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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 0-29204
HomeCom Communications, Inc.
----------------------------
(Exact name of registrant specified in its charter)
Delaware 58-2153309
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Building 12, Suite 110
3495 Piedmont Road
Atlanta, Georgia 30305
(Address of principal executive offices and zip code)
Registrant's Telephone Number, Including Area Code:
(404) 237-4646
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
------------------- ------------------------------------
Common Stock, par value $0.0001 per share Over-the-Counter Bulletin Board
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes / / NO / X /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the average of the closing bid and ask quotations for
the Common Stock on March 26, 2001 as reported on the OTC Bulletin Board, was
approximately $57,000. The shares of Common Stock held by each officer and
director and by each person known to us who owns 5% or more of the outstanding
Common Stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes. As of March 26, 2001, Registrant
had outstanding 9,359,157 shares of Common Stock.
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K into which the document is incorporated:
Document Part of Form 10-K
- -------- into which Incorporated
1. Information Statement or Proxy -----------------------------------
Statement, as applicable, to be filed in Items 10, 11, 12 and 13 of Part III
April 2001 regarding the election of
directors and such other matters as the
Registrant may determine
TABLE OF CONTENTS
PART I
1. Business........................................................... 1
2. Properties......................................................... 5
3. Legal Proceedings.................................................. 5
4. Submission of Matters to a Vote of Security Holders................ 5
PART II
5. Market for Registrant's Common Equity and Related
Shareholder Matters................................................ 6
6. Selected Financial Data............................................ 7
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 8
8. Financial Statements............................................... 13
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................................ 35
PART III
10. Directors and Executive Officers of the Company.................... 36
11. Executive Compensation............................................. 36
12. Security Ownership of Certain Beneficial Owners and Management..... 36
13. Certain Relationships and Related Transactions..................... 36
PART IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................................ 37
Signatures......................................................... 44
ii
PART I
ITEM 1. BUSINESS
Forward-Looking Statements
This Form 10-K contains certain statements, such as statements regarding
HomeCom's future plans, that constitute forward-looking statements within the
meaning of Section 27A of the Securities Act, as amended, and Section 21E of the
Securities and Exchange Act, as amended, including certain statements contained
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" concerning our expectations, beliefs, or strategies regarding
increased future revenues and operations, and certain statements contained under
"Business" concerning our future business plans. When used in this Form 10-K,
the words "believes," "intends," "anticipates" and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those projected or implied by such forward-looking statements.
Such risks and uncertainties include things such as changes in the value and
condition of our assets, the loss of key personnel, a change in control of the
company or changes in financial markets and general economic conditions.
Recent Developments
On March 23, 2001, HomeCom Communications, Inc. a Delaware corporation
("HomeCom", "we" or "us"), announced its intentions to wind down its operations.
Our business is dependent on continued financing from investors to sustain our
activities, and we have been unable to obtain the additional financing that we
need to remain in operation. We currently have insufficient assets to satisfy
completely our obligations to our creditors and the liquidation preferences of
our preferred stock. We continue to evaluate our alternatives, including the
possible sale of other assets, but we cannot offer any assurances that we will
be able to identify or complete any transactions that will enable us to remain
in operation.
On March 29, 2001, Harvey Sax resigned from his positions as our President,
Chief Executive Officer and member of our Board of Directors. In connection with
Mr. Sax's resignation, we entered into a separation and release agreement with
Mr. Sax pursuant to which we paid Mr. Sax severance of $150,000 and pursuant to
which we and Mr. Sax released one another from various potential claims and
liabilities. During 2000 and 2001 several other directors and officers also
resigned. We currently have two directors, who also serve as our two remaining
officers.
On March 15, 2001, we sold substantially all of the assets used in our
Internet banking operations to Netzee, Inc. in a transaction that generated net
proceeds to HomeCom of approximately $275,000. On January 31, 2001, we sold
substantially all of the assets used in the operation of our InsureRate division
to Digital Insurance, Inc. for approximately $458,000 in cash and the assumption
of certain liabilities. The consideration in each of these transactions was
determined by negotiation between the respective parties. The proceeds from
these two transactions do not represent significant operating capital for us.
The financial statements provided in Part II of this Annual Report on Form 10-K
present our Internet Banking operations and our InsureRate division as
discontinued operations, and, as such, we are providing them in satisfaction of
the requirements of both Form 10-K and Item 7 of Form 8-K.
Following the dispositions of our Internet banking operations and our
InsureRate division, our only remaining operations are our professional web
development services and hosting fees. During 2000, this division generated
revenues of approximately $4,510,000 and a net loss of approximately $4,600,000.
History
HomeCom was organized in 1994 to provide complex web-based software
applications and integration services to businesses seeking to take advantage of
the Internet. Over time, we evolved into a Web design, financial applications
and solutions provider to the financial services market, including banking,
insurance, securities brokerage firms and other financially oriented web
portals.
1
Prior to and during 2000, we derived revenue from, among other sources,
professional web development services, software licensing, application
development, insurance and securities sales commissions, and hosting and
transactions fees. However, following our various divestitures, including the
sales of our InsureRate division and our Internet banking operations during
2001, we now derive revenue only from professional web development services and
hosting fees.
Products and Services
During 2000, we operated as three distinct business units. Those units
were:
1. HomeCom Financial Applications, Solutions and Technology ("FAST"),
which creates Internet and intranet business applications, solutions and
technology focused on the banking, insurance and brokerage client markets.
The FAST applications include software programs ranging from simple
mathematical calculators to extremely sophisticated intranets/extranets
communicating with legacy systems and client/server databases. We also
provide turnkey hosting services for these applications.
As of March 31, 2001, this business unit represents our entire
business and is our sole source of revenue.
2. Our Financial Solutions division (Internet banking) provided cost
effective, one-stop web-based financial service applications to the
banking, credit union and brokerage industries that allowed our clients to
rapidly deploy competitive e-commerce platforms more cost-effectively than
custom application development. This group consisted of the following
products:
o "Personal Internet Banker (PIB)": this product provided
interactive Internet banking including bill payment, balance
inquiry, funds transfer, and statement download for checking,
savings and credit card accounts.
o "Harvey": this product enabled banks to advertise and market to
targeted consumers based on demographics and web site browsing
preferences. As consumers interacted with the financial
institution's web site, Harvey would scan the data they entered
on application forms, add information about what they looked at
or clicked on and then combine that information with data from a
variety of legacy systems to increase the financial institution's
cross selling and profit capability.
o "Post on the Fly Conference": this product was an online bulletin
board, collaboration and conferencing system that allowed
customers to capture the body of knowledge within an
organization, its business partners and its customers.
Specifically designed for the needs of financial services
companies, this product could run unlimited numbers of investor
forums, private analyst meetings, financial planning workshops,
or customer support groups.
On March 15, 2001 we sold the remaining assets of our Internet banking
group to Netzee, Inc. for approximately $275,000 in cash.
3. Our InsureRate division provided turnkey online insurance programs
to financial institutions, particularly banks, credit unions, brokerage
houses and financial web portals. InsureRate's bundled or unbundled modular
approach to insurance programs within a financial institution allowed
InsureRate's clients to choose appropriate insurance programs for their
clientele. InsureRate derived its revenues from participation in the sales
commissions paid by insurance carriers, website and extranet setup fees,
and insurance carrier enrollment fees. On March 24, 1999, we acquired First
Institutional Marketing, Inc. ("FIMI") and its affiliated insurance
agencies and NASD broker dealer and integrated their operations with
InsureRate.
2
On January 31, 2001, we sold substantially all of the assets of
InsureRate and its affiliates to Digital Insurance, Inc. for approximately
$458,000 in cash and the assumption of certain liabilities.
Acquisitions and Divestitures
On April 16, 1998, we acquired all of the outstanding capital stock of The
Insurance Resource Center, Inc. ("IRC") for 351,391 shares of our common stock.
IRC provides Internet development and hosting services to the insurance industry
and was incorporated into our FAST group. We wrote off the remaining goodwill
for IRC during 1999.
On June 9, 1998, we sold substantially all of the assets of our HostAmerica
Internet network outsourcing services division to Sage Acquisition Corp.
("Sage") for cash of $4,250,000 and Sage's assumption of approximately $250,000
of unearned revenue. We recorded a gain on the sale of approximately $4,402,000.
This transaction allowed us to further consolidate our business focus on the
financial services market.
On November 6, 1998 we signed a definitive agreement and plan of merger
(the "Merger Agreement") to acquire, among other things, all of the outstanding
shares of FIMI and certain of our affiliates for 1,252,174 shares of common
stock. In addition, we entered into employment agreements for an initial term of
3 years with the three principals of FIMI, calling for them to continue in their
current roles for the acquired companies. On March 24, 1999, we completed this
acquisition. Prior to the closing of the acquisition, we loaned the shareholders
of FIMI $370,000 ("FIMI notes"). The notes were to be repaid in either cash or
common stock and were collateralized by common stock. Additionally, the
principal shareholders of FIMI were granted 300,000 warrants to acquire HomeCom
common stock at an exercise price of $3.74 per share. Vesting of the warrants
was contingent upon FIMI meeting certain operating goals as defined in the
agreement.
On April 23, 1999, HomeCom acquired all the outstanding shares of Ganymede
Corporation for total consideration of 185,342 shares of common stock and
$100,000 cash. Ganymede was a Chicago-based web site developer for financial
institutions. In addition, we entered into employment agreements with the three
principals of Ganymede, calling for them to continue in their current roles for
the acquired company.
On October 1, 1999 we sold our security consulting and integration service
operations for $200,000 in cash, certain security audit rights and shares of a
non-public entity originally valued at approximately $823,000, and entered into
a joint marketing program with the acquiror.
On January 31, 2001, we sold substantially all of the assets of FIMI and
its affiliates to Digital Insurance, Inc. ("Digital") for approximately $458,000
in cash and the assumption of certain liabilities. Additionally, the FIMI notes
were forgiven in exchange for the surrender of the common stock that
collateralized the notes and the warrants were forfeited.
On March 15, 2001, we sold our Internet banking operations to Netzee, Inc.
The sale generated net proceeds to HomeCom of approximately $275,000.
Sales and Marketing
We currently have no active marketing strategies or plans.
3
Intellectual Property Rights
In accordance with industry practice, we have relied primarily on a
combination of copyright, patent and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect our proprietary
rights. We have sought to protect our software, documentation and other written
materials principally under trade secret and copyright laws, which afford only
limited protection. We do not believe that any of our products infringe the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not claim infringement by us with respect to our products. In
addition, Web site developers such as ours face potential liability for the
actions of customers and others using their services, including liability for
infringement of intellectual property rights, rights of publicity, defamation,
libel fraud, misrepresentation, unauthorized computer access, theft, tort
liability and criminal activity under the laws of the United States, various
states and foreign jurisdictions. We routinely enter into non-disclosure and
confidentiality agreements with employees, vendors, contractors, consultants and
customers.
There can be no assurance that our means of protecting our proprietary
rights will be adequate or that our competitors will not independently develop
similar technology. We believe that, due to the rapid pace of Internet
innovation and related software industries, factors such as the technological
and creative skills of our personnel are more important in establishing and
maintaining a leadership position within the industry than are the various legal
protections of our technology.
Employees
As of March 31, 2001, we had 7 full-time employees.
Customers
During 1998, no customer accounted for more than 10% of our total net
sales. During 1999, two customers each accounted for more than 10% of our total
revenue. During 2000, two customers each accounted for over 10% of revenues with
one of those customers accounting for over 40%. Our sales to our five largest
customers represented approximately 27%, 51% and 76% of the total revenues for
1998, 1999, and 2000 respectively.
Insurance
We maintain liability and other insurance that we believe to be customary
and generally consistent with industry practice. We believe that such insurance
is adequate to cover potential claims relating to our existing business
activities.
Government Regulation
Except with regard to insurance and securities sales, as discussed below,
we do not believe that we are currently subject to direct regulation by any
government agency, other than regulations applicable to businesses generally,
and also believe that there are currently few laws or regulations directly
applicable to Web site service companies. The Federal Communications Commission
is studying the possible regulation of the Internet. Any such regulations
adopted by the Federal Communications Commission may adversely impact the manner
in which we conduct our business. It is possible that a number of additional
laws and regulations may be adopted with respect to the Internet, covering
issues such as user privacy, pricing, characteristics, and quality of products
and services. The adoption of any such laws or regulations may decrease the
growth of the Internet, which could in turn decrease the demand for our products
and services and increase our cost of doing business or cause us to modify our
operations, or otherwise have an adverse effect on our business, financial
condition and operating results. Moreover, the applicability to the Internet of
existing laws governing issues such as property ownership, libel, and personal
privacy is uncertain. We cannot predict the impact, if any, that future
regulation or regulatory changes may have on our business. In addition, Web site
4
developers such as us face potential liability for the actions of customers and
others using their services, including liability for infringement of
intellectual property rights, rights of publicity, defamation, libel, fraud,
misrepresentation, unauthorized computer access, theft, tort liability and
criminal activity under the laws of the U.S., various states and foreign
jurisdictions. Any imposition of liability could have a material adverse effect
on us.
