SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K-12(g)3
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: December 21, 2000
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
--------------
(New name of registrant as specified in its charter)
(successor registrant under Sec. 12(g)3 of the Securities Exchange Act of 1934)
Rocky Mountain Financial Enterprises, Inc.
--------------------
(Prior name of corporation pre-merger)
COLORADO 001-14873 84-1251078
---------------- ------------- ------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.
incorporation pre-merger)
pre-merger)
COLORADO 001-14873 84-1251078
----------------- ------------- ------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.
incorporation post-merger)
post-merger)
402 NORTH CARROLL AVENUE, SUITE 110, SOUTHLAKE, TEXAS 76092
-----------------------------------------------------------
(NEW ADDRESS)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 817-410-3780
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
None.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
None.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
None.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
None.
ITEM 5. OTHER EVENTS
A. Pursuant to the Plan and agreement of merger dated November 21, 2000,
between Comercis, Inc., a Delaware corporation, ("Comercis") and Rocky
Mountain Financial Enterprises, Inc., a Colorado corporation ("RMFE").
RMFE will exchange .85 shares of common stock of RMFE for each of the
outstanding and issued shares of Comercis, for a total of 18,234,805
shares. In addition, RMFE will issue Shareholders of Comercis a
Warrant to purchase an additional .25 shares of RMFE for $0.01 for
each share of Comercis previously owned, for a total of 5,363,178
additional shares.
On November 21, 2000, the Board of Directors of Comercis by unanimous
consent adopted the Plan of Merger. No shareholder approval was
required by RMFE as a result of Comercis' purchase of 90.5% of the
authorized stock on October 7, 2000. On December 13, 2000 the Comercis
Shareholders at their Special Meeting of Shareholders approved the
Plan and Agreement of Merger whereby Comercis shall merge into Rocky
Mountain Financial Enterprises, Inc. The transaction is intended to
qualify as a reorganization within the meaning of Section 368(a)(1)(A)
of the Internal Revenue Code of 1986, as amended ("IRC").
The officers of RMFE will continue as officers of the successor
issuer. See "Management" below. The officers, directors and by-laws of
RMFE will continue without change as the officers, directors and
by-laws of the successor corporation.
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B. Comercis, Inc. ("Comercis" or the "Company"), was founded in 1998 and
is based in Southlake, Texas. The Company was founded to develop
software that provides the concept, creation, execution, promotion and
management of web-sites for small businesses. The Company is deploying
its business-to-business internet applications through Internet
Service Providers (ISP's), Application Service Providers (ASP's),
Competitive Local Exchange Carriers (CLEC's), independent yellow page
directory publishers, business associations and tradeshow
organizations around the world. Comercis operates through two
subsidiaries, Netcities.com and eTradeshow.com.
NETCITIES.COM
Netcities provides small to medium sized businesses with an array of
business-to-business e-commerce applications, workflow management
systems, and communication services. The Comercis applications are
designed to allow Business owners to automatically create a business
website or e-commerce storefront through its template-based website
and workflow management tools.
Comercis has initially identified independent yellow page publishers,
ISP's, ASP's and CLEC's as strategic partners to bundle its Internet
applications for local distribution to small-medium business
customers. Strategic partners with whom Comercis has already
established agreements include BellSouth.Net, Alliance Media Group and
Southwestern Bell.
Additionally, the Company's strategy may include the acquisition of
local independent yellow page directory publishers in select markets
to cost effectively increase market share and customer retention for
its Internet applications. Comercis would hope to leverage off of
well-established relationships between these small business customers
and the printed telephone directories in which they advertise to
expand the businesses' advertising to internet based advertising and
e-commerce. Comercis' approach to this sweeping change in the way
small-medium businesses advertise differs from many competitors
because it incorporates a web portal focused specifically on local
community content designed to establish a repeated usage by consumers
in targeted towns and cities.
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Comercis has developed a strategic plan for distribution to
small-medium businesses through its partners and potential
directories. Comercis is focused on partnering with and possibly
acquiring publishers and organizations which provide:
o Substantial market presence in the local markets they serve
o Sales and distribution capabilities
o Revenues and cash flows through existing business in small to
medium local markets
This strategic sales and distribution model is designed to provide an
incentive for Comercis' partners by providing extended compatible
product offerings and potential revenue sources for the partners. In
turn, Comercis hopes to benefit through an increased sales force thus
maximizing its customer reach with a reduced cost of customer
acquisition.
ETRADESHOW.COM
As a complimentary business to the development of the Netcities local
community markets, Comercis has deployed its eTradeshow software
product to bring virtual tradeshows to tradeshow organizers around the
world. This business-to-business e-commerce tool is designed to
augment and extend the reach of established "real-world" tradeshows.
In response to demand generated by this product, distribution of this
virtual tradeshow has been broadened to tradeshow associations in
numerous industries. eTradeshow customers include SemiCon West, FOSE,
OFC and Mobile and PDA Expo. Comercis plans to divest eTradeshow.com
into an independent operating company through spin-off or sale, or to
partner with established companies in the industry which have
sufficient financial and management resources to further develop this
business unit. This will allow Comercis management to focus on the
growth of Netcities.com.
ITEM 6. RESIGNATION AND APPOINTMENT OF OFFICERS AND DIRECTORS
The Board has appointed Chris Meaux as Chairman of the Board. The
Board, after compliance with Section 14f of the Securities & Exchange
Act of 1934, has appointed as Directors effective October 17, 2000:
Robert W. Gallagher
Kenneth F. Reimer
August J. Rantz, III
Randall P. Stern
Gregory Boyd and Donald Schenkeir have resigned as President and
Secretary/Treasurer, respectively, and as Directors.
