------------------------------
(Name of small business issuer specified in its charter)
Delaware 11-3210792
--------------------------------- ---------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1157 North 5th Street, Abilene, Texas 79601
-------------------------------------------
(Address of principal executive offices, including zip code)
915-674-3110
------------------------------------
(Issuer's telephone number, including area code)
----------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (i) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (ii) has been
subject to such filing requirements for the past 90 days. Yes X No -----
The number of shares outstanding of the issuer's Common Stock as of June 30,
2000 was 48,511,512 shares.
Transactional Small Business Disclosure Format (Check one): Yes [ ] No [X]
i
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<PAGE>
<TABLE>
COLUMBIA CAPITAL CORP.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 (UNAUDITED) AND
DECEMBER 31, 1999 (AUDITED)
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
(Unaudited) (Audited)
--------------- ---------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 1,081,571 $ 2,133,740
Interest bearing deposits with banks 501,000 501,000
Accounts receivable, net 1,060,168 319,079
Prepaid expenses and other assets 377,967 337,468
Federal income tax receivable - 556,774
--------------- ---------------
Total current assets 3,020,706 3,848,061
Property and equipment 1,817,687 1,812,720
Less accumulated depreciation 771,387 607,163
--------------- ---------------
Net property and equipment 1,046,300 1,205,557
Other assets
Deferred tax asset 400,967 400,967
Other assets 90,000 90,000
--------------- ---------------
Total other assets 490,967 490,967
--------------- ---------------
TOTAL ASSETS $ 4,557,973 $ 5,544,585
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 1,472,360 $ 2,163,382
Accrued expenses and other liabilities 804,544 476,457
Current portion of note payable - American State Bank 13,055 12,441
Notes payable - related party - -
Accrued interest payable 29,275 -
--------------- ---------------
Total current liabilities 2,319,234 2,652,280
Long term portion of note payable - American State Bank 122,348 124,847
--------------- ---------------
Total liabilities 2,441,582 2,777,127
SHAREHOLDER'S EQUITY
Common stock , $.001 par value; 100,000,000 shares authorized;
48,511,512 issued and outstanding June 30, 2000
38,511,512 issued and outstanding December 31, 1999 48,512 38,512
Additional paid-in capital 7,881,096 5,891,096
Accumulated deficit (5,813,217) (3,162,150)
--------------- ---------------
Total shareholders' equity 2,116,391 2,767,458
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,557,973 $ 5,544,585
=============== ===============
The accompanying notes are an integral
part of these consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
COLUMBIA CAPITAL CORP.
CONSOLIDATED STATEMENTS OF OPERATION - UNAUDITED
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------------------------- ----------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUE
Credit card revenue $ 311,214 $ 843,063 $ 600,830 $ 3,516,332
Mail operations revenue 10,156 24,751 22,498 173,520
Merchant processing fees 216,809 329,617 510,692 356,691
Other 57 63,654 293 222,446
--------------- --------------- --------------- ---------------
Total operating revenue 538,236 1,261,085 1,134,313 4,268,989
EXPENSES
Salaries and employee benefits 769,674 795,109 1,516,377 1,715,292
Equipment and software lease 432,275 877,205 864,224 1,475,727
Facilities rent 71,371 100,341 142,743 201,182
Repair and maintenance 93,209 116,377 176,152 253,839
Depreciation 82,181 99,607 164,224 189,282
Amortization of goodwill - 12,174 - 24,348
Computer and office supplies 32,013 68,935 60,299 164,722
Telephone 86,747 69,810 169,053 148,744
Professional and outside services 124,813 121,022 253,722 453,929
Travel and entertainment 49,921 19,087 99,355 41,562
Other operating 151,874 200,024 305,799 632,659
--------------- --------------- --------------- ---------------
Total operating expenses 1,894,078 2,479,691 3,751,948 5,301,286
--------------- ---------------- ---------------- ----------------
LOSS FROM OPERATIONS (1,355,842) (1,218,606) (2,617,635) (1,032,297)
Other income (expense)
Interest income 10,822 13,639 20,136 24,060
Interest expense (41,611) (24,712) (53,568) (49,322)
--------------- --------------- --------------- ---------------
Total other income (expense) (30,789) (11,073) (33,432) (25,262)
--------------- --------------- --------------- ---------------
LOSS BEFORE TAX (1,386,631) (1,229,679) (2,651,067) (1,057,559)
Income tax expense (benefit) - (426,006) - (357,519)
--------------- --------------- --------------- ---------------
NET LOSS $ (1,386,631) $ (803,673) $ (2,651,067) $ (700,040)
=============== =============== =============== ===============
Basic loss per share $ (0.04) $ (0.06) $ (0.07) $ (0.05)
=============== =============== =============== ===============
Diluted loss per share $ (0.03) $ (0.06) $ (0.06) $ (0.05)
=============== =============== =============== ===============
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements
<PAGE>
<TABLE>
COLUMBIA CAPITAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
JUNE 30, 2000 (UNAUDITED) AND
DECEMBER 31, 1999 (AUDITED)
Common Stock
------------------------- Paid-In Accumulated
Shares Amount Capital (Deficit) Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1998 12,765,000 $ 12,765 $ 1,990,715 $ 882,936 $ 2,886,416
Issuance of common stock 25,746,512 25,747 3,425,381 - 3,451,128
Acquisition of Fi-Scrip - - 475,000 (813,469) (338,469)
Net loss - - - (3,231,617) (3,231,617)
------------ ------------ ------------ ------------ ------------
BALANCE - DECEMBER 31, 1999 38,511,512 38,512 5,891,096 (3,162,150) 2,767,458
Issuance of common stock 10,000,000 10,000 1,990,000 - 2,000,000
Net loss - - - (2,651,067) (2,651,067)
------------ ------------ ------------ ------------ ------------
BALANCE - JUNE 30, 2000 48,511,512 $ 48,512 $ 7,881,096 $(5,813,217) $ 2,116,391
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements
<PAGE>
<TABLE>
COLUMBIA CAPITAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,386,631) $ (803,673) $(2,651,067) $ (700,040)
Adjustments to reconcile net income to
net cash provided by operations
Depreciation and amortization 38,222 50,396 164,224 213,630
Deferred income taxes - (922) - 7,531
(Increase) decrease in
Accounts receivable (25,208) (199,048) (184,315) 14,568
Prepaid expenses and other assets 14,616 46,047 (40,499) 9,147
Increase in accruals and accounts payable (1,726,268) 841,206 (333,660) 915,148
------------ ------------ ------------ ------------
Net cash (used in) provided by operating activities (3,085,269) (65,994) (3,045,317) 459,984
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of fixed assets 40,917 50,206 - -
Purchase of fixed assets - - (4,967) (111,833)
------------ ------------ ------------ ------------
Net cash used in investing activities 40,917 50,206 (4,967) (111,833)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit, net of payments (504,372) (4,708) (1,885) 266,947
Issuance of common stock 2,000,000 - 2,000,000 17,000
Cash and cash equivalents received in
acquisition of Fi-Scrip - - - 413,216
------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities 1,495,628 (4,708) 1,998,115 697,163
------------ ------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (1,548,724) (20,496) (1,052,169) 1,045,314
Cash and cash equivalents at beginning of period 2,630,295 1,334,210 2,133,740 268,400
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT JUNE 30, $ 1,081,571 $ 1,313,714 $ 1,081,571 $ 1,313,714
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Interest paid 1,887 9,937 24,293 49,322
Taxes paid - 436,000 - -
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements
<PAGE>
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of Columbia Capital Corp. (the Company) and its wholly-owned
subsidiaries, Finity Corporation ("Finity") and Fi-Scrip, Incorporated
(Fi-Scrip). Intercompany accounts and transactions have been
eliminated.