In addition, our network services are transmitted to our customers over
dedicated and public telephone lines. These transmissions are governed by
regulatory policies establishing charges and terms for communications. Changes
in the regulatory environment relating to the telecommunications and media
industry could have an effect on our business, including regulatory changes
which directly or indirectly affect use or access of the Internet or increase
the likelihood or scope of competition from regional telephone companies, could
have a material adverse effect on us.
We own, and prior to January 31, 2001, operated a NASD regulated
broker/dealer and were affiliated with various insurance agencies. These
subsidiaries and affiliates are subject to federal and state regulation of their
operations, including but not limited to, the Securities Act of 1933, the
Securities and Exchange Act of 1934 and various comparable state securities and
insurance laws and regulations.
Item 2. Properties
As of March 31, 2001, we occupy approximately 7,000 square feet in one
office building in Atlanta, Georgia under a lease expiring in October 2002. This
facility serves as our headquarters and computer center. We have abandoned an
office in New York City where we used to occupy approximately 3,400 square feet
under a lease expiring in January 2003, and abandoned an office in Chicago,
Illinois where we used to occupy approximately 1,000 square feet under a lease
expiring in 2004. Our InsureRate operations in Houston, Texas occupied
approximately 17,500 sq. ft. under two leases that expire in 2004. In connection
with the sale of the assets of the InsureRate operations, we subleased
approximately 13,100 sq.ft. to the purchaser and abandoned approximately 4,400
sq.ft.
We have accrued a real estate disposition liability of approximately
$400,000 at December 31, 2000, which we believe will be sufficient to settle all
obligations related to the closing and abandonment of our offices in New York,
Houston, Chicago, and Atlanta.
We believe that the properties which we currently have under lease are
adequate to serve our business operations for the foreseeable future. We believe
that if we were unable to renew the lease on any of these facilities, we could
find other suitable facilities with no material adverse effect on our business.
Item 3. Legal Proceedings
We are not a party to any material legal proceedings. From time to time, we
are involved in various routine legal proceedings incidental to the conduct of
our business.
Item 4. Submission of Matters to a Vote of Security Holders
None.
5
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
Our Common Stock has been quoted on the OTC Bulletin Board under the symbol
"HCOM" since December 8, 2000. Prior to that date it was quoted on the Nasdaq
SmallCap Market. The following table shows for the periods indicated the high
and low sale prices for the Common Stock as reported by the Nasdaq SmallCap
Market and the range of high and low bid prices as quoted on the OTC Bulletin
Board (indicated by an asterisk). The quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.
1999: High Low
- ----- ---- ---
First quarter $ 7.63 $ 3.50
Second quarter 9.69 5.00
Third quarter 6.69 2.75
Fourth quarter 5.25 3.00
2000:
- -----
First quarter $ 4.88 $ 3.13
Second quarter 3.25 1.00
Third quarter 1.13 .44
Fourth quarter .47 .02 *
2001:
- -----
First quarter (through March 26, 2001) $ .09 * $ .0025 *
Holders of Record
We had approximately 98 holders of record of our Common Stock as of March
19, 2001.
Dividends
We have not paid any cash dividends on our capital stock to date and do not
foresee that we will have earnings with which to pay dividends in the
foreseeable future. Our board of directors would determine the amount of future
dividends, if any, based upon our earnings, financial condition, capital
requirements and other conditions.
Recent Sales of Unregistered Securities
During 2000, we issued the following unregistered securities in reliance on
the exemptions from registration provided by Sections 3(a)(9), 3(b) and 4(2) of
the Securities Act of 1933 and by Regulation D, as promulgated by the SEC
pursuant to the Securities Act:
On April 14, 2000, we issued 106.4 shares of Series E Convertible Preferred
Stock and warrants to purchase 66,667 shares of common stock at an exercise
price of $3.35 per share to McNab LLC for aggregate consideration of $2,127,000.
The Series E Preferred Stock has an initial stated value of $20,000 per share,
which stated value increases at the rate of 8% per year. Each Series E Preferred
Share is convertible 120 days following the date of issuance, at the option of
the holder, into such number of shares of common stock as is determined by
dividing the Series E Stated Value by the lesser of (a) $3.53, or (b) 82.5% of
the average of the closing bid prices for the five trading days preceding the
date of conversion. Any Series E Preferred Stock issued and outstanding on April
14, 2003 will automatically be converted into common stock at the conversion
price then in effect.
During 2000, we issued 2,234,377 shares of common stock upon conversion of
outstanding shares of preferred stock and issued 59,559 shares of common stock
to holders of our preferred stock in connection with penalties that had accrued
on the preferred stock.
During 2000, we also issued 15,077 shares of common stock for legal costs
incurred during 1999.
6
Item 6. Selected Financial Data
The following selected financial data of HomeCom should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and related notes.
Year Ended December 31,
----------------------------------------------------------------------------
1996 1997 1998 1999 2000
------------ ------------ ------------ ------------ ------------
Statement of Operations Data:
- -----------------------------
Revenues $ 2,229,975 $ 2,503,185 $ 2,481,905 $ 3,907,282 $ 4,509,977
Cost of revenues 775,435 2,139,982 2,085,598 951,406 2,722,309
------------ ------------ ------------ ------------ ------------
Gross profit 1,454,540 363,203 396,307 2,955,876 1,787,668
------------ ------------ ------------ ------------ ------------
Operating expenses:
Sales and marketing 962,220 1,440,002 1,142,222 2,878,303 1,944,020
Product development 78,887 514,655 633,268 315,809 321,259
General and administrative 909,230 2,538,229 2,896,287 3,765,514 1,182,192
Depreciation and amortization 85,068 238,537 542,269 1,757,124 1,605,345
Asset Impairment 1,436,078
------------ ------------ ------------ ------------ ------------
Total operating expenses 2,035,405 4,731,423 5,214,046 8,716,750 6,488,894
------------ ------------ ------------ ------------ ------------
Operating loss (580,865) (4,368,22) (4,817,739) (5,760,874) (4,701,226)
Other expenses (income):
Gain on sale of division (4,402,076)
Interest expense (income) 51,272 543,420 445,216 32,583 (5,981)
Other expense (income), net (6,554) (93,298) (166,917) (103,175) (90,793)
------------ ------------ ------------ ------------ ------------
Loss from continuing operations before (625,583) (4,818,34) (693,962) (5,690,282) (4,604,452)
income taxes
Income tax provision (benefit) -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Loss from continuing operations (625,583) (4,818,342) (693,962) (5,690,282) (4,604,452)
Loss from discontinued operations (62,839) (510,178) (4,630,508) (1,755,898)
Gain (loss) on disposal of business segment 1,144,591 (3,000,377)
------------ ------------ ------------ ------------ ------------
Net Loss (625,583) (4,881,181) (1,204,140) (9,176,199) (9,360,727)
Deemed preferred stock dividend -- (666,667) (2,557,466) (1,526,728)
------------ ------------ ------------ ------------ ------------
Loss applicable to common shareholders $ (625,583) $(4,881,181) $ (1,870,807) $(11,733,665) $(10,887,455)
============ ============ ============ ============ ============
Loss per common share--basic and diluted
Continuing operations $ (0.34) $ (1.86) $ (0.32) $ (1.30) $ (0.72)
Discontinued operations (0.02) (0.12) (0.56) (0.55)
------------ ------------ ------------ ------------ ------------
Total $ (0.34) $ (1.88) $ (0.44) $ (1.86) $ (1.27)
============ ============ ============ ============ ============
Weighted average common shares outstanding 1,862,223 2,602,515 4,287,183 6,324,791 8,549,693
============ ============ ============ ============ ============
--------------------------------------------------------------------
1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
Balance Sheet Data:
- -------------------
Working capital (deficit) $(1,304,682) $ 2,721,930 $ 2,265,725 $ 1,033,802 $ (823,406)
Total assets 1,726,522 4,664,779 4,565,490 10,535,718 2,528,973
Long-term obligations 147,833 1,652,009 88,242 315,275 357,757
Total liabilities 2,347,191 2,708,007 1,117,041 2,930,600 2,298,013
Redeemable Preferred stock 1,624,920 251,750
Stockholders' equity (deficit) (620,669) 1,956,772 3,448,449 5,980,198 (20,790)
7
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Except for historical information contained herein, some matters discussed
in this report constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. We note that a variety of risk
factors could cause our actual results and experience to differ materially from
the anticipated results or other expectations expressed in our forward-looking
statements. Reference is made in particular to the discussion set forth in our
Registration Statements on Forms S-1 (File Nos. 333-12219, 333-42599, 333-45383,
333-86837, 333-88491, and 333-56795) and S-3 (333-73123 and 333-81581). Other
risks that could cause our actual results and experience to differ materially
from anticipated results or other expectation are: include changes in the value
and condition of our assets, the loss of key personnel, a change in control of
the Company, or changes in the financial markets and general economic
conditions.
General
On March 23, 2001, we announced our intentions to wind down our operations.
Our business is dependent on continued financing from investors to sustain our
activities, and we have been unable to obtain the additional financing that we
need to remain in operation. We currently have insufficient assets to satisfy
completely our obligations to our creditors and the liquidation preferences of
our preferred stock. We continue to evaluate our alternatives, including the
possible sale of other assets, but we cannot offer any assurances that we will
be able to identify or complete any transactions that will enable us to remain
in operation.
Historically, we developed and marketed specialized software applications,
products and services that enabled financial institutions and their customers to
use the Internet and intranets/extranets to obtain and communicate important
business information, conduct commercial transactions and improve business
productivity. We provided Internet/intranet solutions in three areas: (i) the
design, development and integration of customized software applications,
including World Wide Web site development and related network outsourcing; (ii)
the development, sale and integration of our existing software applications into
the client's operations; and, (iii) security consulting and integration
services. In October, 1999, we sold our security consulting and integration
services operations and entered into a joint marketing program with the
acquiror. During 2001, we sold our remaining software applications businesses.
Currently, we only derive revenue from professional web development services and
hosting fees.
In March 1999, we completed the acquisition of all the outstanding shares
of the First Institutional Marketing companies, a group of insurance agencies
and a NASD broker/dealer (the "FIMI Companies"), for 1,252,174 shares of common
stock. Pursuant to the Merger and Plan of Reorganization the FIMI Companies
continue as separate subsidiaries of HomeCom. On January 31, 2001 we sold
substantially all of the assets of the FIMI Companies for approximately $458,000
and the assumption of certain liabilities. We recorded a loss on the sale of
$3,000,377. We have removed the results of this discontinued operation from the
continuing operations of the company for all periods presented.
On April 23, 1999, HomeCom acquired all the outstanding shares of Ganymede
Corporation for total consideration of 185,342 shares of common stock and
$100,000 cash. Ganymede was a Chicago-based web site developer for financial
institutions. Pursuant to the Merger and Plan of Reorganization of Ganymede,
Ganymede was merged into HomeCom and has ceased to exist as a separate
corporation. Our revenues have been included in the FAST group.
In August 1996, HomeCom acquired all of the outstanding capital stock of
HomeCom Internet Security Services, Inc. (HISS), a Delaware corporation formed
in July 1996 to provide Internet and Intranet security system consulting
services. In October, 1999 we sold HISS for $200,000, certain security audit and
reseller rights and shares of a non-public entity valued at approximately
$823,000, and entered into a joint marketing program with the acquiror. Results
of operations from the discontinued HISS unit have been shown as a discontinued
operation in the Statement of Operations for the year ended December 31, 1999.
This discontinued operations presentation results in certain revenue and expense
reclassifications for the periods presented.
Our revenues and operating results have varied substantially from period to
period, and should not be relied upon as an indication of future results.
8
Results of Operations
Year Ended December 31, 1999 as Compared to Year Ended December 31, 2000
Revenues. Revenues increased 15.4% from $3,907,282 in 1999 to $4,509,977 in
2000. This increase of $602,695 is primarily attributable to growth in, and
increased reliance upon revenue from the Website Development portion of our
business.
Cost of Revenues. Cost of revenues includes commissions for financial
institutions and agents, salaries for programmers, technical staff, sales staff
and customer support, as well as a pro-rata allocation of telecommunications,
facilities and data center costs. Cost of revenues increased from $951,406, or
24.3% of revenues in 1999, to $2,722,309, or 60.4% of revenues in 2000. This
increase reflects greater costs associated with an increase in technical
personnel as a percentage of employees and, more significantly, an increase in
the pro-rata carrying portion of center operating costs due to reductions in
Sales and Marketing and General and Administrative costs.
Gross Profit. Gross profits decreased by $1,168,208 from $2,955,876 in 1999
to $1,787,668 in 2000. Gross profit margins also decreased from 75.7% during
1999 to 39.6% during 2000. The primary cause for the reduction was an increased
allocation of pro-rata costs to Cost of Revenues, due to reductions in General
and Administrative and Sales and Marketing expenditures.
Sales and Marketing. Sales and Marketing expenses include salaries,
variable commissions, and bonuses for the sales force, advertising and
promotional marketing materials, and a pro-rata allocation of
telecommunications, facilities and data center costs. Sales and Marketing
expenses decreased $934,283 from $2,878,303 in 1999 to $1,944,020 in 2000. This
decrease was primarily attributable to undertaking a more targeted marketing
approach concentrating on obtaining Website Development work as opposed to
previous efforts at product marketing. Additionally, we placed our reliance upon
individual sales contacts and dramatically reduced our previous expenditures on
general advertising. As a percentage of net sales, these expenses decreased from
73.7% in 1999 to 43.1% in 2000.