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Business Experience
The following is a brief account of the business experience during at
least the past five years of the persons designated to be new
directors and officers of the Registrant, indicating the principal
occupation and employment during that period by each, and the name and
principal business of the organizations by which they were employed.
Chris Meaux, age 32, is Chairman of the Board, President and Chief
Executive Officer of Comercis. Mr. Meaux co-founded Comercis and has
served as its Chairman and Chief Executive Officer since October 1998.
He brings to the Corporation more than 14 years of high-technology
industry experience with specific focus on developing new market
segments such as Internet commerce. From 1995 to 1998, Mr. Meaux was
Director of e-commerce at Network Associates, Inc. where he
developed and executed Network Associates, Inc.'s Internet commerce
model. Before that, he was Director of European Distribution and
Retail Sales for Network Associates. Prior to Network Associates,
Mr. Meaux was regional manager for OCLI, a computer accessories
manufacturer, and regional manager for Hyundai Electronics America.
Dr. Robert W. Gallagher, age 36, co-founded Comercis and is Executive
Vice President for and a member of the board of directors of Comercis,
Inc. Dr. Gallagher was an orthodontist in the Dallas-Fort Worth
area. In January 1997, Dr. Gallagher co-founded Orthosolutions, Inc.,
an orthodontics software company, and served as its Vice
President until March of 1998. Dr. Gallagher attended the University
of Texas at Arlington as a mechanical engineering major. He then
attended Dental School at the University of Texas at San Antonio where
he received his D.D.S. and Baylor College of Dentistry in Dallas where
he received his M.S. in Orthodontics.
Kenneth F. Reimer, age 60, is currently Chairman for two
entrepreneurial start-up ventures. He also provides strategic
direction, finance, and policy/governance advisory services to CEO's
and/or Boards of Directors and entrepreneurs. Mr. Reimer served as
President and CEO of Furrs/Bishops, Inc. and Tony Roma Corp. He
was E.V.P. and Chief Operating Officer of Lehndorff Group and of
Reserve Life Insurance Company. He served as E.V.P. and Chief
Financial Officer of Austin Industries and H.S. Miller Companies.
Mr. Reimer has a B.S. in Commerce-Accounting from St. Edward's
University, an MBA in Finance from Texas Tech University and a Ph.D.
in Management from Johnson & Wales University, Providence, RI.
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August J. Rantz, III, age 50, has served as a Director of Comercis
since February 1999. Mr. Rantz founded Quality Medical Management and
serves as the Chief Executive Officer. Mr. Rantz was Chief Executive
Officer of Phoenix Medical Management, Inc., a medical management
services organization.
Randall P. Stern, age 48, has been a Managing Director in the
Corporate Finance Department of Burnham Securities, Inc., a New York
based investment banking firm, since 1995. Mr.Stern has also served as
Executive Chairman of the Board of Dental Partners, Inc., a dental
practice management company. Prior to Burnham, Mr. Stern was
President of Boone Capital Corp. Mr. Stern received his B.A. from
Middlebury College and his M.B.A. from New York University.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS, & EXHIBITS
Financial Statements - For the period from October 1, 1998 (Date of
Inception) to January 31, 1999, the Eleven Months Ended December 31,
1999 and the Nine Months Ended September 30, 2000 (Unaudited)
Exhibits - 10.1 Agreement and Plan of Merger
10.2 Certificate of Ownership and Merger
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 21, 2000 Rocky Mountain Financial Enterprises, Inc.
By: Chris M. Meaux
---------------------------
President
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COMERCIS, INC. AND SUBSIDIARY
Unaudited Consolidated Financial Statements
For the year ended December 31,1999
<PAGE>
COMERCIS, INC. AND SUBSIDIARY
Unaudited Consolidated Financial Statements
C O N T E N T S
FINANCIAL STATEMENTS OF COMERCIS, INC. (UNAUDITED)
Consolidated Balance Sheets as of January 31, 1999, December 31, 1999
and September 30, 2000 . . . . . . . . . . . . . . . . .. . . . F-1
Consolidated Statements of Operations For The Periods Ended
January 31, 1999, December 31, 1999 and September 30, 2000 . . . F-2
Consolidated Statements of Stockholders' Equity(Deficit) For The Periods
Ended January 31, 1999, December 31, 1999 and September 30, 2000 F-3
Consolidated Statements of Cash Flows For The Periods Ended
January 31, 1999, December 31, 1999 and September 30, 2000 . . . F-4
Notes to the Consolidated Financial Statements . . . . . . . . . . F-5 - F-13
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF ROCKY MOUNTAIN FINANCIAL
ENTERPRISES, INC. AND COMERCIS, INC. (UNAUDITED) . . . . . . F-14
Pro Forma Consolidated Balance Sheets as of December 31, 1999
and September 30, 2000 . . . . . . . . . . . . . . . . . . . . . F-15
Pro Forma Consolidated Statement of Operations For The Periods Ended
January 31, 1999, December 31, 1999 and September 30, 2000 . . F-16
Notes to the Pro Forma Consolidated Financial Statements . . . . . . . F-17
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
<PAGE>
<TABLE>
<CAPTION>
COMERCIS, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED BALANCE SHEETS
as of September 30, 2000, December 31, 1999 and January 31, 1999,
ASSETS
<S> <C> <C> <C>
September 30, 2000 December 31, 1999 January 31, 1999
-------------------------------------------------------------
Current assets:
Cash $215,936 $84,824 $15,889
Accounts receivable 427,735 127,892 220
Other current assets 44,191 0 0
--------------------------------------------------------------
Total current assets 687,862 212,716 16,109
--------------------------------------------------------------
Property and equipment:
Office and computer equipment 1,419,165 306,762 21,146