ORGANIZATION AND NATURE OF OPERATIONS
The Company was organized under the laws of the State of Delaware on
February 5, 1993. The Company completed a private offering of its
common stock in November 1993 (See Note 2).
Finity, formerly known as First Independent Computers, Inc. ("FICI"), a
Texas corporation, was incorporated on October 21, 1983, pursuant to
the provisions of the Texas Business Corporation Act. FICI changed its
name to Finity by amendment to its articles of incorporation effective
March 1, 2000. Finity'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.
Fi-Scrip, a Nevada corporation, engages in the financial services
business by marketing computer processing services for automated teller
machines transactions, debit terminal transactions and electronic
benefits transfer system transactions. Fi-Scrip contracts with
merchants and independent service organizations for deployment of
terminals and services.
MANAGEMENT REPRESENTATION
Management believes the financial statements include all adjustments
necessary in order to present a fair presentation and ensure that the
financial statements are not misleading.
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 at the
date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
<PAGE>
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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 June 30, 2000 and December 31,
1999.
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.
<PAGE>
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PER SHARE DATA
In February 1997, Statement of Financial Accounting Standards (SFAS)
No. 128, EARNINGS PER SHARE was issued. Under SFAS 128, net earnings
per share (EPS) are computed by dividing net earnings by the weighted
average number of shares of common stock outstanding during the period.
SFAS 128 replaces fully diluted EPS, which the Company was not
previously required to report, with EPS, assuming dilution. The Company
adopted SFAS 128 effective December 31, 1998. The effect of this
accounting change on previously reported EPS data is not significant.
The computation of basic (loss) earnings per share of common stock is
based on the weighted average number of shares outstanding for the six
months ended June 30, 2000 and 1999 of 38,566,457 and 12,775,000
respectively, adjusted retroactively to reflect the one for two reverse
split effective September 1, 1997. The computation of diluted (loss)
earnings per share of common stock is based on the weighted average
number of shares and equivalent shares outstanding for the six months
ended June 30, 2000 and 1999 of 44,452,975, and 12,775,000
respectively. No potential common shares existed at June 30, 1999;
therefore, basic loss per share equals diluted loss per share at that
date.
PREFERRED STOCK
The Company, under its articles of incorporation, has the authority to
issue up to 5,000,000 shares of preferred stock with a par value of
$.001 each, totaling $5,000. The Board of Directors is authorized to
provide for the issuance of the shares of preferred stock in series by
filing a certificate pursuant to the applicable law of the State of
Delaware, to establish the number of shares to be included in each such
series, and to fix the designations, powers, preferences, rights and
limitations of the shares of each series. At June 30, 2000, there were
no preferred shares issued or outstanding.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments as disclosed herein:
CASH AND SHORT-TERM INSTRUMENTS. The carrying amounts of cash and
short-term instruments approximate their fair value.
INTEREST BEARING DEPOSITS WITH BANKS. The carrying amounts of interest
bearing deposits with banks approximate their fair value.
ACCOUNTS RECEIVABLE. For accounts which are not past due greater than
90 days and have no significant change in credit risk, fair values are
based on carrying values.
NOTES PAYABLE. The Company's notes payable to an unrelated party
arrangement bears a variable interest rate and represents terms and
conditions currently available for the same or similar debt facility in
the marketplace. Thus, the fair value of notes payable approximates the
carrying amount.
FEDERAL INCOME TAX RECEIVABLE. The carrying amount of the federal
income tax receivable approximate their fair value.
<PAGE>
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
RECENT ACCOUNTING STANDARDS
In June 1998, SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES was issued. Required adoption of the statement was
subsequently deferred by SFAS No. 137 until July 1, 2000. SFAS 133
establishes accounting and reporting standards for derivative
instruments embedded in other contracts and for hedging activities. The
Company expects to adopt the standard on July 1, 2000. The adoption of
the statement is not expected to have a significant impact on the
financial statements.
NOTE 2: PRIVATE OFFERINGS 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 to the Company.
In September and October, 1999, pursuant to the terms of the CLCK/CNG
Stock Purchase Agreement, CNG Financial Corporation ("CNG") purchased
24,000,000 shares of common stock of the Company for a purchase price
of $3,000,000. Pursuant to the CLCK/CNG Stock Purchase Agreement CNG
was granted a stock option to purchase an additional 10,000,000 shares
of common stock for the purchase price of $2,000,000, which stock
option must be exercised by CNG on or before September 16, 2000. All
such options are vested. The stock option is exercisable in whole, and
not in part. To date, CNG has purchased a total 34,000,000 shares or
70.1% of the 48,511,512 shares currently issued and outstanding. CNG is
currently the Company's principal shareholder and has, as of the date
of this report, designated four members to the Board of Directors of
the Company.
In connection with the CNG transaction the Company issued to Century,
an affiliate of Messrs. Gallant and Baetz, 1,736,512 shares of common
stock in consideration of the cancellation of the obligation of
$434,128 due and payable by the Company to Century.
NOTE 3: ACQUISITION OF FI-SCRIP
As of January 1, 1999, the primary shareholders of the Company
contributed all of the common stock of Fi-Scrip to the Company for no
consideration. Fi-Scrip became a wholly-owned subsidiary of the Company
effective January 1, 1999.
<PAGE>
NOTE 4: CANCELLATION OF CONTRACT AND MANAGEMENT'S PLANS
On March 4, 1999, the Company received notice that the BestBank credit
card portfolio held by the FDIC, in which the Company derived
approximately 84% of its total operating revenue from processing, as
measured in 1998, was being terminated and the Company's processing
services on the portfolio were also being terminated.
The ability of the Company to continue as a going concern is dependent
on its ability to adjust its operations through the implementation of a
restructuring plan. The Company is currently developing a plan to
reduce expenses and secure replacement processing contracts, as
follows:
o The Company has implemented a plan for the reduction of fixed
operating costs, including restructuring and/or renegotiating
certain operating lease agreements. This reduction in fixed
operating costs will be implemented in phases as dictated by the
economics of the Company's future operations.
o The Company is currently working with approximately eight different
entities, all unaffiliated with the Company, to secure processing
contracts each representing as little as $30,000 and as much as
$2,000,000 in additional processing revenue per year. Letters of
intent and contracts, have been secured for replacement processing
with revenue estimated to be approximately $2,500,000 in the year
ended December 31, 2000.
o The Company has developed and integrated a marketing plan for
attracting new business, which includes the signing of a contract
with one of its major software suppliers, creating an alliance
between the two entities for the referral of new business.
o At June 30, 2000, the Company had cash balances in excess of
$1,000,000.