Product Development. Product development costs consist of personnel costs
required to conduct our product development efforts, and a pro-rata allocation
of telecommunications, facilities and data center costs. Total expenditures for
product development were $321,259, or 7.1% of net sales in 2000. This compares
to total product development expenditures of $315,809, or 8.1% of net sales in
1999.
General and Administrative. General and administrative expenses include
salaries for administrative personnel, insurance and other administrative
expenses, as well as a pro-rata allocation of telecommunications, and facilities
and data center costs. General and administrative expenses decreased from
$3,765,514 in 1999 to $1,182,192 in 2000. This decrease is due to significant
efforts to cut overhead costs including stringent scrutiny of all non-production
expenses, greater usage of internal resources and reduced outsourcing costs
associated with legal, accounting, and printing. Additionally, we shut down our
operations in the Chicago regional office and reduced administrative personnel
in the corporate office. As a percentage of net sales, these expenses decreased
from 96.4% in 1999 to 26.2% in 2000.
Depreciation and Amortization. Depreciation and amortization includes
depreciation and amortization of computers, network equipment, office equipment,
equipment under capital leases, and intangible assets. Depreciation and
amortization decreased from $1,757,124, or 45.0% of net sales in 1999 to
$1,605,345, or 35.6% in 2000, primarily reflecting the discontinuation of
amortization of intangible assets associated with the Ganymede acquisition, as
these intangibles were written off.
Asset Impairment Charge. We incurred an asset impairment charge of
$1,436,078 consisting of: $831,310 to write off the remaining Ganymede goodwill,
$329,270 to reduce the carrying value of the investment in iDefense and $275,498
to reduce the value of fixed assets to an estimated realizable value.
9
Other Income. In 2000 and 1999 we recorded other income of $90,793 and
$103,175, respectively.
Interest Expense. Interest expense decreased from $32,583 in 1999 to
($5,981) during 2000
Discontinued Operations. We recorded a loss of $3,000,377 on the sale of
our FIMI division, which closed on January 31, 2001. In addition, FIMI incurred
operating losses of $2,736,678 and $1,970,584 for the years ended December 31,
1999 and 2000, respectively. We also sold our Software Products segment for a
gain of $262,940. Software Products incurred operating losses of $443,166 and
$1,396,004 for the years ended December 31, 1998 and 1999 respectively. Business
unit net income of $214,686 was realized for the year 2000. This can be
attributed to the sale of a licensing agreement for the usage of the PIB
product.
Year Ended December 31, 1998 as Compared to Year Ended December 31, 1999
------------------------------------------------------------------------
Revenues. Revenues increased 57.4% from $2,481,905 in 1998 to $3,907,282 in
1999. This increase of $1,425,377 is primarily attributable to an increase in
high-end website development revenue of $1,562,408.
Cost of Revenues. Cost of revenues includes commissions for financial
institutions and agents, salaries for programmers, technical staff, sales staff
and customer support, as well as a pro-rata allocation of telecommunications,
facilities and data center costs. Cost of revenues decreased from $2,085,598, or
84.0% of revenues in 1998 to $951,406 or 24.3% of revenues in 1999. The decrease
in cost of revenues as a percentage of revenues is due to increased margins in
our FAST Group.
Gross Profit. Gross profit increased by $2,599,569 from $396,307 in 1998 to
$2,995,876 in 1999. Gross profit margins also increased from 16.0% during 1998
to 75.7% during 1999. This increase as a percentage of net sales is due to an
increase in billing rates associated with the higher margin web development
projects.
Sales and Marketing. Sales and marketing expenses include salaries,
variable commissions, and bonuses for the sales force, advertising and
promotional marketing materials, and a pro-rata allocation of
telecommunications, facilities and data center costs. Sales and marketing
expenses increased $1,736,081 from $1,142,222 in 1998 to $2,878,303 in 1999. As
a percentage of net sales, these expenses increased from 46.0% in 1998 to 73.7%
in 1999.
Product Development. Product development costs consist of personnel costs
required to conduct our product development efforts, and a pro-rata allocation
of telecommunications, facilities and data center costs. Management believes
that continuing investment in product development is required to compete
effectively in our industry. Total expenditures for product development were
$315,809, or 8.1% of net sales in 1999. This compares to total product
development expenditures of $633,268, or 25.5% of net sales in 1998.
General and Administrative. General and administrative expenses include
salaries for administrative personnel, insurance and other administrative
expenses, as well as a pro-rata allocation of telecommunications, and facilities
and data center costs. General and administrative expenses increased from
$2,896,287 in 1998 to $3,765,514 in 1999. As a percentage of net sales, these
expenses decreased from 116.7% in 1998 to 96.4% in 1999. The percentage decline
is a result of operating efficiencies.
Depreciation and Amortization. Depreciation and amortization includes
depreciation and amortization of computers, network equipment, office equipment,
equipment under capital leases, and intangible assets. Depreciation and
amortization increased from $542,269, or 21.8% of net sales in 1998 to
$1,757,124 or 45.0% in 1999, reflecting the amortization of intangible assets
associated with the IRC and Ganymede acquisitions.
10
Other Income. In 1999 and 1998 We recorded other income of $103,175 and
$166,919, respectively.
Interest Expense. Interest expense decreased from $445,216 in 1998 to
$32,583 during 1999, due to the absence of the amortization of the discount on a
convertible debenture converted to common stock during 1998.
Discontinued Operations. We recorded a gain of $1,144,591 on the sale of
our Internet Security Services ("HISS") division in 1999. In addition, HISS
recorded losses of approximately $498,000 and $67,000 in 1999 and 1998,
respectively. During 1998, We recorded a gain on the sale of our HostAmerica
division of $4,402,076 (see Note 12).
Recently Issued Accounting Standards
See Note 1 to Notes to Consolidated Financial Statements for a complete
discussion of recently issued accounting standards and their expected impact on
our consolidated financial statements.
11
Liquidity and Capital Resources
General
Our sources of capital are extremely limited. We have incurred operating
losses since inception and as of December 31, 2000, we had an accumulated
deficit of $25,247,830 and a working capital deficit of $823,406. On March 23,
2001, we announced our intentions to wind down operations. While we continue to
evaluate our alternatives, we have been unable to obtain additional financing
and do not have sufficient assets to completely satisfy our obligations to our
creditors and the liquidation preferences of our preferred shareholders.
We believe that we have exhausted our current sources of capital and also
believe that it is highly unlikely that we will be able to secure additional
capital that would be required to undertake additional steps to continue our
operations. We may elect to implement other cost reduction actions as we may
determine are necessary and in our best interests, including the possible
additional sale of assets. Also, we believe that there may be value in remaining
current in our reporting obligations under the Securities Exchange Act of 1934,
although we can give no assurance that we will ever be able to realize any value
from our situation. If we cannot resolve our liabilities, and no other
alternatives are available, we may be forced to seek protection from our
creditors. The aforementioned factors raise substantial doubt about HomeCom's
ability to continue as a going concern. The financial statements included herein
have been prepared assuming HomeCom is a going concern and do not include any
adjustments that might result should HomeCom be unable to continue as a going
concern.
Net cash used in operating activities was $2.63 million for the year ended
December 31, 2000. We have primarily financed our operations to date through
public and private sales of debt and equity securities and loans from our
principal stockholders and affiliates. During May 1997, we completed an initial
public offering of our common stock, issuing 1,000,000 shares at a price of
$6.00 per share. The net proceeds to us from the initial public offering were
approximately $4.7 million. We repaid all outstanding principal amounts loaned
to us by stockholders and affiliates. During September 1997, we completed the
issuance of an aggregate $1.7 million principal amount of our 5% convertible
debentures due September 22, 2000. Net proceeds from the sale of the debentures
were approximately $1.5 million. In December 1997, we issued 20,000 shares of
Series A preferred stock for aggregate net proceeds of approximately $1.8
million. During 1998, our 5% convertible debentures and our Series A preferred
stock were converted into 961,460 and 711,456 shares of common stock,
respectively. In June 1998, we sold our HostAmerica division to Sage Acquisition
Corp., for net proceeds of approximately $4,500,000. In March 1999, we issued
125 shares of our Series B preferred stock for aggregate net proceeds of
approximately $2.3 million. On July 28, 1999, we sold 175 shares of our Series C
Preferred Stock for net proceeds of approximately $3.3 million. On September 28,
1999, we sold 75 shares of our series D preferred stock for net proceeds of
approximately $1.4 million. On April 14, 2000, we sold 106 shares of our series
E preferred stock for net proceeds of approximately $1.85 million.
We spent $362,161 and $507,117 during 2000 and 1999, respectively, for the
purchase of capital equipment. These amounts were expended primarily for
computer equipment, communications equipment and software necessary for us to
increase our presence in the Internet and Intranet applications marketplace. Our
commitments as of December 31, 2000 consist primarily of leases on our Atlanta,
Georgia; Houston, Texas; Chicago, Illinois; and New York City facilities and
equipment leases.
12
Item 8. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
------
Report of Independent Accountants 14
Consolidated Balance Sheets as of December 31, 1999 and 2000 15
Consolidated Statements of Operations for Each of the Three
Years in the Period Ended December 31, 2000 16
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
for Each of the Three Years in the Period Ended December 31, 2000 17
Consolidated Statements of Cash Flows for Each of the Three Years in
the Period Ended December 31, 2000 18
Notes to Consolidated Financial Statements 20
13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
HomeCom Communications, Inc. and subsidiaries
We have audited the accompanying consolidated balance sheets of HomeCom
Communications, Inc. and subsidiaries as of December 31, 2000 and 1999 and the
related statements of operations, stockholders' equity (deficit) and cash flows
for the years ended December 31, 2000, 1999 and 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of HomeCom
Communications, Inc. and subsidiaries as of December 31, 2000 and 1999 and the
results of its operations and its cash flows for the years ended December 31,
2000, 1999 and 1998 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has experienced recurring losses and negative
cash flows since its inception and has an accumulated deficit. The Company is
dependent on continued financing from investors to sustain its activities and
there is no assurance that such financing will be available. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Feldman Sherb & Co., P.C.
-----------------------------
Feldman Sherb & Co., P.C.
New York, New York
March 20, 2001
14
HOMECOM COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------------
1999 2000
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,497,678 $ 520,716
Accounts receivable, net 1,160,114 443,352
Employee loans 474,583
Receivable from related party 200,000
Other current assets 189,648
------------ ------------
Total current assets 3,522,023 964,068
Furniture, fixtures and equipment, net 1,131,204 476,088
Deposits 92,494 37,739
Intangible assets, net 4,966,822 557,173
Investment 823,175 493,905
------------ ------------
Total assets $ 10,535,718 $ 2,528,973
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,697,210 $ 1,264,416
Accrued payroll liabilities 290,414 375,535
Unearned revenue 296,319
Current portion of obligations under capital leases 204,278 147,523
------------ ------------
Total current liabilities 2,488,221 1,787,474
Obligations under capital leases 315,275 357,757
Other liabilities 127,104 152,782
------------ ------------
Total liabilities 2,930,600 2,298,013
------------ ------------
Redeemable Preferred stock, Series B $.01 par value, 125 shares
authorized, 125 shares issued at December 31, 1999 and 2000,
respectively and 115 and 17.8 shares outstanding at December 31,
1999 and 2000, respectively, convertible, participating, $389,850
liquidation value as of December 31, 2000 1,624,920 251,750
Commitments and contingencies (Note 5)
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.0001 par value, 15,000,000 shares authorized,
9,359,156 and 7,040,525 shares issued and outstanding at December
31, 2000 and 1999, respectively 704 936
Preferred stock, Series C, $.01 par value, 175 shares issued and authorized,
92.1 and 137.5 shares outstanding at December 31, 2000
and 1999, respectively, convertible, participating; $2,031,704
liquidation value at December 31, 2000 2 1
Preferred stock, Series D, $.01 par value, 75 shares issued and authorized,
1.3 and 75 shares outstanding at December 31, 2000 and 1999, respectively;
convertible, participating; $28,345 liquidation value at December 31, 2000 1 1
Preferred stock, Series E, $.01 par value, 106.4 shares issued and
outstanding as of December 31, 2000, convertible, participating; $2,418,836
liquidation value at December 31, 2000 1
Additional paid-in capital 21,931,281 25,226,101
Subscriptions receivable (64,687)
Accumulated deficit (15,887,103) (25,247,830)
------------ ------------
Total stockholders' equity (deficit) 5,980,198 (20,790)
------------ ------------
Total liabilities and stockholders' equity $ 10,535,718 $ 2,528,973
============ ============
The accompanying notes are an integral part of these consolidated financial statements.