Less accumulated depreciation (209,167) (36,054) (3,794)
--------------------------------------------------------------
Total property and equipment 1,209,998 270,708 17,352
--------------------------------------------------------------
Other assets:
Software technology, net of amortization (Note 3) 7,424,374 10,083,071
Investments 50,000 0 0
Deposits 12,513 152,513 4,913
Certificates of deposit - restricted 167,078 160,983 0
Other assets 38,796 38,796 0
--------------------------------------------------------------
Total other assets 7,692,761 10,435,363 4,913
--------------------------------------------------------------
$9,590,621 $10,918,787 $38,374
==============================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $1,850,954 $3,518,996 $156,615
Accrued liabilities 920,792 134,082 303,571
Deferred revenue 311,444 120,973 0
Notes payable 3,013,033 2,003,000 5,056
Convertible debt 1,389,000 0 0
Notes payable to stockholders 0 434,398 40,000
--------------------------------------------------------------
Total current liabilities 7,485,223 6,211,449 505,242
--------------------------------------------------------------
Commitments and contingencies (Note 6) 0 0 0
Stockholders' equity (deficit) (Note 8):
Preferred stock - $.001 par; authorized
5,000,000 shares; none outstanding
Preferred stock of subsidiary - $.001 par; authorized
5,000,000 Shares; 383,050 shares outstanding
at September 30, 2000 383 0 0
Common stock - $.01 par; authorized 30,000,000 shares;
21,172,150, 16,751,621 and 9,904,705 shares
issued and outstanding, respectively 211,722 167,517 99,047
Additional paid-in capital 23,042,147 14,099,470 0
Accumulated deficit (21,148,854) (9,559,649) (565,915)
--------------------------------------------------------------
Total stockholders' equity (deficit) 2,105,398 4,707,338 (466,868)
--------------------------------------------------------------
$9,590,621 $10,918,787 $38,374
==============================================================
See accompanying notes to unaudited consolidated financial statements.
F-1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMERCIS, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Period from October 1, 1998 (Date of Inception) to January 31, 1999, the Eleven Months
Ended December 31, 1999 and the Nine Months Ended September 30, 2000
<S> <C> <C> <C> <C>
October 1, 1998
January 1, 2000 February 1, 1999 to February 1, 1999 to (Date of Inception)
to September 30, 2000 September 30, 1999 December 31, 1999 to January 31, 1999
------------------------ ------------------- ------------------- -------------------
Revenue $924,774 $134,188 $326,928 $966
----------- ------------- ----------- -------------
Operating expenses:
Sales and marketing 2,944,385 2,818,488 4,149,817 19,117
Research and development 1,260,531 977,614 1,729,482 71,630
Site services 2,688,408 368,052 1,100,498 0
General and administrative 1,834,877 1,073,071 1,644,859 397,635
Provision for bad debts 101,364 0 70,453
Depreciation and amortization 2,831,810 202,535 624,189 3,794
----------- ------------- ----------- -------------
Total expenses 11,661,375 5,439,760 9,319,298 492,176
----------- ------------- ----------- -------------
Loss from operations (10,736,601) (5,305,572) (8,992,370) (491,210)
Other income (expense):
Other income 9,139 5,864 6,622 0
Minority interests in losses of 143,967 0 0
Subsidiary
Other expense (110,741)
Interest expense (894,970) (7,655) (7,986) 0
----------- ------------- ----------- -------------
Net loss ($11,589,206) ($5,307,362) ($8,993,734) ($491,210)
=========== ============= =========== =============
Basic net loss per share ($0.59) ($0.44) ($0. 70) ($0.06)
=========== ============= =========== =============
Weighted average common shares
outstanding 19,569,784 12,157,757 12,881,866 8,890,705
=========== ============= =========== =============
See accompanying notes to unaudited consolidated financial statements.
F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMERCIS, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Period from October 1, 1998 (Date of Inception) to January 31, 1999, the Eleven Months Ended
December 31, 1999 and the Nine Months Ended September 30, 2000
<S> <C> <C> <C> <C> <C> <C> <C>
Additional
Preferred Stock Common Stock Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit Total
----------- --------- --------- -------- ------------ ------------ -------------
Balance, October 1, 1998
(date of inception) 0 $0 0 $0 $0 $0 $0
Issuance of stock for services 8,779,705 87,797 0 (64,955) 22,842
Acquisition of Cybermovers 1,125,000 11,250 0 (9,750) 1,500
Net loss 0 0 0 (491,210) (491,210)
----------- --------- --------- -------- ------------ ------------ -------------
Balance, January 31, 1999 0 0 9,904,705 99,047 0 (565,915) (466,868)
Common stock issued for cash 3,613,298 36,133 7,672,117 0.000 7,708,250
Common stock issued for commissions 356,658 3,567 (3,567) 0 0
Common stock issued to acquire
software technology (Note 3) 2,315,000 23,150 6,395,800 0 6,418,950
Options exercised 561,960 5,620 35,120 0 40,740
Net loss 0 0 0 (8,993,734) (8,993,734)
----------- --------- --------- -------- ------------ ------------ -------------
Balance, December 31, 1999 0 0 16,751,621 167,517 14,099,470 (9,559,649) 4,707,338
Common stock issued for cash 0 3,052,210 30,522 7,340,658 0 7,371,180
Common stock issued for
Bridge loans 0 1,252,991 12,530 614,001 0 626,531
Preferred stock of subsidiary issued
for cash 383,050 383 558,602 558,985
Common stock of subsidiary issued
for services and interest 266,803 266,803
Conversion of debt to equity 115,328 1,153 162,613 0.000 163,766
Net loss 0 0 0 (11,589,206) (11,589,206)
----------- --------- --------- -------- ------------ ------------ -------------
Balance, September 30, 2000 383,050 $383 21,172,150 $211,722 $23,042,147 ($21,148,854) $2,105,398
=========== ========= ========= ======== ============ ============ =============
See accompanying notes to consolidated financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMERCIS, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Period from October 1, 1998 (Date of Inception) to January 31, 1999, the Eleven Months Ended
