<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 March 31, 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
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 May 15, 2000
was 38,511,512 shares.
Transactional Small Business Disclosure Format (Check one): Yes No X
--- ---
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<PAGE>
<TABLE>
COLUMBIA CAPITAL CORP.
Consolidated Balance Sheets - Unaudited
<CAPTION>
ASSETS March 31, December 31,
2000 1999
----------------- -----------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 2,630,295 $ 2,133,740
Interest bearing deposits with banks 501,000 501,000
Accounts receivable, net 1,034,960 319,079
Prepaid expenses and other assets 392,583 337,468
Federal income tax receivable - 556,774
----------------- -----------------
Total current assets 4,558,838 3,848,061
Premises and equipment 1,814,645 1,812,720
Less accumulated depreciation 689,206 607,163
----------------- -----------------
Net property and equipment 1,125,439 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 $ 6,175,244 $ 5,544,585
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 2,737,165 $ 2,163,382
Accrued expenses and other liabilities 1,290,292 476,457
Current portion of note payable - American State Bank 15,790 12,441
Notes payable - related party 500,000 -
Accrued interest payable 4,990 -
----------------- -----------------
Total current liabilities 4,548,237 2,652,280
Long term portion of note payable - American State Bank 123,985 124,847
----------------- -----------------
Total liabilities 4,672,222 2,777,127
SHAREHOLDER'S EQUITY
Common stock, $.001 par value; 50,000,000 shares
authorized; 38,511,512 issued and outstanding 38,512 38,512
Additional paid-in capital 5,891,096 5,891,096
Retained earnings (4,426,586) (3,162,150)
----------------- -----------------
Total shareholders' equity 1,503,022 2,767,458
----------------- -----------------
Total liabilities and shareholders' equity $ 6,175,244 $ 5,544,585
================= =================
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements
F-1
<PAGE>
<TABLE>
COLUMBIA CAPITAL CORP.
Consolidated Income Statements - Unaudited
<CAPTION>
For the Three Months
Ended March 31,
------------------------------------------
2000 1999
------------------- -------------------
<S> <C> <C>
REVENUE
Credit card revenue 289,616 2,673,269
Banking revenue - 73,842
Mail operations revenue 12,342 148,769
Merchant processing fees 293,883 27,074
Other 236 84,950
------------------- -------------------
Total operating revenue 596,077 3,007,904
EXPENSES
Salaries and employee benefits 746,703 920,183
Equipment and software lease 431,949 598,521
Facilities rent 71,372 100,841
Repairs and maintenance 82,943 137,462
Depreciation 82,043 89,675
Amortization of goodwill - 12,174
Computer and office supplies 28,286 95,787
Telephone 82,306 78,934
Professional and outside services 128,909 332,907
Travel and entertainment 49,434 22,475
Other operating 153,925 432,635
------------------- -------------------
Total expenses 1,857,870 2,821,594
------------------- -------------------
INCOME FROM OPERATIONS (1,261,793) 186,310
Other income (expense)
Interest income 9,314 10,421
Interest expense (11,957) (20,272)
------------------- -------------------
Total other income (expense) (2,643) (9,851)
------------------- -------------------
INCOME BEFORE TAX (1,264,436) 176,459
Income tax expense - 68,487
------------------- -------------------
NET INCOME $ (1,264,436) $ 107,972
=================== ===================
Basic earnings per share $ -0.03 $ 0.01
=================== ===================
Diluted earnings per share $ -0.03 $ 0.01
=================== ===================
Weighted average shares outstanding 38,511,512 12,775,000
=================== ===================
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements
F-2
<PAGE>
<TABLE>
COLUMBIA CAPITAL CORP.
Consolidated Statements of Changes in Shareholders' Equity - Unaudited
For the Three Months Ended March 31, 2000
<CAPTION>
Common Stock Accumulated
----------------------------------- Paid-In (Deficit)
Shares Amount Capital Earnings 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
Net loss - - - (1,264,436) (1,264,436)
---------------- ---------------- ---------------- --------------- ----------------
BALANCE - MARCH 31, 2000 38,511,512 $ 38,512 $ 5,891,096 $ (4,426,586) $ 1,503,022
================ ================ ================ =============== ================
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements
F-3
<PAGE>
<TABLE>
COLUMBIA CAPITAL CORP.