15
HOMECOM COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
--------------------------------------------
1998 1999 2000
------------ ------------ ------------
Revenues $ 2,481,905 $ 3,907,282 $ 4,509,977
Cost of revenues 2,085,598 951,406 2,722,309
------------ ------------ ------------
GROSS PROFIT 396,307 2,955,876 1,787,668
------------ ------------ ------------
OPERATING EXPENSES:
Sales and marketing 1,142,222 2,878,303 1,944,020
Product development 633,268 315,809 321,259
General and administrative 2,896,287 3,765,514 1,182,192
Depreciation and amortization 542,269 1,757,124 1,605,345
Asset impairment charge 1,436,078
------------ ------------ ------------
Total operating expenses 5,214,046 8,716,750 6,488,894
------------ ------------ ------------
OPERATING LOSS (4,817,739) (5,760,874) (4,701,226)
OTHER EXPENSES (INCOME)
Gain on sale of division (4,402,076)
Interest expense (income) 445,216 32,583 (5,981)
Other expense (income), net (166,917) (103,175) (90,793)
------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (693,962) (5,690,282) (4,604,452)
INCOME TAX PROVISION (BENEFIT) -- -- --
------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS (693,962) (5,690,282) (4,604,452)
LOSS FROM DISCONTINUED OPERATIONS (510,178) (4,630,508) (1,755,898)
GAIN (LOSS) ON DISPOSAL OF DISCONTINUED BUSINESS SEGMENT -- 1,144,591 (3,000,377)
------------ ------------ ------------
NET LOSS (1,204,140) (9,176,199) (9,360,727)
DEEMED PREFERRED STOCK DIVIDEND (666,667) (2,557,466) (1,526,728)
------------ ------------ ------------
LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (1,870,807) $(11,733,665) $(10,887,455)
============ ============ ============
LOSS PER SHARE--BASIC AND DILUTED
CONTINUING OPERATIONS $ (0.32) $ (1.30) $ (0.72)
DISCONTINUED OPERATIONS (0.12) (0.56) (0.55)
------------ ------------ ------------
TOTAL $ (0.44) $ (1.86) $ (1.27)
============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED 4,287,183 6,324,791 8,549,693
============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements.
16
HOMECOM COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For Each of the Three Years in the Period Ended December 31, 2000
Preferred Stock Common Stock
---------------------------- ---------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
Balance, December 31, 1997 20,000 $ 200 2,956,396 $ 295
Issuance of stock 443,085 45
Conversion of convertible
debentures to common
shares 961,460 96
Conversion of preferred
stock to common shares (20,000) (200) 711,456 71
Cancellation of
subscriptions
receivable under
employment agreements
Other
Net loss
------------ ------------ ------------ ------------
Balance, December 31, 1998 5,072,397 507
Issuance of preferred stock
and warrants, net of
offering costs 250 3
Common stock issued in
conjunction with the
acquisition of FIMI 1,252,174 125
Common stock issued in
conjunction with the
acquisition of Ganymede 185,342 19
Warrant exercises 106,875 11
Conversion of preferred
stock to common shares (37) 344,777 34
Stock option exercises 53,278 5
Cancellation of
subscription receivable
under employment
agreements
Other 25,682 3
Net loss
------------ ------------ ------------ ------------
Balance, December 31, 1999 213 3 7,040,525 704
Issuance of preferred stock
and warrants, net of
offering costs 106 1
Warrant exercises 15,077 1
Conversion of Series B
preferred stock to
common shares 902,307 90
Conversion of Series C and
D preferred stock to
common shares (119) (1) 1,391,629 139
Stock option exercises 8,197 1
Cancellation of
subscription receivable
under employment
agreements
Penalties on Series E
preferred stock
Other 1,421 1
Net loss
------------ ------------ ------------ ------------
Balance, December 31, 2000 200 $ 3 9,359,156 $ 936
============ ============ ============ ============
Table continues on following page.
17
HOMECOM COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For Each of the Three Years in the Period Ended December 31, 2000
(Continued)
Total
Additional Stockholders'
Paid-In Subscriptions Accumulated Equity
Capital Receivable Deficit (Deficit)
------------ ------------ ------------ ------------
Balance, December 31, 1997 $ 7,800,542 $ (337,501) $ (5,506,765) $ 1,956,771
Issuance of stock 884,086 884,131
Conversion of convertible
debentures to common
shares 1,699,904 1,700,000
Conversion of preferred
stock to common shares 129
Cancellation of
subscriptions
receivable under
employment agreements 140,623 140,623
Other (28,937) (28,937)
Net loss (1,204,140) (1,204,140)
------------ ------------ ------------ ------------
Balance, December 31, 1998 10,355,724 (196,878) (6,710,905) 3,448,448
Issuance of preferred stock
and warrants, net of
offering costs 5,265,031 5,265,034
Common stock issued in
conjunction with the
acquisition of FIMI 4,235,979 4,236,104
Common stock issued in
conjunction with the
acquisition of Ganymede 1,248,167 1,248,186
Warrant exercises 427,489 427,500
Conversion of preferred
stock to common shares 141,263 141,297
Stock option exercises 209,450 209,455
Cancellation of
subscription receivable
under employment
agreements 132,191 132,191
Other 48,178 48,181
Net loss (9,176,198) (9,176,198)
------------ ------------ ------------ ------------
Balance, December 31, 1999 21,931,281 (64,687) (15,887,103) 5,980,198
Issuance of preferred stock
and warrants, net of
offering costs 1,855,425 1,855,426
Warrant exercises 79,617 79,618
Conversion of Series B
preferred stock to
common shares 1,599,044 1,599,134
Conversion of Series C and
D preferred stock to
common shares (138)
Stock option exercises 12,083 12,084
Cancellation of
subscription receivable
under employment
agreements 64,687 64,687
Penalties on Series E
preferred stock (251,211) (251,211)
Other 1
Net loss (9,360,727) (9,360,727)
------------ ------------ ------------ ------------
Balance, December 31, 2000 $ 25,226,101 $ -- $(24,247,830) $ (20,790)
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements.
17(a)
HOMECOM COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------------------------
1998 1999 2000
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,204,140) $(9,176,198) $(9,360,727)
Adjustments to reconcile net loss to cash used in operating
activities:
Depreciation and amortization 542,269 1,916,170 1,632,939
Amortization of debt discount and debt issue costs 406,532
Write down of investment, fixed assets and intangibles 4,163,731
Write down of employee loans 474,583
Forgiveness of subscriptions receivable 140,623 132,189 64,687
Expense recorded for issuance of warrants 36,093 11,797
Non-cash compensation expense 44,933 68,071
Gain on sale of division (4,402,076) (1,144,591)
Provision for bad debts 167,675 228,000 (184,851)
Deferred rent expense (52,135) (31,532) (124,321)
Change in operating assets and liabilities:
Accounts receivable (309,248) (499,465) 901,613
Accounts payable and accrued expenses (3,793) 542,947 (228,422)
Accrued payroll liabilities 36,747 (45,700) 85,121
Unearned revenue 187,367 167,974 (296,319)
Other 4,963 128,054 244,402
----------- ----------- -----------
Net cash used in operating activities (4,404,190) (7,702,284) (2,627,564)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture, fixtures and equipment (362,689) (507,117) (362,161)
Cash from acquisition 136,938
Loans to related parties (474,583) 200,000
Proceeds from sale of division, net of restricted cash of $250,000 4,000,000
Payment of acquisition costs (152,407)
Release of Restricted cash 250,000
----------- ----------- -----------
Net cash provided by (used in) investing activities 3,484,904 (594,762) (162,161)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of deferred offering costs (28,937) --
Payment of deferred debt issue costs (35,395) --
Repayment of capital lease obligations (144,492) (133,691) (54,747)
Proceeds from issuance of common shares and exercise of warrants 232,094 648,682 12,084
Proceeds from issuance of preferred shares and warrants 6,987,801 1,855,426
----------- ----------- -----------
Net cash provided by financing activities 23,270 7,502,792 1,812,763
----------- ----------- -----------
18
HOMECOM COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Year Ended December 31,
-----------------------------------------
1998 1999 2000
----------- ----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (896,016) (794,254) (976,962)
CASH AND CASH EQUIVALENTS at beginning of period 3,187,948 2,291,932 1,497,678
CASH AND CASH EQUIVALENTS at end of period $ 2,291,932 $ 1,497,678 $ 520,716
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND NON CASH
INVESTING AND FINANCING ACTIVITIES:
Interest paid $ 16,277 $ 32,400 $
=========== =========== ===========
Capital lease obligations incurred during year on lease of
computer equipment $ 208,065 $ 308,093 $ 40,474
=========== =========== ===========
Year 2000
- ---------
216.33 shares of preferred stock were converted into 2,293,936 shares of common
stock.
Year 1999
- ---------
The Company issued 1,252,174 shares of common stock for the net assets of First
Institutional Marketing, Inc. and certain of its affiliates. Additionally,
185,342 shares of common stock were issued for the net assets of Ganymede
Corporation. The Company also converted 47 shares of preferred stock into
344,777 shares of common stock.
Year 1998
- ---------
During 1998, the Company issued 351,391 shares of common stock for the net
assets of The Insurance Resource Center, Inc. Additionally, $1,700,000 of
convertible debentures were converted into 961,460 shares of common stock.
The accompanying notes are an integral part of these consolidated financial statements.
19
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business and Basis of Presentation--Going Concern
Historically, HomeCom Communications, Inc. (the "Company") developed and
marketed specialized software applications, products and services to enable
financial institutions and their customers to use the Internet and
intranets/extranets to obtain and communicate important business information,
conduct commercial transactions and improve business productivity. Revenue was
derived from professional web development services, software licensing,
application development, insurance and securities sales commissions, hosting
fees and transactions fees. The Company's financial statements are prepared
using generally accepted accounting principles applicable to a going concern
which contemplate the realization of assets and liquidation of liabilities in
the normal course of business. The Company has incurred significant losses since
its incorporation, resulting in an accumulated deficit at December 31, 2000 of
approximately $25 million. The Company continues to experience negative cash
flows from operations and is dependent on continued financing from investors to
sustain its activities. There is no assurance that such financing will be
available. These factors raise substantial doubt about the Company's ability to
continue as a going concern.
Subsequent to year end, the Company announced that it was seeking to wind
down its operations. As the Company winds down its operations, it will evaluate
other alternatives, which may include selling additional assets. The Company's
continued existence as a going concern is dependant upon adequate future debt or
equity funding and successful commercialization of its products and services.
Asset Impairment
The Company evaluates the recoverability and carrying value of its
long-lived assets at each balance sheet date, based on guidance in SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-lived Assets to
Be disposed Of. Among other factors considered in such evaluation is the
historical and projected operating performance of business operations, the
operating environment and business strategy, competitive information and market
trends. Accordingly, the Company has recorded an asset impairment charge of
$1,436,078 during fiscal 2000 in connection with the following items:
Ganymede Goodwill
During the second quarter of year 2000, the company recognized a goodwill
impairment charge of $831,310 with no associated tax benefit, related to the
1999 acquisition of Ganymede Corporation ("Ganymede") (See Note 11). The review
for impairment at these operations was triggered by recent cash flow losses and
forecasted operating cash flows below those expected at the time that Ganymede
was acquired. Accordingly, the Company concluded that intangible assets were no
longer recoverable through future operations and therefore recognized an
impairment charge related to this asset.
Investment in iDefense
During the fourth quarter of year 2000, the Company recognized an
impairment loss of $329,270 with no associated tax benefit, related to its
investment in iDefense. The Company identified conditions including the
continued losses of iDefense, the difficulty iDefense has in obtaining
additional financing, as well as significant reductions in valuations of
Internet related companies. The Company believes that these items are all
indicators of asset impairment. These conditions have led to operating results
that were substantially less than had been anticipated at the time of the
Company's sale of its HISS unit to iDefense. Accordingly, the Company concluded
that the investment in iDefense was impaired and recognized a charge related to
this asset.
20
Fixed Assets
Also in the fourth quarter of year 2000, the Company has recorded a charge
of $275,498 related to the write-down of fixed assets at its Atlanta operations.
These write-downs are a result of the conditions as outlined above relative to
the future of the Company.
Intangible Assets
Intangible assets represent identifiable and unidentifiable intangible
assets related to acquired businesses. Amounts assigned to certain relationships
and licenses were amortized on a straight-line basis over three years; amounts
assigned to retail insurance operations were amortized on a straight-line basis
over seven years; costs in excess of net tangible and identifiable intangible
assets acquired that were recorded as goodwill were amortized on a straight-line
basis over periods ranging from three to five years. As of December 31, 2000 the
remaining intangible asset balance represents the net recoverable asset in
conjunction with the ultimate disposition of the FIMI operations.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, subsequent to acquisition, after the
elimination of all significant intercompany accounts and transactions.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, management considers all
highly liquid investments with a maturity of three months or less when purchased
to be cash equivalents.
21
Accounts Receivable, Net
Accounts receivable are shown net of the allowance for doubtful accounts.
The allowance was approximately $215,000 and $31,075 at December 31, 1999 and
2000, respectively. Write-offs were approximately $108,000 and $89,790 for the
year ended December 31, 1999 and 2000, respectively.
Concentration of credit risk with respect to trade accounts receivable is
generally diversified due to the large number of entities comprising and the
quality of its customer base. The Company provides an allowance for accounts
which are estimated to be uncollectible. The Company's sales to its five largest
customers represented approximately 51% and 76% of total revenues for the years
ended December 31, 1999 and 2000, respectively. During 2000, two customers each
accounted for more than 10% of the revenues of the Company. During 1999, two
customers each accounted for more than 10% of the revenues of the Company.