December 31, 1999 and the Nine Months Ended September 30, 2000
<S> <C> <C> <C> <C>
October 1, 1998
January 1, 2000 February 1, 1999 February 1, 1999 (Date of Inception)
to September 30, 2000 to September 30, 1999 to December 31, 1999 to January 31, 1999
--------------------- --------------------- -------------------- --------------------
Cash flows from operating activities:
Net loss ($11,589,206) ($5,307,362) ($8,993,734) ($491,210)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 173,113 21,285 32,260 3,794
Amortization 2,658,697 181,250 591,929 0
Issuance of stock for services and interest 626,531 0 0 22,842
Write-off of Business Web de Mexico 0 0 674,670 0
Changes in operating assets and liabilities:
Accounts receivable (299,842) (44,143) (127,672) (220)
Deposits 140,000 (149,800) (147,600) (2,713)
Other assets (44,191) (2,775,000) 0 0
Accounts payable and accrued liabilities (455,532) 2,181,604 2,502,892 390,186
Deferred revenue 190,471 0 120,973 0
--------------------- --------------------- -------------------- --------------------
Net cash used in operating activities (8,599,958) (5,892,166) (5,346,282) (77,321)
--------------------- --------------------- -------------------- --------------------
Cash flows from investing activities:
Purchase of certificates of deposit (6,095) (160,229) (160,983) 0
Purchase of property and equipment (1,112,403) (154,531) (285,616) (21,846)
Acquisition of software and other assets (50,000) (2,242,776)
Advances to NewGold 0 (425,000) (38,796) 0
--------------------- --------------------- -------------------- --------------------
Net cash used in investing activities (1,168,498) (739,760) (2,728,171) (21,846)
--------------------- --------------------- -------------------- --------------------
Cash flows from financing activities:
Notes payable to stockholders (434,398) 293,398 394,398 40,000
Net change in notes payable 747,998 87,944 0 5,056
Net change in convertible debt 1,389,000
Proceeds from issuance of warrants and stock 8,196,968 6,330,423 7,748,990 0
Notes payable to related party and others 0 (70,000) 0 70,000
--------------------- --------------------- -------------------- --------------------
Net cash provided by financing activities 9,899,568 6,641,765 8,143,388 115,056
--------------------- --------------------- -------------------- --------------------
Net increase in cash and cash equivalents 131,112 9,839 68,935 15,889
Cash and cash equivalents, beginning of period 84,824 15,889 15,889 0
--------------------- --------------------- -------------------- --------------------
Cash and cash equivalents, end of period $215,936 $25,728 $84,824 $15,889
===================== ===================== ==================== ====================
Interest paid $5,703 $7,655 $7,986 $0
===================== ===================== ==================== ====================
Non-cash transactions:
During the period ended January 31, 1999, the Company issued 1,125,000 shares of
common stock for the purchase of a subsidiary (Note 3).
During the period ended December 31, 1999, the Company issued 2,315,000 shares
of common stock and $1,900,000 in debt and $690,000 in accounts payable for
software technology (see Note 3).
During the period ended September 30, 2000, the Company converted $163,766 of
debt into 115,328 shares of common stock.
During the period ended September 30, 2000, the Company issued 1,252,991 shares
of common stock as an incentive for the Bridge loans. The company recognized
$626,531 in prepaid interest.
During the period ended September 30, 2000, the Company issued $425,000 in notes
payable to satisfy an equal amount of accounts payable.
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
COMERCIS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Comercis, Inc. (the "Company") was formed in January 2000 and succeeded to
the business of Business Web Inc. d/b/a Comercis, Inc. which was
incorporated on October 1, 1998. The Company was founded to create software
to provide the concept, creation, execution, promotion and management of
web-sites for small businesses. The Company is deploying
business-to-business internet applications to internet service providers,
application service providers, competitive local exchange carriers,
independent yellow page directory publishers, business associations and
tradeshow organizations around the world. The Company operates two
subsidiaries, Netcities.com, which is 100% owned, and eTradeshow.com, which
is 87% owned.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company's
continuing net losses and working capital deficit raise substantial doubt
about its ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty. The Company is reporting cumulative net losses since inception
of $21,148,854 as of September 30, 2000. The following is a summary of
management's plan to raise capital and generate additional operating funds.
The company has successfully completed a secured debt placement of
approximately $2,500,000 subsequent to September 30, 2000. Currently, the
Company is conducting a private placement of common stock under Regulation
S of the 1933 Securities Act to raise an additional $3 million of equity.
The Company is also engaged in discussions with mezzanine investors who
have tentatively proposed to provide a $15 million subordinated debt
facility to be used for the acquisition of yellow page directory
publishers.
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For statement of cash flow purposes, the Company considers short-term
investments with original maturities of three months or less to be cash
equivalents.
F-5
<PAGE>
COMERCIS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Cost of property renewals and
betterments are capitalized; costs of property maintenance and repairs are
charged against operations as incurred. Depreciation is computed using the
straight-line method over the estimated useful lives of 5 to 7 years.