NOTE 5: FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments at
June 30, 2000 were as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
------------ ------------
<S> <C> <C>
Financial assets:
Cash and interest bearing deposits with banks $ 1,582,571 $ 1,582,571
Accounts receivable 1,060,168 1,060,168
Financial liabilities:
Notes payable $ 135,403 $ 135,403
Accrued interest payable 29,275 29,275
</TABLE>
<PAGE>
NOTE 5: FINANCIAL INSTRUMENTS - CONTINUED
The estimated fair values of the Company's financial instruments at
December 31, 1999 were as follows:
Carrying Fair
Amount Value
------------- -------------
Financial assets:
Cash and interest bearing deposits
with banks $ 2,634,740 $ 2,634,740
Accounts receivable 319,079 319,079
Financial liabilities:
Notes payable $ 137,288 $ 137,288
Accrued interest payable 0 0
The method(s) and assumptions used to estimate the fair value of financial
instruments are disclosed in Note 1, "Fair Values of Financial Instruments".
NOTE 6: INCOME TAXES
The Company files a consolidated federal income tax return; however,
federal income taxes are allocated between the Company and its
subsidiaries based on statutory rates. The consolidated income tax
expense, as a percentage of pretax earnings, differs from the statutory
federal income tax rate as follows:
Six months ended
June 30,
-----------------------------
2000 1999
------------ ------------
Statutory federal income tax rate 34.00% 34.00%
Non-deductible expenses - 3.37
Valuation allowance on net operating loss
carryforwards (34.00) -
Other - 1.44
------------ ------------
Effective income tax rate - % 38.81%
============ ============
Income tax expense is comprised of the following:
Current income tax expense $ - $ 60,034
Deferred income tax expense - 8,453
------------ ------------
$ - $ 68,487
============ =============
The tax effects of temporary differences that gave rise to deferred tax
assets (liabilities) as of June 30, 2000 and December 31, 1999, respectively:
<PAGE>
NOTE 6: INCOME TAXES - CONTINUED
2000 1999
-------------- -------------
DEFERRED TAX ASSETS
Net operating loss carryforwards $ 1,293,246 $ 863,337
Other 9,887 7,514
-------------- -------------
Total deferred tax assets 1,303,133 870,851
DEFERRED TAX LIABILITIES
Depreciation and amortization (100,303) (97,930)
Valuation allowance (801,863) (371,954)
-------------- -------------
Net deferred tax asset $ 400,967 $ 400,967
============== =============
At December 31, 1999, the Company had net operating loss carryforwards
available for federal income tax purposes of approximately $3,500,000, which
expire in the years 2014 - 2015. Of this amount, management has determined
that approximately $2,350,000 may not be utilized in future periods.
Additionally, the Company believes, based on current operating losses, that
it is more likely than not that the Company will not recover deferred tax
assets in excess of approximately $400,000. Accordingly, a valuation
allowance related to the uncertainty of utilization of the net operating loss
carryforwards has been recorded. The following summarizes the changes in the
valuation allowance:
Valuation allowance at January 1, 1999 $ -
Additions during 1999 371,954
--------------
Valuation allowance at December 31, 1999 371,954
Additions during 2000 429,909
--------------
Valuation allowance at June 30, 2000 $ 801,863
==============
NOTE 7: NOTES PAYABLE
On February 16, 2000, the Company issued a promissory note (the "Promissory
Note") to CNG Financial Corporation, an affiliate of the Company. The
Promissory Note, in the principal sum of $500,000, carries an interest rate
of 11.75% and is due and payable in one installment, together with all
accrued and unpaid interest thereon, on demand; provided, however, that
accrued interest shall be payable on March 1, 2000 and on the first day of
each month thereafter until the debt is paid in full. The outstanding balance
and accrued interest payable at June 30, 2000 were $500,000 and $4,990,
respectively.
FICI has a real estate lien note through American State Bank formerly
Security State Bank. The real estate note, dated August 1, 1998, in the
amount of $160,000 carries an annual interest rate of Wall Street prime plus
1%, with a maturity date of August 1, 2001. The note is secured by a deed of
trust to a building in which the note proceeds were used to purchase and
renovate. The outstanding balance on the note as of June 30, 2000 was
$139,775.
<PAGE>
NOTE 8: LEASE OBLIGATIONS
The Company has entered into various operating lease agreements. Under
terms of an operating lease with IBM Corporation, certificates of
deposit with a carrying value of $401,000 at June 30, 2000 were pledged
as collateral against Bank One letters of credit in favor of IBM. Under
terms of an operating lease with Timmermen Leasing, a certificate of
deposit with a carrying value of $100,000 at June 30, 2000, was pledged
as collateral. The future minimum payments for leased property under
these noncancellable lease agreements for each of the next five years
(no commitments for leased property extend more than five years) ending
December 31, 2004 are as follows:
2000 $ 678,192
2001 906,752
2002 327,233
2003 120,378
2004 108,049
2005 92,904
----------
Lease obligations $2,233,508
==========
On August 24, 1999 the Company entered into a new lease for its office
space, 36,182 square feet, from American State Bank at an annual cost
of approximately $282,168.
NOTE 9: MARKET RISK AND CONCENTRATIONS
For the six months ended June 30, 2000, merchant processing revenue
through Fi-Scrip and processing fees billed to CNG accounted for
approximately $191,195 or 24% and $160,684 or 20% of the Company's
total revenues, respectively. Greater Nevada Credit Union, Logberg and
American State Bank accounted for approximately $93,570 or 12%, $88,881
or 11%, and 87,708 or 11%, of the Company's total revenues,
respectively. No other customers accounted for 10% or more of the
Company's total revenues.
For the year ended December 31, 1999, revenue from the Best Bank
portfolio accounted for approximately $3,064,150 or 59% of the
Company's total revenues and merchant processing revenue accounted for
approximately $645,623 or 13% of the Company's total revenues. No other
customers accounted for 10% or more of the Company's total revenues.
Since the Best Bank failure in July 1998 the Company continued its role
as processor for the portfolio accounts through May 17, 1999, in which
it was receiving payment from the FDIC for its processing costs.
NOTE 10: RELATED PARTY TRANSACTIONS
On February 16, 2000 the Company issued an unsecured promissory note
(the "Demand Promissory Note) to CNG. The Promissory Note, in the
principal sum of $500,000, carries an interest rate of 11.75% and is
due and payable on demand in one installment, together with all accrued
and unpaid interest thereon; provided, however, that accrued interest
shall be payable on March 1, 2000 and on the first day of each month
thereafter until the debt is paid in full.