Furniture, Fixtures and Equipment, Net
Furniture, fixtures and equipment are recorded at cost less accumulated
depreciation, which is computed using the straight-line method over the
estimated useful lives of the related assets. Furniture and fixtures are
depreciated over a 5 year life; computer equipment is depreciated over a 3 year
life. Assets recorded under capital leases are amortized over the shorter of
their useful lives or the term of the related leases using the straight-line
method. Maintenance and repairs are charged to expense as incurred. Upon sale,
retirement or other disposition of these assets, the cost and the related
accumulated depreciation are removed from the respective accounts and any gain
or loss on the disposition is included in income.
Software Development Costs, Net
The Company capitalizes internal software development costs in accordance
with Statement of Financial Accounting Standards No. 86, "Accounting For Costs
of Computer Software To Be Sold, Leased, or Otherwise Marketed". The
capitalization of these costs begins when a product's technological feasibility
has been established and ends when the product is available for general release
to customers. Amortization is computed on an individual product basis and is the
greater of (a) the ratio of current gross revenues for a product to the total
current and anticipated future growth revenues for the product or (b) the
straight-line method over the estimated economic life of the product.
Amortization of capitalized software development costs totaled approximately
$32,000 in 1998. These expenses are included in cost of sales.
22
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments approximates
fair value.
Revenue Recognition
The Company recognizes revenues on web site development and specialized
software application contracts using the percentage-of-completion method. Earned
revenue is based on the percentage that incurred hours to date bear to total
estimated hours after giving effect to the most recent estimates of total hours.
Earned revenue reflects the original contract price adjusted for agreed upon
claim and change order revenue, if any. If estimated total costs on any of these
contracts indicate a loss, the entire amount of the estimated loss is recognized
immediately. Revenues related to other services are recognized as the services
are performed. Revenues related to insurance product commissions are recognized
upon receipt. Revenues from equipment sales and related costs are recognized
when products are shipped to the customer. Unearned revenue, as reflected on the
accompanying balance sheet, represents the amount of billings recorded on
contracts in advance of services being performed.
Advertising Expenses
Advertising costs are expensed when incurred. Advertising expenses were
approximately $263,000, $1,147,000 and $216,099 for the years ended December 31,
1998, 1999 and 2000, respectively.
Income Taxes
The Company accounts for income taxes using the asset and liability method
as described by Statement of Financial Accounting Standards No. 109, Accounting
For Income Taxes ("SFAS No. 109").
Under SFAS 109 the liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
The Company provides a valuation allowance for deferred tax assets which
are determined by management to be below the threshold for realization
established by SFAS 109.
Basic and Diluted Loss Per Share
Basic and diluted loss per share are calculated according to the provisions
of Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("FAS 128"). Due to the net loss position of the Company for each of the three
years in the period ending December 31, 2000, the numerator and denominator are
the same for both basic and diluted loss per share.
The table below illustrates the calculation of the loss per share amounts
attributable to continuing and discontinued operations applicable to common
shareholders.
Year Ended December 31,
--------------------------------------------
1998 1999 2000
------------ ------------ ------------
Loss from continuing operations $ (693,962) $ (5,690,282) $ (4,604,452)
Less: Deemed Preferred stock dividend (666,667) (2,557,466) (1,526,728)
------------ ------------ ------------
Loss from continuing operations applicable to
common shareholders (1,360,629) (8,247,748) (6,131,180)
Discontinued operations (510,178) (3,485,917) (4,756,275)
------------ ------------ ------------
Net loss applicable to common shareholders $ (1,870,807) $(11,733,665) $(10,887,455)
============ ============ ============
Weighted average common shares outstanding--
Basic and diluted 4,287,183 6,324,791 8,549,693
------------ ------------ ------------
Loss per share--continuing operations (0.32) (1.30) (0.72)
Loss per share--discontinued operations (0.12) (0.56) (0.55)
------------ ------------ ------------
$ (0.44) $ (1.86) $ (1.27)
============ ============ ============
23
The Company has not declared or paid any dividends to the shareholders of
the Preferred Stock. However, the Preferred Stock possess conversion rights (the
"Beneficial Conversion Feature") that are analogous to dividends. Accordingly,
the Beneficial Conversion Feature is accounted for as a Deemed Preferred Stock
Dividend. (See footnotes 7, 8, 9 and 10).
Recently Issued Accounting Standards
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and
Hedging Activities" and SFAS No. 138, "Accounting for certain Derivative
Instruments and Certain Hedging Activities (an amendment of SFAS 133). "These
statements establish accounting and reporting standards for derivative
instruments for fiscal years beginning after June 15, 2000. At December 31,
2000, The Company did not have any significant derivative instruments or hedging
activities, and therefore, management believes that the initial application of
these statements will not have a material impact on the Company's consolidated
financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 clarifies existing accounting principles related to revenue
recognition in financial statements. The Company adopted SAB 101 during the
fourth quarter of 2000 and the adoption did not affect the Company's
consolidated financial statements for the year ended December 31, 2000.
Other Matters
Certain prior year amounts have been reclassified to conform to current
year presentation.
2. FURNITURE, FIXTURES AND EQUIPMENT, NET
Furniture, fixtures and equipment, net, are comprised of the following as
of:
December 31,
--------------------------
1999 2000
----------- -----------
Furniture and fixtures $ 399,845 $ 235,921
Computer equipment 1,195,234 1,225,407
Computer equipment under capital leases 810,917 843,708
----------- -----------
2,405,996 2,305,036
Less: accumulated depreciation and amortization (1,274,792) (1,553,450)
Less: write down to fair value less costs to sell (275,498)
----------- -----------
$ 1,131,204 $ 476,088
=========== ===========
24
3. INTANGIBLE ASSETS
Intangible assets consist of the following:
December 31,
---------------------------
1999 2000
----------- -----------
Licenses and training programs $ 172,269 $ 172,269
Bank and carrier relationships 450,000 450,000
Retail insurance operations 1,500,000 1,500,000
Goodwill 3,830,888 3,830,888
----------- -----------
5,953,157 5,953,157
Less: Accumulated amortization (986,335) (2,028,297)
Less: Write down related to asset impairment (3,367,687)
----------- -----------
$ 4,966,822 $ 557,173
=========== ===========
Amortization expense relating to intangible assets was $108,190 and
$1,337,655 for the years ended December 31, 1998 and 1999, respectively.
Amortization charged to expense in 2000 was $1,041,962 of which $63,912 related
to the amortization of Ganymede goodwill and $978,050 related to the
amortization of FIMI intangibles.
4. SEGMENT INFORMATION
Historically, the Company was organized into five separate business units.
The Company determined that its reportable segments were those that were based
on the Company's method of internal reporting, which disaggregated its business
by product and service category into business units. The Company's reportable
segments were: custom Web development (FAST), Internet outsourcing services
(HostAmerica), Internet security services (HISS), software products, and
InsureRate/FIMI. On June 9, 1998, the Company sold substantially all of the
assets of its HostAmerica Internet outsourcing services business unit to Sage
Acquisition Corp. On October 1, 1999 the Company sold all of the assets of its
HISS unit to Infrastructure Defense, Inc. On January 31, 2001 the Company sold
all of the assets of its InsureRate/FIMI unit to Digital Insurance, Inc. and on
March 15, 2001 the Company sold the remaining assets of its Software Products
group to Netzee, Inc. The Company currently operates in a single business
segment. Historical segment information is not provided since each of the former
segments is presented as discontinued operations.
5. COMMITMENTS AND CONTINGENCIES
The Company leases office space and equipment under noncancelable operating
lease agreements expiring through 2002. The Company has entered into capital
leases of computer equipment.
Future minimum lease payments under capital and operating leases are as
follows as of December 31, 2000:
Capital Operating
Leases Leases
-------- --------
2001 $ 81,064 $318,344
2002 44,451 195,783
2003 7,938 --
-------- --------
Total minimum lease payments 133,453 $514,127
========
Less: amount representing interest (19,872)
--------
Present value of minimum lease payments 113,581
Less: current portion (66,418)
--------
$ 47,163
========
25
The Company leases office space in New York City, Chicago, Houston, and
Atlanta. The Company has recorded a deferred credit to reflect the excess of
rent expense over cash payments since inception of the leases. The Company has
abandoned facilities in New York, Houston, Chicago, and Atlanta. As such, a real
estate disposition liability of approximately $400,000 has been recorded.
Rental expense under operating leases was approximately $440,000, $588,000
and $831,999 for the years ended December 31,1998, 1999 and 2000 respectively.
Various legal proceedings may arise in the normal course of business.
Additionally, the Company's software and equipment are vulnerable to computer
viruses or similar disruptive problems caused by customers or other Internet
users. Computer viruses or problems caused by third parties could lead to
interruptions, delays or cessation in service to the Company's customers.
Moreover, customers of the Company could use computer files and information
stored on or transmitted to Web server computers maintained by the Company to
engage in illegal activities that may be unknown or undetectable by the Company,
including fraud and misrepresentation, and unauthorized access to computer
systems of others. Furthermore, inappropriate use of the Internet by third
parties could also jeopardize the security of customers' confidential
information that is stored in the Company's computer systems. Any such actions
could subject the Company to liability to third parties. The Company does not
have errors and omissions, product liability or other insurance to protect
against risks caused by computer viruses or other misuse of software or
equipment by third parties. The Company does maintain errors and omissions to
protect it from malfunctions or nonmerchantability of its software products and
from potential market conduct liabilities relating to its insurance and
securities operations. Although the Company attempts to limit its liability to
customers for these types of risks through contractual provisions, there can be
no assurance that these provisions will be enforceable. Management does not
believe that there are currently any asserted or unasserted claims that will
have a material adverse effect on the financial position, results of operations
or cash flows of the Company.
6. EQUITY AND CONVERTIBLE DEBT TRANSACTIONS
In connection with the completion of the Company's initial public offering,
the Company granted its underwriter warrants to acquire 100,000 shares of the
Company's common stock at an exercise price of $7.20 per share. The exercise
price is subject to adjustment under certain circumstances. These warrants
expire on May 12, 2002 if not earlier exercised.
In September 1997, the Company issued $1,700,000 of 5% convertible
debentures due September 22, 2000. Net proceeds to the Company from the issuance
of the debentures totaled approximately $1,500,000. During 1998, the full
principal amount of the debentures was fully converted into 961,460 shares of
common stock. Due to the beneficial conversion feature of the debentures, a
portion of the proceeds ($566,667) was allocated to additional paid-in capital.
The corresponding discount on the debentures was amortized in 1998 as a non-cash
charge to interest expense.
At December 31, 1999, 1,261,960 warrants were outstanding at a weighted
average exercise price of $6.20. At December 31, 2000, 442,000 warrants are
outstanding at a weighted average exercise price of $4.16.
On October 7, 1998, the Company issued 18,959 shares of common stock to the
former holders of HISS's capital stock as an earnout payment, which was recorded
as compensation expense. In October, 1999, in connection with the sale of the
HISS business unit, the Company issued 18,959 shares of common stock to the
former shareholders of HISS as an earnout payment. In addition, the Company
committed to issue another 18,959 shares of common stock to the former
shareholders of HISS in the event that the Company's equity stake in the
acquiring entity becomes worth over $5 million and is freely tradable.
During 1999, the Company issued 1,252,174 shares of common stock for the
net assets of First Institutional Marketing, Inc. and certain of its affiliates.
26
During 1999, the Company issued 185,342 shares of common stock for the net
assets of Ganymede Corporation.
During 2000, the Company's shareholders voted to amend the Company's
articles of incorporation to increase the number of authorized shares of common
stock from 15,000,000 to 50,000,000.
7. ISSUANCE OF SERIES B PREFERRED STOCK
The Company issued Series B Preferred Stock totaling $2,500,000 on March
25, 1999 (the "Issuance Date"). The Series B Preferred Stock investors were
issued 125 shares of preferred stock, having a stated value of $20,000 per
share, and 225,000 warrants to purchase common stock at $5.70 per share. The
Company paid offering costs of $216,250 cash plus 25,000 warrants to purchase
common stock at $5.70 per share, resulting in net proceeds to the Company of
$2,283,750 for the preferred shares and warrants.
The Series B Preferred Stock bears no dividends and is convertible at the
option of the holder at the earlier of 90 days after issuance or the effective
date of a registration statement covering the shares. The warrants are
exercisable at any time and expire five years from the date of issuance.
The Series B Preferred Stock is convertible into common stock at a
conversion price equal to the lower of (a) the average of the closing price for
four consecutive trading days in the twenty-five consecutive trading days ending
one day prior to the conversion date ($4.86 at the Issuance date) and (b) $5.23.
The number of common shares into which the Series B Preferred Stock is
convertible is determined by dividing the stated value of the Series B Preferred
Stock, increased by 5% annually, by the conversion price. As the Series B
Preferred Stock is automatically convertible on March 24, 2002, the most
beneficial conversion ratio was determined to include the additional common
shares attributable to the 5% annual increase for the three year period ending
in 2002. After adjustment for this additional benefit the $4.86 conversion price
is reduced to $4.23, the most beneficial conversion price at the Issuance Date.