Consolidated Statement of Cash Flows - Unaudited
<CAPTION>
For the Three Months
Ended March 31,
------------------------------------------
2000 1999
------------------- -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ (1,264,436) $ 107,972
Adjustments to reconcile net income to
net cash provided by operations
Depreciation and amortization 82,043 101,849
Deferred income tax expense - 8,453
(Increase) decrease in
Accounts receivable (159,107) 140,657
Prepaid expenses and other assets (55,115) 80,744
Increase in
Accruals and accounts payable 1,395,095 113,962
------------------- -------------------
Net cash (used in) provided by operating activities (1,520) 553,637
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (1,925) (13,744)
Investment in interest bearing deposit - -
------------------- -------------------
Net cash used in investing activities (1,925) (13,744)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit, net of payments 500,000 95,701
Proceeds from the sale of stock - 17,000
Cash and cash equivalents received in acquisition
of Fi-Scrip - 413,216
------------------- -------------------
Net cash provided by financing activities 500,000 525,917
------------------- -------------------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 496,555 1,065,810
Cash and cash equivalents at beginning of period 2,133,740 268,400
------------------- -------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,630,295 $ 1,334,210
=================== ===================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest expense $ 6,967 $ 19,423
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements
F-4
<PAGE>
COLUMBIA CAPITAL CORP.
Notes to Financial Statements
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 March 31, 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
three months ended March 31, 2000 and 1999 of 38,511,512 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 three months
ended March 31, 2000 and 1999 of 40,589,888, and 12,775,000
respectively. No potential common shares existed at March 31, 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 March 31, 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 24,000,000 shares or
62.3% of the 38,511,512 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 March 31, 2000, the Company had cash balances in excess of
$2,500,000.
NOTE 5: FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments at
March 31, 2000 were as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
----------- -----------
<S> <C> <C>
Financial assets:
Cash and interest bearing deposits with banks $ 3,131,295 $ 3,131,295
Accounts receivable 1,034,960 1,034,960
Financial liabilities:
Notes payable $ 639,775 $ 639,775
Accrued interest payable 4,990 4,990
</TABLE>
<PAGE>
NOTE 5: FINANCIAL INSTRUMENTS - CONTINUED
The estimated fair values of the Company's financial instruments at
December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
----------- -----------
<S> <C> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
Statutory federal income tax rate 34.00% 34.00%
Non-deductible expenses - 3.37
Valuation allowance on net operating loss carryforwards - -
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
=========== ===========
</TABLE>
The tax effects of temporary differences that gave rise to deferred tax
assets (liabilities) as of March 31, 2000 and December 31, 1999,
respectively:
<PAGE>
NOTE 6: INCOME TAXES - CONTINUED
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
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
=========== ===========
</TABLE>
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 March 31, 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
March 31, 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 March
31, 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 March 31, 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 March 31,
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 $ 950,174
2001 888,925
2002 327,233
2003 120,378
2004 108,049
2005 92,904
------------
Lease obligations $ 2,487,663
============
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. The former lease made on August 1, 1997,
which included 52,248 square feet at a rate of $400,000 per year, was
for a term of two years expiring July 31, 1999 with a 180 day
termination clause.
NOTE 9: MARKET RISK AND CONCENTRATIONS
For the three months ended March 31, 2000, merchant processing revenue
through Fi-Scrip and processing fees billed to CNG accounted for
approximately $81,000 or 21% and $67,000 or 18% of the Company's total
revenues, respectively. Greater Nevada Credit Union, Logberg, American
State Bank and GMAC accounted for approximately $50,000 or 13%, $44,000
or 12%, $42,000 or 11%, and $31,000 or 10%, 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 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
March 31, 2000 were $500,000 and $4,990, respectively.
<PAGE>
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.
<TABLE>
<CAPTION>
Options vested
--------------------------------- Total Options
Exercise July 1, October 1, January 1, Vested and
Director Price 1998 1998 1999 Outstanding
---------------------- -------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
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
==========
</TABLE>
The following table shows the vesting schedule and the exercise price
for each of the five directors awarded options on August 6, 1999.
<TABLE>
<CAPTION>
Options vested
---------------------------- Total Options
Exercise August 6, October 22, Vested and
Director Price 1999 1999 Outstanding
---------------------- -------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
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
==========
</TABLE>
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 March 31, 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.
<PAGE>
NOTE 11: STOCK OPTION PLAN - CONTINUED
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
March 31, 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 March 31, 2000 Mr. Courter has 25,000 options
vested and none have been exercised.