<PAGE>
NOTE 10: RELATED PARTY TRANSACTIONS - CONTINUED
On April 21, 2000 the Company and CNG executed a revolving line of
credit up to a maximum principal amount of $2,000,000 evidenced by a
convertible promissory note (the "Convertible Promissory Note"). The
Convertible Promissory Note matured three years from its date of
issuance and did bear interest at the rate of 11.5% per annum payable
quarterly. The initial draw under the revolving line of credit was used
to retire the Demand Promissory Note. The Convertible Promissory Note
was convertible into 10,000,000 shares of Common Stock based upon the
conversion rate of principal amount of the Convertible Promissory
Note/$0.20 per share. The Company also issued two warrants (Warrant A
and Warrant B) to CNG, which will be exercisable if certain revenue
targets are met. Warrant A expires April 30, 2001 and may become
exercisable to purchase a maximum of 2,000,000 shares of Common Stock
at $.01 per share if the total revenues of Finity are $620,000 or more
for any month prior to the expiration date of Warrant A. Warrant B
expires April 30, 2002 and may become exercisable to purchase a maximum
of 5,000,000 shares of Common Stock at $.01 per share if the total
revenues of Finity are $1,120,000 or more for any month prior to the
expiration date of Warrant B. On June 14, 2000 CNG elected to convert
the Convertible Promissory Note. On June 30, 2000 CNG surrendered the
Convertible Promissory Note to the Company, and in exchange the Company
issued to CNG 10,000,000 shares of Common Stock based on the
outstanding principal balance of $2,000,000 converted at $0.20 per
share. To date, CNG has purchased a total of 34,000,000 shares or 70.1%
of the 48,511,512 shares currently issued and outstanding. CNG is
currently the Company's principal shareholder and has, as of the date
of this report, designated four members to the Board of Directors of
the Company.
The outstanding balance and accrued interest payable at June 30, 2000
were $0 and $29,275, respectively.
NOTE 11: STOCK OPTION PLAN
The Company adopted a stock plan to provide for the granting of options
to senior management of the Company. As of December 31, 1999, the
Company has allocated 1,250,000 shares of stock for issuance under the
plan. On July 1, 1998 and August 6, 1999 the Company granted 316,666
and 550,000 options, respectively. The options expire five years from
the date of issuance. On December 24, 1998, the Company amended the
exercise price of the options previously granted on July 1, 1998.
The following table shows the vesting schedule and the exercise price,
as amended, for each of the five current and two former directors
awarded options on July 1, 1998.
Options vested
--------------
Total Options
Exercise July 1, October 1, January 1, Vested and
Director Price 1998 1998 1999 Outstanding
-------- ----- ---- ---- ---- -----------
Glenn M. Gallant $ .62 16,666 16,667 - 33,333
Douglas R. Baetz $ .62 16,666 16,667 - 33,333
Kenneth A. Klotz $ .48 16,666 16,667 16,667 50,000
Charles LaMontagne $ .48 16,666 16,667 16,667 50,000
Olan Beard $ .48 16,666 16,667 16,667 50,000
Donald Thone $ .48 16,666 16,667 16,667 50,000
Robert Feldman $ .48 16,666 16,667 16,667 50,000
-----------
316,666
============
<PAGE>
NOTE 11: STOCK OPTION PLAN - CONTINUED
The following table shows the vesting schedule and the exercise price
for each of the five directors awarded options on August 6, 1999.
OPTIONS VESTED
Total Options
Exercise August 6, October 22, Vested and
Director Price 1999 1999 Outstanding
-------- ----- ---- ---- -----------
Kenneth A. Klotz $ .23 50,000 100,000 150,000
Charles LaMontagne $ .23 50,000 100,000 150,000
Olan Beard $ .23 50,000 100,000 150,000
Donald Thone $ .23 50,000 - 50,000
Robert Feldman $ .23 50,000 - 50,000
-----------
550,000
===========
Messrs. Baetz and Gallant, having greater than 10% of the outstanding
shares of the Company at July 1, 1998, were granted options with an
exercise price set at 110% of the fair market value of the Company's
common stock at the date of the grant. The remaining five directors
were granted options with an exercise price set at 85% of the fair
market value of the Company's common stock at the date of the grant. As
of June 30, 2000 no options under the plan had been exercised
The 100,000 options granted to each of Messrs. Klotz, LaMontagne and
Beard on August 6, 1999 and vesting on November 16, 1999, originally
were to vest over a two year period, beginning with 50,000 vesting on
August 6, 2000 and 50,000 vesting on August 6, 2001, but were
accelerated by the change in control of the Company's shareholders on
October 22, 1999.
Effective December 7, 1999, Mr. Roland Koch was granted 125,000 options
to purchase the Company's common stock under the plan, with an exercise
price of $0.40, 85% of the fair market value of the Company's common
stock at the date of the grant. The options will vest over a three year
period beginning December 7, 1999 at a rate of 1/3 each year. As of
June 30, 2000 Mr. Koch has 41,667 options vested and none have been
exercised.
Effective December 7, 1999, Mr. John Courter was granted 25,000 options
to purchase the Company's common stock under the plan, with an exercise
price of $0.40, 85% of the fair market value of the Company's common
stock at the date of the grant. The options are currently vested as of
December 7, 1999. As of June 30, 2000 Mr. Courter has 25,000 options
vested and none have been exercised.
Effective March 27, 2000, Mr. Harvey Wagner was granted 50,000 options
to purchase the Company's common stock under the plan, with an exercise
price of $0.27, 85% of the fair market value of the Company's common
stock at the date of the grant. The options are currently vested as of
March 27, 2000. As of June 30, 2000 Mr. Wagner has 50,000 options
vested and none have been exercised.
Effective March 7, 2000, Mr. Michael R. Waldron was granted 10,000
options to purchase the Company's common stock under the plan, with an
exercise price of $0.27, 85% of the fair market value of the Company's
common stock at the date of the grant. The options vest on the
following schedule: 1,000 shares vested July 1, 2000; 1,000 shares
vested March 7, 2001; 1,000 shares vested March 7, 2002; 1,000 shares
vested March 7, 2003; 6,000 shares will be awarded subject to
management discretion based upon agreed to performance measures As of
June 30, 2000 Mr. Wagner has 0 options vested.
<PAGE>
NOTE 11: STOCK OPTION PLAN - CONTINUED
The Company accounts for the options in accordance with Accounting
Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, under which compensation cost is recognized for the
difference in the option's exercise price and the fair market value of
the stock as of the date of each grant over the vesting period. The
effect of further compensation cost for the plan, had it been included
in the income statement as provided for in SFAS No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, would have resulted in an insignificant
reduction to the Company's net earnings and earnings per share on a pro
forma basis, based on estimates using an accepted options pricing
model.
NOTE 12: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY
The following represents consolidated financial information of the
parent company as of and for the six months ended June 30, 2000 and as
of and for the year ended December 31, 1999 utilizing the equity method
of accounting.