In determining the accounting for the beneficial conversion feature, the
Company first allocated the net proceeds of $2,283,750 to the preferred stock
and the warrants based on their relative fair values at the Issuance Date,
resulting in $1,766,217 assigned to the preferred stock and $517,533 assigned to
the warrants as of March 24, 1999. The Company then allocated $899,284 of the
Series B net proceeds to additional paid in capital for the beneficial
conversion feature. The beneficial conversion feature will be recognized as a
deemed dividend to the preferred shareholders over the minimum period in which
the preferred shareholders can realize that return. Approximately $18,000 and
$792,000 of the beneficial conversion was amortized in 1999 and 2000,
respectively. The balance of the beneficial conversion feature will be
recognized through March, 2002. During 1999, 10 shares of Series B Preferred
Stock were converted into 63,317 shares of common stock. During 2000, 97.19
shares of Series B Preferred Stock were converted into 902,307 shares of common
stock.
The Company has the option to redeem the Series B Preferred Stock after 110
days for 120% of face value. Additionally, if the Company has issued common
stock upon conversion of the Series B Preferred Stock such that 19.99% of the
common stock outstanding is held by the preferred shareholders, the Company must
obtain approval of the shareholders before any more preferred shares can be
converted. If such approval is not obtained within 60 days of notice, the
preferred shareholders may require the Company to repurchase the remaining
Series B Preferred Stock at 120% of face value. The Series B Preferred Stock is
presented outside of permanent equity as the outcome of the shareholder vote,
and possible redemption, is outside of the control of the Company.
27
8. ISSUANCE OF SERIES C PREFERRED STOCK
On July 28, 1999, the Company completed a private placement of $3,500,000
principal amount of the Company's Series C Convertible Preferred Stock, par
value $.01 per share (the "Series C Preferred Stock") and warrants to acquire up
to 59,574 shares of Common Stock (the "Series C Preferred Warrants"). The Series
C Preferred Stock has an initial stated value of $20,000 per share, which stated
value increases at the rate of 6% per year (such stated value, as increased from
time to time, is referred to as the "Series C Stated Value"). Each Series C
Preferred Share is convertible, from and after 120 days following the date of
issuance, at the option of the holder, into such number of shares of Common
Stock as is determined by dividing the Series C Stated Value by the lesser of
(a) $5.875, and (b) 82.5% of the average of the closing bid prices for the five
trading days preceding the date of conversion. Any Series C Preferred Stock
issued and outstanding on July 22, 2002 will automatically be converted into
Common Stock at the conversion price then in effect.
In determining the accounting for the beneficial conversion feature, the
Company first allocated the net proceeds of $3,323,748 to the preferred stock
and the warrants based on their relative fair values at the Issuance Date,
resulting in $3,170,904 assigned to the preferred stock and $152,844 assigned to
the warrants as of July 27, 1999. The Company then allocated $1,678,505 of the
Series C net proceeds to additional paid in capital for the beneficial
conversion feature. The beneficial conversion feature will be recognized as a
deemed dividend to the preferred shareholders over the minimum period in which
the preferred shareholders can realize that return. Approximately $1,485,000 and
$72,000 of the beneficial conversion was amortized in 1999 and 2000,
respectively. The balance of the beneficial conversion feature will be
recognized through July, 2002. During 1999, 37.5 shares of Series C Preferred
Stock were converted into 281,460 shares of common stock. During 2000, 45.4
shares of Series C Preferred Stock were converted in to 802,056 shares of common
stock.
The Company has the right, in its sole discretion, to redeem, from time to
time, any or all of the Series C Preferred Stock; provided that certain
conditions are met, including the availability of cash, credit or standby
underwriting facilities available to fund the redemption at 120% of the original
purchase price.
The Series C Preferred Warrants expire on July 27, 2004 and have an
exercise price of $7.34 per share, subject to adjustment under certain
circumstances.
9. ISSUANCE OF SERIES D PREFERRED STOCK
On September 28, 1999, the Company completed a private placement of
$1,500,000 principal amount of the Company's Series D Convertible Preferred
Stock, par value $.01 per share (the "Series D Preferred Stock") and warrants to
acquire up to 25,000 shares of Common Stock (the "Series E Preferred Warrants").
The Series D Preferred Stock has an initial stated value of $20,000 per share,
which stated value increases at the rate of 6% per year (such stated value, as
increased from time to time, is referred to as the "Series D Stated Value").
Each Series E Preferred Share is convertible, from and after 120 days following
the date of issuance, at the option of the holder, into such number of shares of
Common Stock as is determined by dividing the Series D Stated Value by the
lesser of (a) $5.875, and (b) 82.5% of the average of the closing bid prices for
the five trading days preceding the date of conversion. Any Series D Preferred
Stock issued and outstanding on September 22, 2002 will automatically be
converted into Common Stock at the conversion price then in effect.
In determining the accounting for the beneficial conversion feature, the
Company first allocated the net proceeds of $1,423,750 to the preferred stock
and the warrants based on their relative fair values at the Issuance Date,
resulting in $1,387,477 assigned to the preferred stock and $36,273 assigned to
the warrants as of September 28, 1999. The Company then allocated $642,084 of
the Series D net proceeds to additional paid in capital for the beneficial
conversion feature. The beneficial conversion feature will be recognized as a
deemed dividend to the preferred shareholders over the minimum period in which
the preferred shareholders can realize that return. Approximately $280,000 and
$281,000 of the beneficial conversion was amortized in 1999 and 2000,
respectively. The balance of the beneficial conversion feature will be
recognized through September, 2002. During 2000, 73.7 shares of Series D
Preferred Stock were converted into 589,573 shares of common stock.
28
The right of the holders of the Series D Preferred Stock to convert their
shares is also subject to the following restrictions: (i) during the period
beginning on the issuance date through the following 90 days, each holder may
not convert more than 25% of the Series D Preferred Stock purchased by such
holder; (ii) during the period beginning on the issuance date through the
following 120 days, each holder may not convert more than 50% of the Series D
Preferred Stock purchased by such holder; and (iii) during the period beginning
on the issuance date through the following 150 days, each holder may not convert
more than 75% of the Series D Preferred Stock purchased by such holder. At any
time after the issuance date, the Company shall have the right, in its sole
discretion, to redeem, from time
10. ISSUANCE OF SERIES E PREFERRED STOCK
On April 14, 2000, the Company completed a private placement of $2,127,000
principal amount of the Company's Series E Convertible Preferred Stock, par
value $.01 per share (the "Series E Preferred Stock") and warrants to acquire
66,667 shares of common stock (the "Series E Preferred Warrants"). The Series E
Preferred Stock has an initial stated value of $20,000 per share, which stated
value increases at the rate of 8% per year. Each Series E Preferred Share is
convertible 120 days following the date of issuance, at the option of the
holder, into such number of shares of common stock as is determined by dividing
the Series E Stated Value by the lesser of (a) $3.53, or (b) 82.5% of the
average of the closing bid prices for the five trading days preceding the date
of conversion. Any Series E Preferred Stock issued and outstanding on April 14,
2003 will automatically be converted into common stock at the conversion price
then in effect.
Pursuant to certain registration rights granted to the investors in the
private placement, we are obligated to file a registration statement under the
Securities Act of 1933 with respect to a minimum of 1,808,293 shares of common
stock issueable upon conversion of the Series E Preferred Stock and exercise of
the Series E Preferred Warrants. The Company is obligated to pay penalties if
the Registration Statement is not filed and/or declared effective within the
specified time periods. As of March 31, 2001, such registration statement has
not been declared effective and penalties are owed to the Series E Preferred
Stock holders. In accordance with the terms of the private placement, penalties
accrue at the rate of 2% per 30 day period of the outstanding purchase price of
the unregistered securities. For the year ended December 31, 2000, $251,211 in
penalties were recorded as a deemed dividend to the Preferred Stockholders.
The Company may at its option at any time after the 90th day following the
issuance of the Series E Preferred Stock through April 14, 2002, prohibit
holders of the Series E Preferred Stock from exercising any conversion rights
for up to 90 days, provided that certain conditions are met. If the Company
exercises that right, the Company is required to compensate the holders of the
Series E Preferred Stock in cash in an amount equal to 3% of the principal
amount of the Series E Preferred Stock held by each holder for each thirty days
that prohibition is in effect (pro rated for partial months) or, at the
Company's option, deliver common stock in payment of such amount (based on the
average closing bid prices for the common stock for the twenty trading days
preceding the end of each calendar month during the period conversion is so
prohibited).
At any time after the issuance date, the Company shall have the right, in
its sole discretion, to redeem, from time to time, any or all of the Series E
Preferred Stock; provided that certain conditions are met, including the
availability of cash, credit or standby underwriting facilities available to
fund the redemption. The redemption price will be calculated as (i) 105% of the
original purchase price for the first 30 days following the issuance date; (ii)
110% of the original purchase price for the next 90 days thereafter and (iii)
120% of the original purchase price after 120 days from the issuance date.
In determining the accounting for the beneficial conversion feature, the
Company first allocated the net proceeds of $1,855,426 to the Series E Preferred
Stock and the Series E Preferred Warrants based on their relative fair values at
the issuance date, resulting in $1,791,211 assigned to the Series E Preferred
Stock and $64,215 assigned to the Series E Preferred Warrants as of April 14,
2000. The Company then allocated $1,059,347 of the Series E Preferred Stock net
proceeds to additional paid in capital for the beneficial conversion feature.
The beneficial conversion feature will be recognized as a deemed dividend to the
preferred shareholders over the minimum period in which the preferred
shareholders can realize that return. Approximately $905,000 of the beneficial
conversion was amortized in 2000. The balance of the beneficial conversion
feature will be recognized through April 14, 2003.
29
The Series E Preferred Warrants expire on April 14, 2005 and have an exercise
price of $3.35 per share, subject to adjustment under certain circumstances.
11. STOCK OPTION PLANS
The Company's Employee Stock Option Plan (the "Stock Option Plan") was
adopted by the Company's stockholders in September 1996. Shares of common stock
may be sold or awarded to officers, key employees and consultants. On March 3,
1999 at a Special Meeting of Stockholders, the Company's stockholders approved
an amendment to the Stock Option Plan which increased the number of shares
reserved for issuance under the Stock Option Plan to 2,000,000. Options granted
under the Stock Option Plan may be either (i) options intended to qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code or (ii)
non-qualified stock options.
The options granted to purchase shares under the Stock Option Plan vest 25%
per year and expire ten years after the grant date. The exercise price of the
options was at or above the fair market value of the stock on the grant date.
The Company's Non-Employee Directors' Stock Option Plan (the "Directors'
Plan") was adopted by the Company's stockholders in September 1996. Shares of
common stock may be sold or awarded to directors who are not officers or
employees of the Company ("Non-Employee Directors"). The Company has reserved
300,000 shares of common stock for issuance under the Directors' Plan.
The Directors' Plan provides for the automatic granting of an option to
purchase 10,000 shares of common stock to each Non-Employee Director who is
first appointed or elected to the Board of Directors. Also, each Non-Employee
Director is automatically granted an option to purchase 5,000 shares of common
stock on the date of each annual meeting of the Company's stockholders.
Furthermore, the Directors' Plan allows the Board of Directors to make
extraordinary grants of options to Non-Employee Directors.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123") requires that companies with stock-based
compensation plans either recognize compensation expense based on new fair value
accounting method or continue to apply the provisions of Accounting Principles
Board Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB 25") and
disclose pro forma net income and earnings per share assuming the fair value
method had been applied.
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options, however, on September 20, 2000, the
Company re-priced options to purchase its common stock, $.0001 par value, held
by certain employees and certain officers. To be eligible for the re-pricing,
option holders were required to exchange one and one-half old options for each
new option. As such, 587,580 old options were exchanged for 391,719 new options.
Options having an exercise price greater than $0.59, the closing bid price of
Homecom common stock on September 20, 2000, were re-priced to an exercise price
of $0.59. In addition, each option holder agreed to a six month lock-up period
in which they would be precluded from exercising any of their options. According
to FASB Interpretation No. 44 "Accounting for Certain Transactions Involving
Stock Compensation," reductions to the exercise price of a fixed option award
must be accounted for as variable from the date of the modification to the date
the award is exercised, forfeited or expires unexercised. Under variable
accounting, a compensation cost must be recorded based on the intrinsic value of
the award, which is computed as the difference between the exercise price and
the fair value of Homecom's common stock on the date of the re-pricing.
Thereafter, an additional compensation cost must be recorded or reversed based
on the difference between the value of the option at the beginning and end of
the accounting period. The reversal of compensation cost cannot be larger than
accumulated compensation expense incurred. To date, no compensation expense has
been recognized as Homecom's stock price has been below the new exercise price
of $0.59. The Company has recognized no compensation expense for options issued
to employees, non-employees, and non-employee directors.