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 three months ended March 31, 2000 and
as of and for the year ended December 31, 1999 utilizing the equity
method of accounting.
CONDENSED BALANCE SHEET:
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
2000 1999
-------------- --------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 25,565 $ -
Prepaid expenses and other assets 17,500 36,820
Federal income tax receivable - -
Due from subsidiaries 1,859,054 1,920,928
-------------- --------------
Total current assets 1,902,119 1,957,748
Other assets
Deferred tax asset 17,637 17,637
Other investments 90,000 90,000
Investment in subsidiaries (372,103) 792,635
-------------- --------------
Total other assets (264,466) 900,272
-------------- --------------
TOTAL ASSETS $ 1,637,653 $ 2,858,020
============== ==============
</TABLE>
<PAGE>
NOTE 12: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY - CONTINUED
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
LIABILITIES
Accrued expenses and other liabilities $ 134,631 $ 90,562
Due to subsidiaries - -
--------------- ---------------
Total current liabilities 134,631 90,562
SHAREHOLDERS' EQUITY
Common stock 38,512 38,512
Capital surplus 5,891,096 5,891,096
Retained (deficit) earnings (4,426,586) (3,162,150)
--------------- ---------------
Total shareholders' equity 1,503,022 2,767,458
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,637,653 $ 2,858,020
=============== ===============
CONDENSED STATEMENT OF OPERATIONS:
REVENUES
Undistributed (loss) earnings of subsidiaries $ (1,164,737) $ (2,722,064)
EXPENSES
Stockholder costs and fees 582 5,115
Professional and outside services 90,601 405,584
Marketing 5,866 106,987
Other operating 2,650 2,503
--------------- ---------------
Total operating expenses 99,699 520,189
Compensation to directors - 10,000
--------------- ---------------
Total other expense - 10,000
--------------- ---------------
(LOSS) INCOME BEFORE FEDERAL INCOME TAX (1,264,436) (3,252,253)
Income tax benefit ( - ) (20,636)
--------------- ---------------
Net (loss) $ (1,264,436) $ (3,231,617)
=============== ===============
CONDENSED STATEMENT OF CASH FLOWS:
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (1,264,436) $ (3,231,617)
Adjustments to reconcile net (loss) income
to net cash provided by operations
Undistributed loss (earnings) in subsidiaries 1,164,737 2,722,063
Decrease (increase) in receivables 61,874 (1,338,319)
Decrease in prepaid
expenses and other assets 19,321 51,543
Increase (decrease) in accruals
and accounts payable 44,069 (1,565,859)
--------------- ---------------
Net cash provided by (used by) operating activities 25,565 (3,362,189)
</TABLE>
<PAGE>
NOTE 12: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY - CONTINUED
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------- ---------------
<S> <C> <C>
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 - 3,000,000
--------------- ---------------
Net cash provided by financing activities - 3,451,128
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 25,565 (1,061)
Cash and cash equivalents at beginning of year - 1,061
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 25,565 $ -
=============== ===============
</TABLE>
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.
<PAGE>
NOTE 13: CONSULTING AGREEMENTS - CONTINUED
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 March 31, 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.
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). As of the date of this report CNG effectively
holds 24,000,000 or 62.3% of the 38,511,512 common shares outstanding.
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.
The Company has been advised by CNG that the source of payment for the
purchase of the 24,000,000 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.
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.
Further, the Company has agreed to issue to Century an additional
1,736,512 shares of Common Stock for no further consideration, in the
event that the following contingencies (collectively, the Century
Contingencies) are satisfied: (i) that Century shall procure or broker,
without compensation, executed processing contracts (the Processing
Contracts) between the Company and one or more customers;
<PAGE>
NOTE 14: STOCK PURCHASE AGREEMENT - CONTINUED
(ii) that each of the Processing Contracts shall have a term length of
not less than five (5) years; (iii) that the Processing Contracts shall
collectively generate not less than $150,000 of processing revenues for
the Company during the month of March, 2000; and (iv) that CNG shall
pay the Second Installment Payment to the Company in accordance with
the terms and conditions of the CLCK/CNG Stock Purchase Agreement.