<TABLE>
CONDENSED BALANCE SHEET:
<CAPTION>
ASSETS June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 20 $ -
Prepaid expenses and other assets 17,500 36,820
Federal income tax receivable - -
Due from subsidiaries 3,731,454 1,920,928
------------ ------------
Total current assets 3,748,974 1,957,748
Other assets
Deferred tax asset 17,637 17,637
Other investments 90,000 90,000
Investment in subsidiaries (1,676,342) 792,635
------------ ------------
Total other assets (1,568,705) 900,272
------------ ------------
TOTAL ASSETS $ 2,180,269 $ 2,858,020
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accrued expenses and other liabilities $ 63,878 $ 90,562
Due to subsidiaries - -
------------ ------------
Total current liabilities 63,878 90,562
SHAREHOLDERS' EQUITY
Common stock 48,512 38,512
Capital surplus 7,881,096 5,891,096
Accumulated deficit (5,813,217) (3,162,150)
------------ ------------
Total shareholders' equity 2,116,391 2,767,458
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,180,269 $ 2,858,020
============ ============
</TABLE>
<PAGE>
<TABLE>
NOTE 12: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY - CONTINUED
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
CONDENSED STATEMENT OF OPERATIONS:
REVENUES
Undistributed loss of subsidiaries $(2,468,977) $(2,722,064)
EXPENSES
Stockholder costs and fees 582 5,115
Professional and outside services 171,659 405,584
Marketing 6,012 106,987
Other operating 3,837 2,503
------------ ------------
Total operating expenses 182,090 520,189
Compensation to directors - 10,000
------------ ------------
Total other expense - 10,000
------------ ------------
LOSS BEFORE FEDERAL INCOME TAX (2,651,067) (3,252,253)
Income tax benefit (-) (20,636)
------------ ------------
Net loss $(2,651,067) $(3,231,617)
============ ============
CONDENSED STATEMENT OF CASH FLOWS:
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,651,067) $(3,231,617)
Adjustments to reconcile net loss
to net cash provided by operations
Undistributed loss in subsidiaries 2,468,977 2,722,063
Iincrease in receivables (1,810,526) (1,338,319)
Decrease in prepaid
expenses and other assets 19,320 51,543
Decrease in accruals
and accounts payable (26,684) (1,565,859)
------------ ------------
Net cash used by operating activities (1,999,980) (3,362,189)
CASH FLOWS FROM INVESTING ACTIVITIES
Other investments - (90,000)
------------ ------------
Net cash used by investing activities - (90,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit, net of payments - 451,128
Issuance of common stock 2,000,000 3,000,000
------------ ------------
Net cash provided by financing activities 2,000,000 3,451,128
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 20 (1,061)
Cash and cash equivalents at beginning of year - 1,061
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20 $ -
============ ============
</TABLE>
<PAGE>
NOTE 13: CONSULTING AGREEMENTS
On March 20, 1998, the Company entered into a consulting agreement with
Worldwide Corporate Finance (Worldwide). Worldwide, through its
individual affiliate, Michael Markow, provided the Company with
consulting services, including long-term business, managerial and
financial planning; investigating and analysis in corporate
reorganizations and expansion in merger and acquisition opportunities;
and the introduction of business opportunities for credit card
processing services. As compensation for services, the Company granted
to Mr. Markow options to purchase up to 700,000 shares of Common Stock,
at varying prices between $0.95 and $1.70, which are the subject of a
currently effective registration statement. The fair value of the
options granted approximated the value of the services provided by Mr.
Markow and has been recognized as a component of consulting fees in the
consolidated income statement.
In February 1999, the Company's management and Mr. Markow reached an
agreement to terminate the existing consulting agreement between the
Company and Worldwide. In settlement the Company agreed to allow Mr.
Markow to exercise 10,000 additional options to purchase an equal
number of shares of the Company's Common Stock at $1.70 per share
resulting in a transaction valued at $17,000. Additionally the Company
agreed to pay Mr. Markow $15,000 in cash and terminate the remaining
unexercised balance of options initially granted to Mr. Markow and
Worldwide under the consulting agreement. The Company does not expect
to enter into any additional consulting agreements with Mr. Markow or
Worldwide in the future. Mr. Markow and Worldwide had exercised a total
of 275,000 options valued at $298,750 under the former consulting
agreement. As of the date of this report there are no remaining options
outstanding related to the former consulting agreement with Mr. Markow
and Worldwide.
The fair value of the options granted approximate the value of the
services provided by Mr. Markow and has been recognized as a component
of consulting fees in the income statement over the term of the
agreement.
On July 1, 1998, Columbia Capital Corp. entered into a consulting
agreement with Matthias and Berg, LLP ("the Firm"). The Firm, through
its partner, Jeffrey Berg, provides the Company with consulting and
litigation services, including long term business, managerial and
financial litigation support; investigating and analysis in corporate
reorganizations and legal expertise on merger and acquisition
opportunities. As compensation for services, the Company granted to the
Firm options to purchase up to 100,000 shares of Common Stock, which
are the subject of a currently effective registration statement, on the
following terms and conditions: (i) options to purchase up to 100,000
shares of Common Stock at an exercise price of $0.48 per share,
exercisable from July 1, 1998. The fair value of consulting and
litigation services provided by the Firm is being recognized as the
services are provided. As of June 30, 2000 no options have been
exercised under the agreement.
NOTE 14: STOCK PURCHASE AGREEMENT
On September 16, 1999, pursuant to the terms of an Agreement for
Purchase of Stock, dated as of September 16, 1999, and as amended as of
December 31, 1999 (the CLCK/CNG Stock Purchase Agreement), by and
between the Company and CNG, an Ohio corporation (CNG), CNG purchased
4,000,000 shares of common stock of the Company for a purchase price of
$500,000. CNG is a holding company of subsidiaries which provide
consumer financial services. CNG is based in Mason, Ohio.
<PAGE>
NOTE 14: STOCK PURCHASE AGREEMENT - CONTINUED
On October 22, 1999, CNG obtained a controlling interest in the
Company, when pursuant to the terms of the CLCK/CNG Stock Purchase
Agreement, CNG acquired an additional 20,000,000 shares of common stock
(the Second Installment) for a purchase price of $2,500,000 (the Second
Installment Payment). On June 14, 2000 CNG elected to convert a
Convertible Promissory Note. On June 30, 2000 CNG surrendered the
Convertible Promissory Note to the Company, and in exchange the Company
issued to CNG 10,000,000 shares of Common Stock based on the
outstanding principal balance of $2,000,000 converted at $0.20 per
share. CNG controls in excess of a majority of the issued and
outstanding voting securities of the Company, able to elect all of the
directors of the Company and effectively control the Company's affairs.
To date, CNG has purchased a total of 34,000,000 shares or 70.1% of the
48,511,512 shares currently issued and outstanding. CNG is currently
the Company's principal shareholder and has, as of the date of this
report, designated four members to the Board of Directors of the
Company.