SOFTWARE
Capitalization of software developed begins upon the establishment of
technological feasibility for the product. After considering the factors
related to technological feasibility, the Company has determined that all
software development costs to date should be expensed. Software acquired
in the Netgate and Netopia acquisitions (Note 3) have met the
technological feasibility criteria and have been capitalized. Software is
being amortized using the greater of (a) the ratio that current gross
revenues bear to the total of current and anticipated future gross
revenues for the product or (b) the straight-line method over the
three-year estimated economic life of the software.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). SFAS 109 utilizes the asset and liability method of computing
deferred income taxes. The objective of the asset and liability method is
to establish deferred tax assets and liabilities for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities at enacted tax rates expected to be in
effect when such amounts are realized or settled.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All significant inter-company balances and
transactions are eliminated in consolidation.
NET LOSS PER COMMON SHARE
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128").
SFAS 128 provides for the calculation of basic and diluted earnings per
share. Basic earnings per share includes no dilution and is computed by
dividing net income by the weighted average number of common shares
outstanding for the period. Loss per common share was calculated by
dividing the Company's net loss by the weighted average common shares
outstanding. Certain common stock equivalents were excluded from the
calculation, as such inclusion would have had an anti-dilutive effect. All
references in the accompanying financial statements to the number of common
shares and per-share.
F-6
<PAGE>
COMERCIS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER COMMON SHARE (CONTINUED)
amounts for the periods ended December 31, 1999, January 31, 1999,
September 30, 2000 and September 30, 1999 have been restated to reflect the
stock splits as explained in Note 8.
STOCK-BASED COMPENSATION
The Company has issued stock options. Compensation costs arising from such
options will be recorded as an expense. The measurement date for
determining compensation costs is the date of the grant. Compensation cost
is the excess, if any, of the market value of the stock at date of grant
over the amount the employee must pay to acquire the stock. The Company
measures compensation costs using the intrinsic value based method of
accounting for stock issued to employees.
3. ACQUISITIONS
In October 1998, the Company acquired Cybermovers, Inc. ("Cybermovers") for
1,125,000 shares of common stock. Cybermovers was a development stage
company. The acquisition was valued at $1,500 and the total cost was
assigned to goodwill. Pro forma information, as if the acquisition had been
made at the beginning of the period, has not yet been provided since
Cybermovers had nominal operations prior to acquisition. The investment was
written off during the period ended December 31, 1999.
In December 1999, the Company acquired Netgate Medical, Inc. ("Netgate"),
including its Web-based community commerce software technology, for
2,000,000 common shares valued at $6,000,000, $2,500,000 in a note payable
in September and October 1999 and warrants to purchase 1,000,000 shares of
the Company's common stock at $7.00 per share, expiring December 31, 2004.
The Company has made payments totaling $1,075,000 on the note and has made
an offer to the shareholders of Netgate to allow them to exercise 1,000,000
warrants at $1.42 in satisfaction of the remaining $1,425,000 balance of
the notes. Holders of $163,766 in notes have accepted the offer and
exercised their warrants in exchange for common stock.
The transaction was accounted for as a purchase. Accordingly, the Company's
financial statements include the operations of Netgate from the date of
acquisition. Under purchase accounting, the total purchase price
($8,500,000) was allocated to software, the only significant asset of
Netgate.
Amortization of the Netgate software amounted to $2,125,000 and $236,000
for the periods ended September 30, 2000 and December 31, 1999,
respectively.
The common stock issued was valued based on the market price of the
securities over a reasonable period of time before and after the companies
reached an agreement on the purchase price and the proposed transaction was
announced.
F-7
<PAGE>
COMERCIS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITIONS (CONTINUED)
The following unaudited pro forma consolidated information for the eleven
months ended December 31, 1999 and the period from October 1, 1998 to
January 31, 1999 gives effect to the Netgate transaction as if it had
occurred at the beginning of each period. The unaudited pro forma
consolidated information is presented for informational purposes only and
is not necessarily indicative of the results of operations that would have
been achieved had the transaction been completed as of the beginning of
that year, nor are they indicative of the Company's future results of
operations.
Eleven
Months Ended October 1, 1998 to
December 31, 1999 January 31, 1999
Revenues $326,928 $6,683
Net loss ($11,354,846) ($1,561,065)
Net loss per common share ($0.76) ($0.14)
In May 1999, the Company acquired certain software from Netopia, Inc.
("Netopia") for $2,175,000. The Company has made payments of $1,900,000 and
has accrued the remaining $275,000 of payments due. As of September 30,
2000, the remaining balance outstanding amounts to $275,000. Amortization
of the software amounted to $533,697 and $355,819 for the periods ended
September 30, 2000 and December 31, 1999, respectively.
4. NOTES PAYABLE AND CONVERTIBLE DEBT
Notes payable are summarized as follows:
September 30, December 31, January 31,
2000 1999 1999
Note payable to Netgate for
purchase of software technology
(Note 3) $1,261,234 $1,900,000 $ -
Bridge loans - see below 1,222,999 - -
Non interest bearing notes due to
suppliers converted from accounts
payable, due in January 2001 425,800 - -
Other debt 103,000 103,000 5,056
---------- ---------- ----------
$3,013,033 $2,003,000 $5,056
========== ========== ==========
F-8
<PAGE>
COMERCIS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
4. NOTES PAYABLE AND CONVERTIBLE DEBT (CONTINUED)
During the period ended September 30, 2000, the Company borrowed $1,227,991
through bridge loans. The original maturity was 60 days after the issuance
of the note and the note had an interest rate of 10%. The Company also
issued warrants to lenders to purchase 1,227,991 shares of common stock of
the Company for a total of $35. All of the warrants were exercised
immediately and were valued at $.50 a share, resulting in a charge to
prepaid interest of $626,531.