Further, in connection with the CLCK/CNG Stock Purchase Agreement, CNG
has agreed to sell an additional 1,000,000 shares of common stock to
Century for the purchase price of $10; provided, however, that the
Century Agreement shall be null and void, and CNG shall have no
obligation whatsoever to sell any shares of common stock to Century, in
the event that the Century Contingencies are not satisfied. For
purposes of calculating the percentage of beneficial ownership of a
stockholder in the following paragraphs, pursuant to the rules of the
Securities and Exchange Commission, shares of common stock which an
individual or group has a right to acquire within 60 days pursuant to
the exercise of options or warrants are deemed to be outstanding for
the purpose of computing the percentage ownership of such individual or
group, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
Immediately prior the closing of the transactions contemplated by the
CLCK/CNG Stock Purchase Agreement, Messrs. Baetz and Gallant
beneficially owned, in the aggregate, 10,697,916 shares of common stock
(including options to purchase 66,666 shares), or approximately 83.3%
of the issued and outstanding shares of common stock (12,841,666 shares
issued and outstanding for purposes of calculating the percentage of
beneficial ownership).
Immediately following the issuance of the 4,000,000 shares to CNG and
the 1,736,512 shares to Century, Messrs. Baetz and Gallant collectively
beneficially owned 12,434,428 shares of common stock, or approximately
66.9% of the issued and outstanding shares of common stock (18,578,178
shares issued and outstanding for purposes of calculating the
percentage of beneficial ownership) and CNG beneficially owned
4,000,000 shares of common stock, or approximately 21.6% of the
18,511,512 issued and outstanding shares of common stock (excluding the
20,000,000 shares relating to the Second Installment and the 10,000,000
shares relating to the Stock Option).
Immediately following the issuance of the 20,000,000 shares and now
being entitled to exercise the Stock Option with respect to the
additional 10,000,000 shares, CNG will beneficially own 34,000,000
shares of common stock, or 70.01% of the assumed issued and outstanding
common stock (48,511,512 shares issued and outstanding for purposes of
calculating the percentage of beneficial ownership).
In the further event that the Century Contingencies are satisfied, and
the Company will issue an additional 1,736,512 shares of common stock
to Century and Century purchases the 1,000,000 shares of common stock
from CNG, CNG will beneficially own 33,000,000 shares of common stock
(including options to purchase 10,000,000 shares), or approximately
65.7% of the then issued and outstanding common stock (50,248,024
shares issued and outstanding for purposes of calculating the
percentage of beneficial ownership), and Messrs. Baetz and Gallant will
collectively beneficially own 15,170,940 shares (including options to
purchase 66,666 shares), or approximately 37.6% of the then issued and
outstanding common stock (40,314,690 shares issued and outstanding for
purposes of calculating the percentage of beneficial ownership).
<PAGE>
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. 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 $74,739 to the plan in 1999.
<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 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 Columbia Capital Corp., a Delaware corporation ("Columbia"), and
the related notes thereto, contained elsewhere in this report.
Columbia was organized under the laws of the State of Delaware on February 5,
1993. Columbia operates through its wholly-owned subsidiaries, Finity, formerly
known as First Independent Computers, Inc. ("FICI"), a Texas corporation and
Fi-Scrip, Incorporated, a Nevada corporation ("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, Columbia, 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 three (3) months ended March 31, 2000 and
1999, which include the consolidated balance sheets of the Company as of March
31, 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 three (3) month periods ended March 31, 2000 and 1999.
The consolidated income statements and statements of cash flows of the Company
for the three (3) months ended March 31, 2000 and 1999, which form a part of the
Company's consolidated financial statements for such periods, reflect the
consolidated results of operations and cash flows of the parent holding company,
Finity and Fi-Scrip.
RESULTS OF OPERATIONS FOR THE THREE (3) MONTHS ENDED MARCH 31, 2000 AND 1999
Total operating revenues for the three months ended March 31, 2000 decreased
approximately 80% to $596,077 from $3,007,904 for the three months ended March
31, 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 three months ended March 31, 2000
decreased 89% to $289,616 from $2,673,269 during the three months ended March
31, 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>
Banking and financial service revenues during the three months ended March 31,
2000 decreased to $0 from $73,842. This decrease related to the expiration of
the Company's processing arrangements with American State Bank during 1999.
Merchant processing revenue was $293,883 and $27,074 for the three months ended
March 31, 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.
Total operating expenses during the three months ended March 31, 2000 decreased
34% to $1,857,869 from $2,821,594 during the three months ended March 31, 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 three months ended March 31,
2000 decreased 19% to $746,703 from $920,183 during the three months ended March
31, 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. The Company has struggled to maintain its professional staff,
including officers, management, computer programmers and equipment operators,
following the decreased in demand for credit card processing services relating
to the loss of the Master Agreement.