30
Pro forma information regarding loss per share is required by FAS 123 and
has been determined as if the Company had accounted for its employee stock
options under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions:
December 31,
-------------------------------
1998 1999 2000
---- ---- ----
Risk-free interest rate 5.93% 5.11% 5.58%
Volatility factors of the expected market
price of the Company's common stock 90% 110% 85%
Weighted average expected life of the options 5 years 5 years 5 years
Expected dividend yield 0% 0% 0%
Had compensation cost for the Company's stock-based compensation plans been
determined under the provisions consistent with FAS 123, the Company's net loss
and loss per share for the years ended December 31, 1998, 1999 and 2000 would
have been the pro forma amounts listed below:
Year Ended December 31,
-------------------------------------------------
1998 1999 2000
------------- -------------- --------------
Loss applicable to common shareholders:
As reported $ (1,870,807) $ (11,733,665) $ (10,887,455)
Pro forma (2,351,259) (12,591,580) (11,496,918)
Basic and diluted loss per share:
As reported (0.44) (1.86) (1.27)
Pro forma (0.55) (1.99) (1.34)
Option activity under all of the stock option plans is summarized as follows:
Year Ended December 31,
---------------------------------------------------------------------------
1998 1999 2000
---------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
Price Price Price
------------ -------- ------------- -------- -------------- --------
Outstanding at beginning of year 421,160 $4.95 558,610 $4.59 1,155,259 $4.49
Granted 312,700 3.35 1,067,958 4.31 924,688 1.17
Exercised (4,375) 4.06 (53,278) 3.93 (4,500) 4.06
Forfeited (170,875) 3.34 (418,031) 4.25 (1,283,803) 3.10
------------ ------------- --------------
Outstanding at end of year 558,610 4.59 1,155,259 4.49 791,644 2.75
============ ============= ==============
Options exercisable at year end 127,791 4.98 251,112 4.85 348,349 3.52
============ ============= ==============
Shares available for future grant 41,390 912,912 1,080,187
============ ============= ==============
Weighted-average fair value of
options granted during the year
at the shares' fair value $ 2.79 $ 3.10 $ 0.40
============ ============= ==============
31
The following table summarizes information about fixed options outstanding
at December 31, 2000.
Weighted Average
Remaining Contractual
Exercise Prices Shares Life
- --------------- ----------- ---------------------
$0.59-0.75 398,320 7.6
$2.18-2.81 47,000 8.6
$3.47-4.55 128,187 6.6
$5.25-6.50 218,137 7.5
-----------
791,644
===========
12. ACQUISITIONS, DIVESTITURES AND DISCONTINED OPERATIONS
HostAmerica
On June 9, 1998, the Company sold substantially all of the assets of its
HostAmerica Internet network outsourcing services division to Sage Acquisition
Corp. ("Sage") for cash of $4,250,000 and Sage's assumption of approximately
$250,000 of unearned revenue. The Company recorded a gain on the sale of
approximately $4,402,000. The assets sold consisted of computer network
equipment and service contracts.
FIMI/InsureRate
On March 24, 1999, the Company acquired First Institutional Marketing,
Inc., and certain of its affiliates ("FIMI") of Houston, Texas for total
consideration of $4,236,104, consisting of 1,252,174 shares of common stock. The
acquisition was accounted for as a purchase transaction. The value of the shares
was determined by using the average closing stock price of the two days before
and after the definitive agreement was publicly announced. The resulting
intangible assets were being amortized over a period of approximately 3 to 7
years. Prior to the closing of the acquisition, the Company loaned the
shareholders of FIMI $370,000 ("FIMI notes"). The notes were to be repaid in
either cash or common stock and were collateralized by common stock.
Additionally, the principal shareholders of FIMI were granted 300,000 warrants
to acquire HomeCom common stock at an exercise price of $3.74 per share. Vesting
of the warrants was contingent upon FIMI meeting certain operating goals as
defined in the agreement.
On January 31, 2001, the Company sold substantially all of the assets of
FIMI and its affiliates to Digital Insurance, Inc. ("Digital") for approximately
$458,000 in cash and the assumption of certain liabilities. Additionally, the
FIMI notes were forgiven in exchange for the surrender of the common stock that
collateralized the notes. Additionally, the warrants were forfeited. The
purchase price was established through arms' length negotiations between the
Company and Digital.
The Company has removed the results of this discontinued operation from the
continuing operations of the Company for all periods presented. The Company
recorded a loss of approximately $3 million on the sale of the assets of the
FIMI.
Net assets associated with discontinued operations of FIMI at December 31,
2000 are as follows:
Current Assets:
Accounts receivable, net $212,303
Receivable from related party 15,000
--------
Total current assets 227,303
Furniture, fixtures and equipment, net 397,952
Total assets $625,255
========
Current Liabilities:
Accounts payable and accrued expenses $269,199
Accrued payroll liabilities 13,283
Current portion of obligations under capital
leases 100,245
--------
Total current liabilities 382,727
Obligations under capital leases 341,272
--------
Total liabilities 723,999
--------
Net liabilities associated with discontinued
operations of FIMI $ 98,744
========
32
Ganymede
On April 23, 1999, the Company acquired all of the outstanding shares of
Ganymede Corporation ("Ganymede") for total consideration of $1,348,186,
consisting of 185,342 shares of common stock and $100,000 cash. The acquisition
was accounted for as a purchase transaction. The purchase price was allocated to
assets acquired and liabilities assumed based on their estimated fair values at
the time and the resulting intangible assets were being amortized over a period
of approximately 3 to 5 years. Results of operations for Ganymede have been
included with those of the Company for periods subsequent to the date of
acquisition. In June 2000, the company recognized a goodwill impairment charge
of approximately $800,000 with no associated tax benefit, related to this
acquisition (See Note 1).
HISS
On October 1, 1999, the Company sold substantially all of the assets of its
HomeCom Internet Security Services ("HISS") division to Infrastructure Defense,
Inc. ("iDefense") for $823,175 in common stock of the non-public acquiror,
certain security audit rights and $200,000 cash, paid in January, 2000. The
purchase price was established through arms length negotiations between the
Company and iDefense.
The Company has removed the results of this discontinued operation from the
continuing operations of the Company for all periods presented. The Company
recorded a gain of approximately $1.14 million on the sale of the HISS unit in
1999.
Software Products
On March 15, 2001, the Company sold substantially all of the assets of its
Software Products group to Netzee, Inc. ("Netzee") for $275,000 in cash. The
purchase price was established through arms length negotiations between the
Company and Netzee. The Company has removed the results of this discontinued
operation from the continuing operations of the Company for all periods
presented
12. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows, as of:
33
December 31,
-----------------------------------------
1998 1999 2000
----------- ----------- -----------
Temporary differences:
Allowance for uncollectibles $ 36,246 $ 82,052 $
Vacation accrual 33,586 29,812
Depreciation 4,826 113,930
Deferred rent expense 25,462 19,490
Cash to accrual adjustment 100,278
Other accruals 160,000 102,000
Software development expenses 35,138 32,620
Net operating loss carryforward 2,357,670 5,043,323 6,018,000
----------- ----------- -----------
Deferred tax asset 2,492,928 5,581,505 6,200,000
Valuation allowance (2,492,928) (4,896,133) (6,200,000)
----------- ----------- -----------
Net deferred tax asset -- 685,372 --
Acquired intangibles -- (685,372) --
----------- ----------- -----------
Deferred tax liability -- (685,372) --
----------- ----------- -----------
Net deferred tax asset (liability) -- -- --
=========== =========== ===========
At December 31, 2000, the Company had net operating loss carryforwards for
income tax purposes of approximately $17,700,000 which begin to expire in 2011.
Realization of these assets is contingent on having future taxable earnings. In
addition, certain stock transactions during 1997 resulted in the Company
incurring an ownership change as defined in Internal Revenue Code Section 382.
The result of this ownership change is to substantially limit the future
utilization of the Company's net operating loss carryforwards as of the change
date. Certain stock transactions occurring in 1998, 1999 and 2000 may have
resulted in the Company incurring an ownership change, which may result in a
limitation on the Company's future utilization of net operating loss
carryforwards generated in 1998,1999 and 2000. Based on the cumulative losses in
recent years and the limitation and the use of the Company's net operating
losses management believes that a full valuation allowance should be recorded
against the deferred tax asset.
The income tax benefit differs from the amounts computed by applying the
Federal statutory rate of 34% to loss before taxes principally as a result of
the recording of the valuation allowance.
34
ITEM 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
(a) Previous Independent Accountants
(i) On February 8, 2001, we dismissed PricewaterhouseCoopers LLP ("PWC"), as our
independent accountants effective immediately. Our Board of Directors
participated in and approved the decision to change independent accountants.
(ii) The reports of PWC on our consolidated balance sheets as of December 31,
1999 and 1998, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows, did not contain, except as
otherwise described in this paragraph (a)(ii) of Item 9 of Form 10-K, an adverse
opinion or disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles. However, in its report on our
financial statements for the fiscal years ended December 31, 1999 and 1998, it
included the following explanatory paragraph: "The accompanying financial
statements have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the financial statements, the Company has
experienced recurring losses and negative cash flows since its inception and has
an accumulated deficit. The Company is dependent on continued financing from
investors to sustain its activities and there is no assurance that such
financing will be available. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty."
(iii) In connection with its audits for the two most recent fiscal years and
through February 8, 2001, there have been no disagreements with PWC on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of PWC would have caused them to make reference thereto in their
report on the financial statements for such years.
(iv) During the two most recent fiscal years and through February 8, 2001, there
have been no reportable events (as defined in Regulation S-K Item 304(a)(1)(v)).
(v) On February 13, 2001, we delivered a copy of the disclosures which we made
in Item 4 on Form 8-K as filed on February 14, 2001, and requested that PWC
furnish us with a letter addressed to the Securities and Exchange Commission
stating whether or not PWC agreed with such disclosures. A copy of such letter
dated February 13, 2001 indicating such agreement was filed as Exhibit 16.1 to
that Form 8-K.
(b) New Independent Accountants
(i) On February 8, 2001, the Company engaged the firm of Feldman Sherb &
Co, ("FSC") as independent accountants for the Company's fiscal year ending
December 31, 2000. The Company's Board of Directors approved the selection of
FSC as independent accountants.
(ii) During the two most recent fiscal years and through February 8, 2001,
the Company has not consulted with FSC with respect to (1) the application of
accounting principles to a specified transaction, either completed or proposed;
or the type of audit opinion that might be rendered on the Company's financial
statements; or (2) on any matter that was either the subject of a disagreement
(as defined in Item 304 (a)(1)(iv) of Regulation S-K) or a reportable event (as
described in Item 304(a)(1)(v) of Regulation S-K).
35
Item 10. Directors and Executive Officers of the Company
We incorporate by reference the information contained under the caption
"Board of Directors" in the Company's Information Statement or Proxy Statement,
as applicable, to be filed in April 2001 regarding the election of directors and
such other matters as the Company may determine (the "2001 Information or Proxy
Statement").
Item 11. Executive Compensation
We incorporate by reference the information contained under the caption
"Executive Compensation" in the 2001 Information or Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
We incorporate by reference the information contained under the caption
"Executive Compensation -- Beneficial Ownership of Capital Stock" in the 2001
Information or Proxy Statement.
Item 13. Certain Relationships and Related Transactions
We incorporate by reference the information contained under the caption
"Directors -- Certain Relationships and Related Transactions" in the 2001
Information or Proxy Statement.
36
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
Exhibit Description
- ------- --------------------------------------------------------------------
2.1 Asset Purchase Agreement, dated January 31, 2001, for the
Acquisition of Certain Assets of HomeCom Communications, Inc.,
InsureRate, Inc. and FIMI Securities, Inc. by Digital Insurance,
Inc.
2.2 Asset Purchase Agreement by and between Netzee, Inc. and HomeCom
Communications, Inc. dated as of March 15, 2001.
3.1 Restated Certificate of Incorporation of the Registrant.*
3.2 Restated Bylaws of the Registrant.*
3.3 Certificate of Designation of Series A Convertible Preferred
stock.***
3.4 Certificate of Designation of Series B Convertible Preferred
Stock.**
3.5 Certificate of Designation of Series C Convertible Preferred Stock
(previously filed).
3.6 Certificate of Designation of Series D Convertible Preferred Stock
(previously filed).