Convertible debt at September 30, 2000 consists of 12% notes due in
September 2001, is secured by substantially all of the company's assets and
is convertible by the holder into shares of the Company's common stock at
$.50 per share. The Company has violated certain non-financial covenants in
the security agreement related to the convertible secured debt, but has
received a waiver of that non-compliance from the debtholders.
Notes payable to stockholders were due to three stockholders of the
Company, were noninterest-bearing and were paid during 2000.
5. INCOME TAXES
Deferred taxes are determined based on temporary differences between the
financial statement and income tax basis of assets and liabilities as
measured by the enacted tax rates, which will be in effect when these
differences reverse.
The Company has recorded no income tax benefit due to the existence of a
net operating loss. Net operating loss carryforwards for tax purposes,
which will expire, if not utilized, beginning in 2014, amounted to
approximately $21,000,000 at September 30, 2000. The Company has recorded a
valuation allowance equal to the deferred tax asset related to the net
operating loss carryforwards each year.
The components of the Company's deferred taxes were as follows:
September 30, December 31, January 31,
2000 1999 1999
Net operating loss carryforwards $7,140,000 $3,400,000 $187,000
Deferred tax asset valuation (7,140,000) (3,400,000) (187,000)
allowance ---------- ----------- ----------
$ - $ - $ -
========== =========== ==========
F-9
<PAGE>
COMERCIS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases its office and certain equipment under terms of
operating leases. Minimum lease commitments as of December 31, 1999 are as
follows:
Years ending December 31, Amount
2000 $1,539,497
2001 1,727,832
2002 1,371,388
2003 1,242,117
2004 1,112,019
In December 2000, the Company terminated its lease on its primary office
facility. It is negotiating with the lessor to determine a lease
termination settlement amount, which management estimates may range up to
$800,000. Additionally, the Company has vacated its leased premises at a
data center and is negotiating a termination settlement with that lessor,
which management believes will be immaterial.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies.
The fair value of financial instruments classified as current assets or
liabilities including cash and cash equivalents, receivables and accounts
payable approximate carrying value due to the short-term maturity of the
instruments. The fair value of notes payable approximates carrying value
based on their effective interest rates compared to current market rates.
The Company is involved as a defendant in certain litigation which has
arisen in the ordinary course of business. Management believes that the
resolution of this litigation will not have a material effect on the
Company's financial position or results of operations.
CONCENTRATION OF CREDIT RISK
The Company invests its cash primarily in deposits with major banks.
Certain deposits have been in excess of federally insured limits. The
Company has not incurred losses related to its cash.
F-10
<PAGE>
COMERCIS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Company did not and does not expect to encounter any significant matter
which will effect its operations arising from the so called Y2K or Year
2000 problem.
7. ACCOUNTING DEVELOPMENTS
SFAS 133
Statement of Financial Accounting Standards (SFAS) 133, "Accounting for
Derivative Instruments and Hedging Activities," establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred
to as derivatives) and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as
(a) a hedge of the exposure to changes in the fair value of a recognized
asset or liability or an unrecognized firm commitment, (b) a hedge of the
exposure to variable cash flows of a forecasted transaction, or (c) a hedge
of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for sale security,
or a foreign-currency-denominated forecasted transaction. Because the
Company has no derivatives, this accounting pronouncement has no effect on
the Company's financial statements.
8. STOCKHOLDERS' EQUITY
During the period ended December 31, 1999, the Company raised $7,708,250
through the issuance of 3,613,298 common shares.
See Note 3 regarding the issuance of 2,315,000 shares of common stock for
software technology during 1999.
During the period ended September 30, 2000, the Company raised $7,371,180
through the issuance of 3,052,210 units which contained one share of common
stock and a warrant which gives the holder of each warrant the right to
purchase one share of Company common stock for $3 (see Note 9). During the
period ended September 30, 2000, the Company issued 1,252,991 shares of
common stock valued at $626,531 for prepaid interest in connection with the
bridge loans (Note 4).
During the period ended September 30, 2000, the Company issued 115,328
shares of common stock to convert certain debt of the Company.
The common shares of the Company issued for non-cash consideration have
been valued at the price for which the Company was selling its shares in
private offerings at the time of each transaction.
F-11
<PAGE>
COMERCIS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
8. STOCKHOLDERS' EQUITY (CONTINUED)
During the period ended September 30, 2000, the Company's subsidiary,
eTradeshow.com ("eTradeshow"), issued 383,050 shares of preferred stock for
$666,100 cash and issued shares of common stock representing approximately
10% of outstanding common shares for $303,371 in interest and services. The
common shares were valued based upon an independent third party valuation.
The preferred stock has no liquidating preference and participates with
common stock in earnings of the subsidiary. Accordingly, $143,967 in
original minority interest was recorded, representing 13.1% of eTradeshow's
original net worth. This amount has been eliminated through the statement
of operations since eTradeshow's losses have resulted in a deficit in its
stockholders' equity.
The Company's Board of Directors has authorized common stock splits of
five-for-one and three-for-two, effective as of March 1, 1999 and June 4,
1999, respectively. All share and per share amounts in the accompanying
financial statements have been retroactively adjusted for the splits.