The Company has been advised by CNG that the source of payment for the
purchase of the 34,000,000 shares was from the working capital line of
credit provided by CNG's credit facility lenders.
The CLCK/CNG Stock Purchase Agreement also provides that CNG shall be
granted a Non-Qualified Stock Option (Stock Option) to purchase an
additional 10,000,000 shares of common stock for the purchase price of
$2,000,000 (the Third Installment Payment), which Stock Option must be
exercised by CNG on or before September 16, 2000. The Stock Option is
exercisable in whole, and not in part.
Following the issuance of the 30,000,000 shares to CNG and being
entitled to exercise the Stock Option with respect to the additional
10,000,000 shares, CNG will beneficially own 44,000,000 shares of
common stock, or 75.2% of the assumed issued and outstanding common
stock (58,511,512 shares issued and outstanding for purposes of
calculating the percentage of beneficial ownership).
In connection with the CLCK/CNG Stock Purchase Agreement, the Company
entered into a stock purchase agreement (the CLCK/Century Stock
Purchase Agreement), dated as of September 16, 1999, with Century
Financial Group, Inc., a Florida corporation (Century). Century is an
affiliate of two of the Company's principal stockholders, Douglas R.
Baetz and Glenn M. Gallant. Century and Messrs. Baetz and Gallant are
not affiliated with CNG. Under the terms and conditions of the
CLCK/Century Stock Purchase Agreement, Century purchased 1,736,512
shares of common stock of the Company in consideration of the
cancellation of the obligation of $434,128 due and payable by the
Company to Century.
NOTE 15: BAYTREE SETTLEMENT
On June 30, 1998, the Company, FICI, Douglas R. Baetz and Glenn M.
Gallant filed a complaint (the Complaint) in the United States District
Court for the Southern District of Florida (Case No. 98-6701) against
Baytree., Michael Gardner (Gardner), certain former officers and
directors of the Company, and certain other parties. The complaint
alleges claims against the named defendants, including fraud,
securities fraud and breach of fiduciary duty, in connection with the
transactions related to the Stock Purchase Agreement, entered into as
of September 23, 1997, among the Company, FICI, and Messrs. Gallant and
Baetz.
<PAGE>
NOTE 15: BAYTREE SETTLEMENT - CONTINUED
The complaint seeks relief against the named defendants, including
monetary damages relating to improper sales of shares of common stock
into the public market by the named defendants and the cancellation of
the shares of common stock issued by the Company to Baytree for
services rendered for arranging the transactions which are the subject
of the Stock Purchase Agreement. On September 16, 1999, Baytree and
Gardner filed an answer to the Complaint, denying the claims and
asserting counterclaims against the Company and affiliates. On
September 29, 1999, the Company, FICI, Douglas R. Baetz, Glenn M.
Gallant, Baytree and Gardner entered into a settlement agreement. Under
the terms of the settlement agreement each party has agreed to drop the
complaints against each of the other parties. Additionally, under terms
of the settlement agreement Baytree/Gardner agreed to sell their
holdings of 400,000 restricted shares of the Company's common stock to
an unaffiliated third party. The Company views the settlement as
favorable to the interests of the Company and other shareholders.
NOTE 16: IMPAIRMENT OF GOODWILL
Based on circumstances and events which occurred during the year ended
December 31, 1999, which includes the termination of the Master
Agreement related to the BestBank portfolio (Note 6) and a change in
control of the Company's principal shareholders (Note 18), management
of the Company has determined that the significant tangible and
intangible assets acquired in the purchase of FICI in 1997, no longer
exist or have been fully depreciated and that the related goodwill is
fully impaired. Accordingly, the balance of goodwill was written off at
December 31, 1999, resulting in a non- recurring charge of $844,066
reflected in the Statement of Operations under the caption other
expense.
NOTE 17: AMENDMENT OF CERTIFICATE OF INCORPORATION
Effective March 1, 2000, FICI amended its certificate of incorporation
effectively changing its name to Finity Corporation. This amendment
will not affect current operations of the Company.
NOTE 18: EMPLOYEE BENEFIT PLAN
The Company and its subsidiaries have an employee benefit plan covering
substantially all employees. The plan is a qualified salary reduction
plan under Section 401(k) of the Internal Revenue Code, which allows
deferral of compensation, effective January 1, 1998. Under this plan,
the Company's annual contribution is at the discretion of the Company's
Board of Directors and cannot exceed fifteen (5%) of eligible
compensation. The Company contributed $0 and $74,739 to the plan as of
June 30, 2000 and December 31, 1999, respectively.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
This report, including the disclosures below, contains certain forward-looking
statements that involve substantial risks and uncertainties. Unless the context
otherwise requires, the term "Company" refers to Finity Holdings, Inc., formerly
known as Columbia Capital Corp. and its wholly-owned subsidiaries, Finity
Corporation, a Texas corporation ("Finity") and Fi-Scrip, Incorporated, a Nevada
corporation ("Fi-Scrip"), through which the Company principally conducts its
business operations. When used herein, the terms "anticipates," "expects,"
"estimates," "believes" and similar expressions, as they relate to the Company
or its management, are intended to identify such forward-looking statements. The
Company's actual results, performance or achievements may differ materially from
those expressed or implied by such forward-looking statements. Factors that
could cause or contribute to such material differences include inability to
replace lost business, inability to generate sufficient additional capital,
consolidation of banks and other financial institutions, government regulation,
competition and various other factors discussed in this report and in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1999.
OVERVIEW OF PRESENTATION
The following should be read in conjunction with the Consolidated Financial
Statements of Finity Holdings, Inc. formerly known as Columbia Capital Corp., a
Delaware corporation (the "Company"), and the related notes thereto, contained
elsewhere in this report.
The Company was organized under the laws of the State of Delaware on February 5,
1993. The Company operates through its wholly-owned subsidiaries, Finity,
formerly known as First Independent Computers, Inc. ("FICI"), a Texas
corporation and Fi-Scrip. FICI changed its name to Finity by amendment to its
articles of incorporation effective March 1, 2000. The amendment was implemented
as part of management's strategic marketing plan and is not expected to have an
immediate affect on the operations of the subsidiary. Unless stated otherwise,
the Company, Finity and Fi-Scrip shall hereinafter be referred to collectively
as the Company.
The Company has included in this Report the unaudited consolidated financial
statements of the Company for the six (6) months ended June 30, 2000 and 1999,
which include the consolidated balance sheets of the Company as of June 30, 2000
(unaudited) and December 31, 1999 (audited), and the related consolidated income
statements and statements of changes in shareholders' equity and cash flows for
the six (6) month periods ended June 30, 2000 and 1999.
RESULTS OF OPERATIONS FOR THE SIX (6) MONTHS ENDED JUNE 30, 2000 AND 1999
Total operating revenues for the six months ended June 30, 2000 decreased
approximately 73% to $1,134,313 from $4,268,989 for the six months ended June
30, 1999. Total operating revenues principally include (i) credit card
processing revenues, (ii) mail operations and (iii) merchant processing
revenues.