Equipment and software expenses during the three months ended March 31, 2000
decreased 28% to $431,949 from $598,521 during the three months ended March 31,
1999. This decrease primarily related to the Company renegotiating terms of its
software lease with PaySys.
Cost of professional and outside services during the three months ended March
31, 2000 decreased 61% to $128,909 from $332,907 during the three months ended
March 31, 1999. The decline in professional and outside services expense for
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 three months
ended March 31, 2000, decreased 64% to $153,924 from $432,635 during the three
months ended March 31, 1999. These decreases resulted primarily from no bad debt
being recorded during the first quarter of 1999 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 $2,643 and $9,851 for the
three months ended March 31, 2000 and 1999, respectively. Other income and
expenses consist of interest income of $9,314 offset by interest expenses of
$11,957 for the three months ended March 31, 2000. Other income and expenses
consist of interest income of $10,421 offset by interest expenses of $20,272 for
the three months ended March 31, 1999.
As a result of the foregoing, the Company generated net loss of $1,264,436
during the three months ended March 31, 2000, as compared to a net income of
$107,972 during the three months ended March 31, 1999. This loss 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 March 31, 2000, the ratio of current assets to current liabilities was 1 to 1
as compared to 1.45 to 1 at December 31, 1999.
The Company's cash flow needs for the three months ended March 31, 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 three months ended
March 31, 1999 were primarily provided from operations. At March 31, 2000 and
December 31, 1999, $20,000 of unallocated reserve for bad debt was carried by
the Company. At March 31, 2000, prepaid expenses were $392,583 and are
anticipated to be expensed as used in the future. Net property and equipment was
$1,125,439 at March 31, 2000.
There were no major capital additions during the three months ended March 31,
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
three months ended March 31, 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.
<PAGE>
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.
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 "Note")
payable to CNG in consideration of $500,000. The Note is due and payable on
demand with accrued interest due and payable monthly at a rate of 11.75%. The
accrued interest payable to CNG on March 31, 2000 was $4,990. The proceeds of
the note will be used for operations of the Company.
Cash and cash equivalents were $2,630,295 as of March 31, 2000, as compared to
$2,133,740 at December 31, 1999. This increase was primarily attributable to
proceeds the Company received from the Note.
As of March 31, 2000 and December 31, 1999, the Company's long-term borrowings
were $123,985 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 March 31, 2000, the Company had short-term borrowings in the aggregate
amount of $515,790, as compared to $12,441 at December 31, 1999. This increase
resulted primarily from borrowing under the Note.
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.
Net cash (used in) provided by operating activities was $(1,520) and $553,637
for the three months ended March 31, 2000 and 1999, respectively. Net cash used
by operations during the three months ended March 31, 2000 primarily consisted
of net losses from operations, offset primarily by increases in accruals and
accounts payable. Net cash provided by operations during the three months ended
March 31, 1999 primarily consisted of net income from operations, 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 $1,925 and $13,744 for the three
months ended March 31, 2000 and 1999, respectively. In the three months ended
March 31, 2000, the Company utilized $1,925 to purchase certain fixed assets. In
the three months ended March 31, 1999, the Company utilized $13,744 to purchase
certain fixed assets.
<PAGE>
Net cash provided by financing activities was $500,000 and $525,917 for the
three months ended March 31, 2000 and 1999, respectively. In the three months
ended March 31, 2000, the Company received proceeds of $500,000 from the Note.
For the three months ended March 31, 1999, the Company drew $95,701 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 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: May 15, 2000 By: /s/ Kenneth A. Klotz
-------------------------------
Kenneth A. Klotz
President
Dated: May 15, 2000 By: /s/ Charles La Montagne
-------------------------------
Charles La Montagne
Chief Financial Officer
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,630,295
<SECURITIES> 0
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<PP&E> 1,814,645
<DEPRECIATION> 689,206
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<CURRENT-LIABILITIES> 4,548,237
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0
0
<COMMON> 38,512
<OTHER-SE> 1,464,510
<TOTAL-LIABILITY-AND-EQUITY> 6,175,244
<SALES> 596,077
<TOTAL-REVENUES> 596,077
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<INCOME-PRETAX> (1,264,436)
<INCOME-TAX> 0
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