<TABLE>
<CAPTION>
9. STOCK OPTIONS
The Company has issued compensatory stock options to employees and
directors. A summary of the status of stock options is set forth below:
<S> <C> <C> <C> <C> <C> <C>
Period Ended Period Ended Period Ended
September 30, 2000 December 31, 1999 January 31, 1999
----------------------- ----------------------- ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Stock options Shares Price Shares Price Shares Price
-------------------------------------------------------------------------------------------------------
Outstanding, beginning of period 1,015,062 $1.75 281,250 $0.05 -
Granted 1,707,911 $0.85 1,651,272 $1.34 622,500 $0.05
Exercised - ( 471,960) $0.17 (60,000) $0.07
Forfeited/expired ( 139,000) $0.50 ( 445,500) $0.82 (281,250) $0.01
-------------------------------------------------------------------------------------------------------
Outstanding, end of period 2,583,973 $1.22 1,015,062 $1.75 281,250 $0.08
========= ========= =======
Options exercisable
at end of period 615,881 $0.50 491,751 $0.50 161,250 $0.05
========= ========= =======
</TABLE>
Fair value for the stock underlying stock options was determined using
information available from other stock sale transactions at or near the
grant date. In management's opinion, these transactions between willing
parties included the best information available at the time of grant to
estimate the market value of the common stock of the Company. These fair
values were used to determine the compensatory components of the stock
options granted.
Compensation costs for employee options are recognized as an expense in an
amount equal to the excess of the fair market value of the stock at the
F-12
<PAGE>
COMERCIS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
9. STOCK OPTIONS (CONTINUED)
date of measurement over the amount the employee must pay. The measurement
date is generally the grant date. Under this method, there was no
compensation expense for the periods ended December 31, 1999 and
January 31, 1999.
Using the fair value method, the fair value of each option grant is
estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions used for grants during the
periods ended: January 31, 1999: dividend yield of 0.0 percent; expected
volatility of 0 percent; risk free interest rates of 4.5 percent; expected
lives of two years; December 31, 1999: dividend yield of 0.0 percent;
expected volatility of 0 percent; risk free interest rates of 5.5 percent;
expected lives of two years; September 30, 2000: dividend yield of 0.0
percent; expected volatility of 0 percent; risk free interest rates of 5.5
percent; expected lives of two years. Using the fair value method of FASB
Statement 123, net loss and net loss per share would for the periods ended
December 31, 1999 and January 31, 1999, would have been $(9,584,931) and
$(.74), respectively. Using the fair value method of FASB Statement 123,
net loss and net loss per common share for the nine months ended September
31, 2000 would have been $(11,822,188) and $(.60), respectively.
The Company recorded an additional $101,960 in compensation expense during
the period ended September 30, 2000 under FASB Statement 123 for options
issued to non-employees.
The Company has issued warrants to purchase its common stock, generally
in connection with offerings of debt and equity securities, acquisitions
and purchase of services. See Notes 3, 4 and 8. Additionally, in December
1999, the Company granted warrants to purchase 3,132,794 shares at $4 per
share to a company with which it was terminating a merger agreement. All
of these warrants expire at the end of 2004. The table below summarizes
outstanding warrants:
Exercise Price Shares
---------------------------- ----------------
$0.50 2,632,863
1.67 207,997
3.00 3,849,166
4.00 4,237,753
7.00 1,000,000
----------------
TOTAL 11,088,724
----------------
F-13
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF
ROCKY MOUNTAIN FINANCIAL ENTERPRISES, INC.
AND COMERCIS, INC. (UNAUDITED)
F-14
<PAGE>
<TABLE>
<CAPTION>
ROCKY MOUNTAIN FINANCIAL SERVICES, INC. AND COMERCIS, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED BALANCE SHEETS
As of December 31, 1999 and September 30, 2000
(Unaudited)
September 30, 2000 December 31, 1999
--------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rocky Mountain Comercis Adjust- Pro forma Rocky Mountain Comercis Adjust- Pro forma
ASSETS ments Combined ments Combined
-------------- -------- ------- ---------- -------------- -------- -------- ----------
Current assets:
Cash $0 $215,936 $215,937 $84,824 $84,824
Accounts receivable 427,735 427,734 127,892 127,892
44,191 44,191 0 0 0 0
-------------- -------- ------- ---------- -------------- -------- -------- ----------
Total current assets 0 687,862 687,862 0 212,716 0 212,716
-------------- -------- ------- ---------- -------------- -------- -------- ----------
Property, plant and equipment:
Office and computer equipment 1,419,165 1,419,165 306,762 306,762
Less accumulated depreciation (209,167) (209,167) (36,054) (36,054)
-------------- -------- ------- ---------- -------------- -------- -------- ----------
Total property and equipment 0 1,209,998 1,209,998 0 270,708 0 270,708
-------------- -------- ------- ---------- -------------- -------- -------- ----------
Other assets:
Software technology,
net of amortization 7,424,374 7,424,374 10,083,071 10,083,071
Investments 50,000 50,000 0 0
Deposits 12,513 12,513 152,513 152,513
Certificates of deposit - restricted 167,078 167,078 160,983 160,983
Advances to NewGold 38,796 38,796 38,796 38,796
-------------- -------- ------- ---------- -------------- -------- -------- ----------
Total other assets 0 7,692,761 0 7,692,761 0 10,435,363 0 10,435,363
-------------- -------- ------- ---------- -------------- -------- -------- ----------
$0 $9,590,621 $0 $9,590,621 $0 $10,918,787 $0 $10,918,787
============== ========= ======= ========== ============== ========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $67,736 $1,850,954 $1,918,690 $63,736 $3,518,996 $3,582,732
Accrued liabilities 920,792 920,792 134,082 134,082
Deferred revenue 311,444 311,444 120,973 120,973