Credit card processing revenues during the six months ended June 30, 2000
decreased 83% to $600,830 from $3,516,332 during the six months ended June 30,
1999. This decrease primarily relates to the loss of the revenues associated
with the processing contract (the "Master Agreement") with BestBank of Boulder,
Colorado ("BestBank") which was terminated by the Federal Deposit Insurance
Corporation ("FDIC") on March 4, 1999.
<PAGE>
Mail operations revenues during the six months ended June 30, 2000 decreased to
$22,498 from $173,520. This decrease related to the expiration of the Company's
processing arrangements with American State Bank during 1999 and the loss of the
revenues associated with the processing contract (the "Master Agreement") with
BestBank of Boulder, Colorado ("BestBank") which was terminated by the Federal
Deposit Insurance Corporation ("FDIC") on March 4, 1999.
Merchant processing revenue was $510,692 and $356,691 for the six months ended
June 30, 2000 and 1999, respectively. Merchant processing revenue is from the
Company's subsidiary Fi-Scrip, which was consolidated into the Company as of
January 1, 1999 and has experienced significant growth in Electronic Benefits
Transfer transactions throughout 1999 and the first half of 2000.
Total operating expenses during the six months ended June 30, 2000 decreased 29%
to $3,751,948 from $5,301,286 during the six months ended June 30, 1999. Total
operating expenses principally include: (i) cost of salaries and employee
benefits, (ii) equipment and software expenses, (iii) professional and outside
services, as follows:
Cost of salaries and employee benefits during the six months ended June 30, 2000
decreased 12% to $1,516,377 from $1,715,292 during the six months ended June 30,
1999. This decrease primarily resulted from a decrease of approximately 16 full
time employees through attrition. The Company generally did not replace those
employees that left and worked to consolidate job responsibilities among fewer
employees.
Equipment and software expenses during the six months ended June 30, 2000
decreased 41% to $864,224 from $1,475,727 during the six months ended June 30,
1999. This decrease primarily related to the Company renegotiating terms of its
software lease with PaySys.
Cost of professional and outside services during the six months ended June 30,
2000 decreased 44% to $253,722 from $453,929 during the six months ended June
30, 1999. The decline in professional and outside services expense from 1999
resulted from a decline in the Company's legal and accounting fees.
Further, certain miscellaneous operating expenses, including insurance, postage
and delivery fees, and franchise use and sales taxes, during the six months
ended June 30, 2000, decreased 52% to $305,799 from $632,659 during the six
months ended June 30, 1999. These decreases resulted primarily from no bad debt
being recorded during 2000 versus bad debt being recorded during the first
quarter of 1999 related to uncollected processing fees on the former BestBank
portfolio.
Other income and expenses resulted in net expenses of $33,432 and $25,262 for
the six months ended June 30, 2000 and 1999, respectively. Other income and
expenses consist of interest income of $20,136 offset by interest expenses of
$53,568 for the six months ended June 30, 2000. Other income and expenses
consist of interest income of $24,060 offset by interest expenses of $49,322 for
the six months ended June 30, 1999.
As a result of the foregoing, the Company generated net loss of $2,651,067
during the six months ended June 30, 2000, as compared to a net loss of
$1,057,559 during the six months ended June 30, 1999. The losses primarily
resulted from a decline in revenue from credit card processing related to the
termination of the Master Agreement.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the ratio of current assets to current liabilities was 1.3 to
1 as compared to 1.45 to 1 at December 31, 1999.
The Company's cash flow needs for the six months ended June 30, 2000 were
primarily provided from capital injections and borrowings related to the
agreements between the Company and its principal shareholder, CNG Financial
Corporation ("CNG"). The Company's cash flow needs for the six months ended June
30, 1999 were primarily provided from operations. At June 30, 2000 and December
31, 1999, $20,000 of unallocated reserve for bad debt was carried by the
Company. At June 30, 2000, prepaid expenses were $377,967 and are anticipated to
be expensed as used in the future. Net property and equipment was $1,046,300 at
June 30, 2000. There were no major capital additions during the six months ended
June 30, 2000.
The termination of the Master Agreement, which eliminated approximately 84% of
the Company's monthly revenues from processing, as measured during 1998, has had
a material adverse affect on the Company's results of operations during the six
months ended June 30, 2000 and the year ended December 31, 1999, and is
anticipated to have a material adverse effect on the Company's results of
operations during the near future unless and until the Company rebuilds and
replaces its revenue sources.
Management of the Company hopes the Company will be able to replace the loss of
revenue from the Master Agreement and is currently working to negotiate new
business to offset such loss. Management is continuing to work to strategically
reduce operating costs in an effort to streamline the Company's operations while
maintaining the integrity of systems and the overall ability of the Company to
move swiftly and effectively to implement new business.
On September 16, 1999, Finity effectively terminated an eight hundred thousand
dollars ($800,000) unsecured operating line of credit through Century Financial
Group, Inc. ("Century"). Finity agreed to offset $576,352 in accounts receivable
from Century to Finity against the $827,921 balance of the line of credit, which
included $27,921 in accrued interest payable, and through the Company, issued
1,006,276 shares of Common Stock in consideration of the cancellation of the
remaining $251,569 balance of the line of credit. The line of credit carried an
annual percentage rate of ten percent (10%). Under the terms of the line of
credit, Finity paid interest on a monthly basis with the unpaid principal due at
maturity, September 15, 1999.
On September 16, 1999, Fi-Scrip effectively terminated an operating line of
credit through Century. The Company agreed to issue 730,236 shares of Common
Stock in consideration of the cancellation of the $182,559 balance of the line
of credit, including $6,604 in accrued interest payable. The line of credit,
dated May 1, 1998, with Century provided Fi-Scrip with a maximum operating line
of credit of two hundred and fifty thousand dollars ($250,000). The note carried
an annual percentage rate of ten percent (10%). Under the terms of the note,
Fi-Scrip paid interest on a monthly basis with the unpaid principal due on
demand.
In September and November, 1999, pursuant to the terms of a stock purchase
agreement between CNG and the Company (the "CLCK/CNG Stock Purchase Agreement"),
CNG purchased 24,000,000 shares of Common Stock for a purchase price of
$3,000,000. Pursuant to the CLCK/CNG Stock Purchase Agreement, CNG was granted
an option (the "CNG Stock Option") to purchase an additional 10,000,000 shares
of Common Stock for the purchase price of $2,000,000. CNG has agreed to exercise
the CNG Stock Option at any time that the Company indicates a need for these
funds for operations. However, no assurance can be given that CNG will exercise
the CNG Stock Options when called upon to do so.
<PAGE>
In connection with the CLCK/CNG Stock Purchase Agreement, the Company entered
into the CLCK/Century Stock Purchase Agreement, dated as of September 16, 1999,
with Century. Under the terms and conditions of the CLCK/Century Stock Purchase
Agreement, Century purchased 1,736,512 shares of Common Stock of the Company in
consideration of the cancellation of the obligation of $434,128 due and payable
by the Company to Century.
On February 16, 2000, the Company entered into a promissory note (the "Demand
Promissory Note") payable to CNG in consideration of $500,000. The Note was due
and payable on demand with accrued interest due and payable monthly at a rate of
11.75%. On April 21, 2000 the Company and CNG executed a revolving line of
credit up to a maximum principal amount of $2,000,000 evidenced by a convertible
promissory note (the "Convertible Promissory Note"). The Convertible Promissory
Note had a scheduled maturity date of three years from its date of issuance and
an interest rate of 11.5% per annum payable quarterly. The initial draw under
the revolving line of credit was used to retire the Demand Promissory Note. The
Convertible Promissory Note was convertible into 10,000,000 shares of Common
Stock based upon the conversion rate of principal amount of the Convertible
Promissory Note/$0.20 per share. On June 14, 2000 CNG elected to convert the
Convertible Promissory Note. On June 30, 2000 CNG surrendered the Convertible
Promissory Note to the Company in exchange for 10,000,000 shares of Common Stock
based on the outstanding principal balance of $2,000,000 converted at $0.20 per
share.
The Company has also issued two warrants (Warrant A and Warrant B) to CNG, which
will be exercisable if certain revenue targets are met. Warrant A expires April
30, 2001 and may become exercisable to purchase a maximum of 2,000,000 shares of
Common Stock at $.01 per share if the total revenues of Finity are $620,000 or
more for any month prior to the expiration date of Warrant A. Warrant B expires
April 30, 2002 and may become exercisable to purchase a maximum of 5,000,000
shares of Common Stock at $.01 per share if the total revenues of Finity are
$1,120,000 or more for any month prior to the expiration date of Warrant B.
The outstanding balance and accrued interest payable at June 30, 2000 were $0
and $29,275, respectively. The proceeds of the note were used for operations of
the Company.
Cash and cash equivalents were $1,081,571 as of June 30, 2000, as compared to
$2,133,740 at December 31, 1999. This decrease was primarily attributable to the
Company working to keep its accounts payable current.
As of June 30, 2000 and December 31, 1999, the Company's long-term borrowings
were $122,348 and $124,847, respectively. Long-term borrowings consisted of the
note payable to American State Bank, less the current portion of the note
payable.
As of June 30, 2000, the Company had short-term borrowings in the aggregate
amount of $13,055, as compared to $12,441 at December 31, 1999.
In October, 1997, the Company entered into a 36-month equipment lease with IBM
related to the Company's credit card processing operations. The Company upgraded
the equipment lease in March, 1998 to provide for continued increases in the
Company's processing volume and efficiencies, and expansion of business
operations. The Company financed the lease agreement by the pledge of
certificates of deposit in the aggregate amount of $501,000.
The certificates of deposit are for one-year terms and are automatically
renewable for an additional year. The certificates of deposit bear varying rates
of interest based on the date of the establishment of the certificates of
deposit.
<PAGE>
Net cash (used in) provided by operating activities was $(3,045,317) and
$459,984 for the six months ended June 30, 2000 and 1999, respectively. Net cash
used by operations during the six months ended June 30, 2000 primarily consisted
of net losses from operations and decreases in accruals and accounts payable.
Net cash provided by operations during the six months ended June 30, 1999
primarily consisted of net loss from operations, offset by increases in accruals
and accounts payable and deferred income taxes, decreases in accounts
receivable, deposits and prepaid expenses and depreciation and amortization.
Net cash used in investing activities was $4,967 and $111,833 for the six months
ended June 30, 2000 and 1999, respectively. In the six months ended June 30,
2000, the Company utilized $4,967 to purchase certain fixed assets. In the six
months ended June 30, 1999, the Company utilized $111,833 to purchase certain
fixed assets.
Net cash provided by financing activities was $1,998,115 and $697,163 for the
six months ended June 30, 2000 and 1999, respectively. In the six months ended
June 30, 2000, the Company received proceeds of $2,000,000 from the issuance of
common stock less payments made on the note payable to American State Bank. For
the six months ended June 30, 1999, the Company drew $266,947 on the Line of
Credit with Century, net of payments, received proceeds of $17,000 from the
issuance of common stock and benefited from $413,216 in cash and cash
equivalents related to the acquisition of Fi-Scrip.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) On June 30, 2000 CNG converted a Convertible Promissory Note in the
principal amount of $2,000,000 in exchange for 10,000,000 shares of Common Stock
based on a conversion rate of $0.20 per share. The issuance of the Common Stock
was exempt under Sections 3(a)(9) and 4(2) of the Securities Act of 1933 since
the Common Stock was exchanged exclusively with CNG, the sole holder of the
Convertible Promissory Note, and no commission or other remuneration was paid or
given directly or indirectly for soliciting such exchange.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(c) On June 20, 2000, the Company held its annual meeting. The
following is a brief description of the matters voted upon at the meeting.
(1) The following table lists the nominees who were elected as
directors of the Company and the votes cast for, and withheld from, the election
of such directors. All of the nominees were elected without opposition.
<PAGE>
NAME SHARES VOTED SHARES VOTED SHARES
---- FOR AGAINST ABSTAINED
-----------------------------------------------
Kenneth A. Klotz 25,458,978 2,000 20,530
Olan Beard 25,458,978 2,000 20,530
Robert M Feldman 25,460,978 20,530
Donald L. Thone 25,460,978 20,530
Jared Davis 25,460,978 20,530
A. David Davis 25,460,978 20,530
Allen L. Davis 25,460,978 20,530
Roland Koch 25,460,978 20,530
Harvey A. Wagner 25,460,978 20,530
(2) The adoption and approval of an amendment to the Restated
Certificate of Incorporation to (a) increase the authorized
shares of Common stock from 50,000,000 to 100,000,000, and (b)
change the name of the Company to Finity Holdings, Inc.. There
were 25,428,478 votes cast for, and 34,030 votes cast against
the amendment. There were 19,000 abstentions and 0 broker
non-votes.
(3) The adoption of the Company's 2000 Stock Option Plan (the
"2000 Stock Option Plan") and to reservation of 4,000,000
shares of the Company's Common Stock for issuance under the
2000 Stock Option Plan. There were 24,163,429 votes cast for,
and 37,330 votes cast against the adoption of the 2000 Stock
Option Plan. There were 19,000 abstentions and 1,261,749
broker non-votes.
(4) The ratification of the appointment of Davis Kinard & Co.
P.C., Certified Public Accountants, as independent public
accountants for the Company for the year ending December 31,
2000. There were 25,456,778 votes cast for, and 24,730 votes
cast against the ratification. There were 0 abstentions and 0
broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27. Financial Data Schedule
Reports on Form 8-K
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
COLUMBIA CAPITAL CORP.
Dated: August 14, 2000 By: /s/ Kenneth A. Klotz
---------------------------
Kenneth A. Klotz
President
Dated: August 14, 2000 By: /s/ Charles La Montagne
---------------------------
Charles La Montagne
Chief Financial Officer