Notes payable 3,013,033 3,013,033 2,003,000 2,003,000
Convertible debt 1,389,000 1,389,000 0 0
Notes payable to stockholders 0 0 0 0 434,398 434,398
-------------- --------- ------- ---------- -------------- ---------- -------- ----------
Total current liabilities 67,736 7,485,223 0 7,552,959 63,736 6,211,449 0 6,275,185
-------------- --------- ------- ---------- -------------- ---------- -------- ----------
Minority interest in subsidiary 0 0 0 0 0 0 0 0
Commitments and contingencies 0 0 0 0 0 0 0 0
Stockholders' equity (deficit):
Preferred stock - $.001 par;
authorized 5,000,000
shares; none outstanding
Preferred stock of subsidiary -
$.001 par; authorized
5,000,000 shares; 383,050 shares
outstanding at September 30, 2000 383 383 0 0 0 0
Common stock - $.01 par; authorized
30,000,000 shares;
21,172,150, 16,751,621 and
9,904,705 shares issued and
outstanding, respectively 61,940 211,722 273,662 61,507 167,517 229,024
Additional paid-in capital 23,042,147 23,042,147 14,099,470 14,099,470
Accumulated deficit (129,676)(21,148,854) (21,278,530) (125,243) (9,559,649) (9,684,892)
-------------- ---------- ------- ---------- -------------- ---------- -------- ----------
Total stockholders' equity (deficit) (67,736) 2,105,398 0 2,037,662 (63,736) 4,707,338 0 4,643,602
-------------- ---------- ------- ---------- -------------- ---------- -------- ----------
$0 $9,590,621 $0 $9,590,621 $0 $10,918,787 $0 $10,918,787
============== ========= ======= ========== ============== ========== ======== ==========
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
F-15
<PAGE>
<TABLE>
<CAPTION>
ROCKY MOUNTAIN FINANCIAL SERVICES, INC. AND COMERCIS, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Period from October 1, 1998 (Date of Inception) to January 31, 1999, the Eleven Months Ended
December 31, 1999 and the Nine Months Ended September 30, 2000
(Unaudited)
October 1, 1998
(Date of
Inception)
January 1, 2000 to September 30, 2000 January 31, 1999 to December 31, 1999 to January 31,
1999
----------------------------------------------- ---------------------------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rocky Mountain Comercis Adjust Pro forma Rocky Comercis Adjust Pro forma Comercis
ments Combined Mountain ments Combined
-------------- ---------- ------ ---------- -------- ----------- ------- --------- ------------
Revenue $924,774 $924,774 $326,928 $326,928 $966
-------------- ---------- ------ -------- -------- ----------- ------- --------- ------------
Operating expenses:
Sales and marketing 2,944,385 2,944,385 4,149,817 4,149,817 19,117
Research and development 1,260,531 1,260,531 1,729,482 1,729,482 71,630
Site services 2,688,408 2,688,408 1,100,498 1,100,498 0
General and administrative $4,000 1,834,877 1,838,877 $250 1,644,859 1,645,109 401,429
Provision for bad debts 101,364 101,364 70,453 70,453
Depreciation and amortization 2,831,810 2,831,810 624,189 624,189
-------------- ---------- ------ ---------- -------- ----------- ------- --------- ------------
Total expenses 4,000 11,661,375 11,665,375 250 9,319,298 9,319,548 492,176
------------- ---------- ------ ---------- -------- ----------- ------- --------- ------------
Loss from operations (4,000) (10,736,601) (10,740,601) (250) (8,992,370) (8,992,620) (491,210)
Other income (expense):
Other income 9,139 9,139 6,622 6,622 0
Minority interests in losses of 143,967 143,967 0 0 0
subsidiary
Other expense (110,741) (110,741) 0
Interest expense (894,970) (894,970) (700) (7,986) (8,686) 0
-------------- --------- ------ ---------- -------- ------------ ------- --------- -----------
Net loss ($4,000)($11,589,206) ($11,593,206) ($950)($8,993,734) ($8,994,684) ($491,210)
============== =========== ====== ========== ======== ============ ======= ========= ===========
Basic net loss per share $0.00 ($0.59) ($0.59) ($0.01) ($0.67) ($0.70) ($0.06)
============== =========== ====== ========== ======== ============ ======= ========= ===========
Weighted average common shares
outstanding 1,875,056 19,569,784 19,569,784 1,442,028 12,881,866 12,881,866 8,890,705
============== ========== ====== ========== ========= ============ ======= ========= ===========
See accompanying notes to pro forma consolidated financial statements.
F-16
</TABLE>
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma combined statement of operations for the year ended
December 31, 1999 and the nine-month period ended September 30, 2000 (the "pro
forma consolidated statements of operations") and the unaudited pro forma
combined balance sheets as of September 30, 2000 and December 31, 1999 (the "pro
forma balance sheet" and, together with the pro forma statement of operations,
the "pro forma financial statements"), have been prepared to illustrate the
estimated effect of the acquisition by Rocky Mountain Financial Enterprises,
Inc. ("RMFE") of 100% of the outstanding stock of Comercis, Inc. ("Comercis").
The two companies have entered into an agreement to merge, dated November 21,
2000. The pro forma financial statements do not reflect any anticipated cost
savings from the Comercis acquisition, or any synergies that are anticipated to
result from the combination, and there can be no assurance that any such cost
savings or synergies will occur. The pro forma statements of operations give pro
forma effect to the acquisition as if it had occurred on February 1, 1999. The
pro forma balance sheet gives pro forma effect to the acquisition as if it had
occurred on December 31, 1999. The pro forma statements do not purport to be
indicative of the results of operations or financial position of the combined
company that would have actually been obtained had such transaction been
completed as of the assumed dates and for the periods presented, or which may be
obtained in the future. The pro forma adjustments are described in the
accompanying notes and are based upon available information and certain
assumptions that the companies believe are reasonable. The pro forma financial
statements should be read in conjunction with the separate historical
consolidated financial statements of RMFE and Comercis and the notes thereto.
F-17