4.1 See Exhibits 3.1 and 3.2 for provisions of the Restated Certificate
of Incorporation and Bylaws of the Registrant defining rights of the
holders of Common Stock of the Registrant.*
4.2 Specimen Stock Certificate.*
4.3 Form of Warrant.*
10.1 HomeCom Communications, Inc. Stock Option Plan and form of Stock
Option Certificate.*
10.2 HomeCom Communications, Inc. Non-Employee Directors Stock Option
Plan and form of Stock Option Certificate.*
10.3 Employment Agreement between the Registrant and Harvey W. Sax, dated
January 1, 1996.*
10.4 Form of Employment Agreement entered into between the Registrant and
each of its executive officers except Harvey W. Sax.*
10.5 Lease Agreement between Property Georgia OBJLW One Corporation and
the Registrant dated January 22, 1996.*
10.6 Lease and Services Agreement between Alliance Greensboro, L.P. and
the Registrant, dated June 25, 1996.*
10.7 Business Alliance Program Agreement between Oracle Corporation and
the Registrant, dated May 30, 1996, together with the Sublicense
Addendum, Application Specific Sublicense Addendum, Full Use and
Deployment Sublicense Addendum and License Transfer Policy, each
dated May 30, 1996.*
10.8 Network Enrollment Agreement between Apple Computer, Inc. and the
Registrant, effective May 1996.*
10.9 Member Level Agreement between Microsoft Corporation and the
Registrant, effective May 1996.*
37
Exhibit Description
- ------- --------------------------------------------------------------------
10.10 Master Agreement for internet Services and Products between BBN
Planet Corporation and the Registrant, dated February1, 1996.*
10.11 Authorized Business Partners Agreement between BBN Planet
Corporation and the Registrant, dated May 14, 1996.*
10.12 Stock Purchase Agreement between the Registrant and the stockholders
of HomeCom internet Security Services, Inc., dated August 31, 1996.*
10.13 Form of Promissory Notes issued by the Registrant and held by Mark
Germain.*
10.14 Form of Promissory Notes issued by the Registrant and held by Esther
Blech and the Edward A. Blech Trust.*
10.15 Marketing Associate Solution Alliance Agreement dated February 6,
1997 between the Registrant and Unisys Corporation.*
10.16 Marketing Associate Agreement dated February 6, 1997 between the
Registrant and Unisys Corporation.**
10.17 Letter agreement dated January 16, 1997 between the Registrant,
David A. Blech, Esther Blech and the Edward A. Blech Trust.*
10.18 HomeCom Communications, Inc. Employee Stock Purchase Plan.*
10.19 5% Convertible Debenture Purchase Agreement dated effective
September 19, 1997 between the Registrant, Euro Factors
International, Inc., Beauchamp Finance, FTS Worldwide Corporation
and COLBO.***
10.20 Form of 5% Convertible Debenture issued by the Registrant and held
by Euro Factors International, Inc., Beauchamp Finance, FTS
Worldwide Corporation and COLBO.***
10.21 Registration Rights Agreement dated effective September19, 1997
between the Registrant, Euro Factors International, Inc., Beauchamp
Finance, FTS Worldwide Corporation and COLBO.***
10.22 Letter agreement dated September 23, 1997 between the Registrant,
Euro Factors International, Inc., Beauchamp Finance, FTS Worldwide
Corporation and COLBO.***
10.23 Letter agreement dated September 27, 1997 between the Registrant,
Euro Factors International, Inc., Beauchamp Finance, FTS Worldwide
Corporation and COLBO.***
10.24 Form of Warrant to purchase 200,000 shares of Common Stock at an
exercise price of $4.00 per share issued by the Registrant to First
Granite Securities, Inc.***
10.25 Form of Warrant to purchase 200,000 shares of Common Stock at an
exercise price of $6.00 per share issued by the Registrant to First
Granite Securities, Inc.***
10.26 Form of Securities Purchase Agreement between the Registrant,
Sovereign Partners, L.P. and Dominion Capital Fund, LTD. dated as of
December 23, 1997.***
10.27 Form of Registration Rights Agreement between the Registrant,
Sovereign Partners, L.P. and Dominion Capital Fund, LTD. dated as of
December 23, 1997.***
38
Exhibit Description
- ------- --------------------------------------------------------------------
10.28 Form of Warrant to purchase 18,750 shares of Common Stock issued by
the Registrant to Sovereign Partners, L.P.***
10.29 Form of Warrant to purchase 56,250 shares of Common Stock issued by
the Registrant to Dominion Capital Fund, LTD.***
10.30 Common Stock Purchase Agreement dated January 23, 1998 by and among
InsureRate, Inc., the Registrant, Jerome R. Corsi and Hamilton
Dorsey Alston HomeCom.***
10.31 Escrow Agreement dated as of January 23, 1998 by and among
InsureRate, Inc., Hamilton Dorsey Alston HomeCom, the Registrant,
Jerome R. Corsi and SunTrust Bank, Atlanta.***
10.32 Shareholders Agreement dated January 23, 1998 by and among Hamilton
Dorsey Alston HomeCom, the Registrant and InsureRate, Inc.***
10.33 Web Development and Hosting Services Agreement dated January 23,
1998, by and among InsureRate, Inc. and Hamilton Dorsey Alston
HomeCom.***
10.34 Form of Warrant to purchase 25,000 shares of Common Stock for an
aggregate purchase price of $92,500 by the Registrant to Hamilton
Dorsey Alston HomeCom.***
10.35 Loan Agreement dated January 23, 1998 by and between InsureRate,
Inc. and the Registrant.***
10.36 Form of Master Note issued by the Registrant to InsureRate, Inc.***
10.37 Form of Warrant to purchase 50,000 shares of Common Stock issued by
the Registrant to The Malachi Group, Inc.+
10.38 Letter Agreement, dated April 8, 1998 by and among HomeCom,
Eurofactors International Inc., Blauchamp France, FTS Worldwide
Corporation and COLBO.****
10.39 Letter Agreement, dated April 8, 1998 by and between First Granite
Securities, Inc. and HomeCom.****
10.40 Letter Agreement, dated April 17, 1998 by and among Sovereign
Partners, L.P., Dominion Capital Fund and HomeCom.****
10.41 Agreement and Plan of Reorganization by and among The Insurance
Resource Center, Inc., Tim Strong, James Higham, Cameron M. Harris &
HomeCom and HomeCom, dated as of April15, 1998.***
10.42 Employment Agreement by and between HomeCom and Tim Higham, dated as
of April 16, 1998.***
10.44 Asset Purchase Agreement by and between HomeCom and Sage Networks
Acquisition Corp. dated as of June 10, 1998.+
10.45 Escrow Agreement by and between HomeCom and Sage Networks
Acquisition Corp. dated as of June 10, 1998.+
10.46 Transitional Services Agreement by and between HomeCom and Sage
Networks Acquisition Corp. dated as of June 10, 1998.+
39
Exhibit Description
- ------- --------------------------------------------------------------------
10.47 Co-Location Agreement by and between HomeCom and Sage Networks, Inc.
dated as of June 10, 1998.+
10.48 Agreement and Plan of Merger by and among HomeCom Communications,
Inc, FIMI Securities Acquisitions Corp., Inc., ATF Acquisition
Corp., Inc. and Daniel A. Delity, James Wm. Ellsworth, and David B.
Frank dated as of November 6, 1998, together with exhibits.++
10.50 Securities Purchase Agreement dated as of March 25, 1999 by and
among HomeCom Communications, Inc. and CPR (USA), Inc., Liberty View
Funds, L.P., and Liberty View Fund, L.L.C.++
10.51 Registration Rights Agreement dated as of March 25, 1999 by and
among HomeCom Communications, Inc. and CPR (USA), Inc., Liberty View
Funds, L.P., and Liberty View Fund, L.L.C.++
10.52 Transfer Agent Instructions dated as of March 25, 1999.++
10.53 Transfer Agent Legal Opinion dated as of March 25, 1999.++
10.54 Placement Agency Agreement dated as of March 25, 1999 by and between
HomeCom Communications, Inc. and J.P. Turner & Company, L.L.C.++
10.55 Stock Purchase Agreement by and among HomeCom Communications, Inc.
and Richard L. Chu, Joseph G. Rickard, John R. Winans, Mario
D'Agostino, Karen Moore, and John Kokinis, dated as of April 23,
1999.+++
10.56 Employment Agreement Between Ganymede Corporation and Richard L.
Chu, dated as of April 23, 1999.+++
10.57 Employment Agreement between Ganymede Corporation and John Winans,
dated as of April 23, 1999.+++
10.58 Employment Agreement between Ganymede Corporation and Joseph G.
Rickard, dated as of April 23, 1999.+++
10.59 Escrow Agreement by and among HomeCom Communications, Inc. and
Richard L. Chu, Joseph G. Rickard, John R. Winans, Mario D'Agostino,
Karen Moore, and John Kokinis, dated as of April 23, 1999.+++
10.60 Pledge and Security Agreement by and between HomeCom Communications,
Inc. and Richard L. Chu, Joseph G. Rickard, John R. Winans, Mario
D'Agostino, Karen Moore, and John Kokinis, dated as of April 23,
1999.+++
10.61 Warrant Agreement, dated as of March 25, 1999, by and among CPR
(USA), Inc. and HomeCom Communications, Inc.++++
10.62 Warrant Agreement, dated as of March 25, 1999, by and among Liberty
View Fund, L.L.C. and HomeCom Communications, Inc.++++
10.63 Warrant Agreement, dated as of March 25, 1999, by and among Liberty
View, Funds, L.P. and HomeCom Communications, Inc.++++
10.64 Warrant Agreement, dated as of March 25, 1999, by and among J.P.
Turner & Company, L.L.C and HomeCom Communications, Inc.++++
40
Exhibit Description
- ------- --------------------------------------------------------------------
10.65 Securities Purchase Agreement dated as of July 23, 1999 by and among
HomeCom Communications, Inc. and MacNab LLC (previously filed).
10.66 Registration Rights Agreement dated as of July 23, 1999 by and among
HomeCom Communications, Inc. and MacNab LLC (previously filed).
10.67 Transfer Agent Instructions dated as of September 28, 1999
(previously filed).
10.68 Transfer Agent Legal Opinion dated as of July 23, 1999 (previously
filed).
10.69 Placement Agency Agreement dated as of July 23, 1999 by and between
HomeCom Communications, Inc. and Greenfield Capital Partners
(previously filed).
10.70 Warrant Agreement, dated as of July 23, 1999, by and between HomeCom
Communications, Inc. and MacNab LLC (previously filed).
10.71 Securities Purchase Agreement dated as of September 27, 1999 by and
among HomeCom Communications, Inc. and Jackson LLC (previously
filed).
10.72 Registration Rights Agreement dated as of September 27, 1999 by and
among HomeCom Communications, Inc. and Jackson LLC (previously
filed).
10.73 Transfer Agent Instructions dated as of September 28,
1999 (previously filed).
10.74 Transfer Agent Legal Opinion dated as of September 28, 1999
(previously filed).
10.75 Placement Agency Agreement dated as of September 27, 1999 by and
between HomeCom Communications, Inc. and Greenfield Capital Partners
(previously filed).
10.76 Warrant Agreement, dated as of September 27, 1999, by and between
HomeCom Communications, Inc. and Jackson LLC (previously filed).
10.77 Asset Purchase Agreement, dated October 1, 1999, by and between
HomeCom Communications, Inc. and Infrastructure Defense, Inc.+++++
10.78 Bill of Sale and Assignment, dated October 1, 1999, by and between
HomeCom Communications, Inc. and Infrastructure Defense, Inc.+++++
10.79 Non-solicitation and Non-compete Agreement, Dated October1, 1999, by
and between HomeCom Communications, Inc. and Infrastructure Defense,
Inc.+++++
10.80 Registration Rights Agreement, October 1, 1999, by and between
HomeCom Communications, Inc. and Infrastructure Defense, Inc.+++++
10.81 Form of Opinion of Purchaser's Counsel.+++++
10.82 Form of Opinion of Seller's Counsel.+++++
10.83 Referral and Service Agreement, dated October 1, 1999, by and
between HomeCom Communications, Inc. and Infrastructure Defense,
Inc.+++++
10.84 Value Added Distributor Agreement, dated October 1, 1999 by and
between HomeCom Communications, Inc. and Infrastructure Defense,
Inc.+++++
41
Exhibit Description
- ------- --------------------------------------------------------------------
10.85 Resignation Letter of Krishan Puri, dated November 1, 1999.++++++
10.86 Employment Agreement between the Registrant and Timothy R. Robinson
dated August 1, 2000
10.87 Amendment to Employment Agreement between the Registrant and George
Bokuchava dated January 10, 2001
21.1 List of Subsidiaries.***
23.1 Consent of Feldman Sherb, & Co., P.C.
- --------------------------------------------------------------------------------
* Incorporated herein by reference to exhibit of the same number in
the Form S-1 Registration Statement of the Registrant (Registration
No. 333-12219).
** Incorporated herein by reference to exhibit of the same number in
the Form 10-K of the Registrant filed with the Commission on March
31, 1998.
*** Incorporated herein by reference to exhibit of the same number in
the Form S-1 Registration Statement of the Registrant (Registration
No. 333-42599).
**** Incorporated herein by reference to exhibit of the same number in
Form 8-K of the Registrant filed with the Commission on April 28,
1998.
+ Incorporated herein by reference to exhibit of the same number in
Form 8-K of the Registrant filed with the Commission on June 25,
1998.
++ Incorporated herein by reference to exhibit of the same number in
Form 8-K of the Registrant filed with the Commission on November 18,
1998.
+++ Incorporated herein by reference to exhibit of the same number in
Form 10-Q/A of the Registrant filed with the Commission on November
17, 1999.
+ Incorporated herein by reference to exhibit of the same number in
Form S-1 Registration Statement of the Registrant(Registration No.
333-45383).
++ Incorporated herein by reference to exhibit of the same number in
Form 10-K of the Registrant filed with the Commission on March 31,
1999.
+++ Incorporated herein by reference to exhibit of the same number in
Form 8-K of the Registrant filed with the Commission on May 10,
1999.
++++ Incorporated herein by reference to Registration Statement on Form
S-3 of the Registrant (Registration No. 333-79761)
+++++ Incorporated herein by reference to exhibit of the same number on
Form 8-K of the Registrant filed with the Commission on October 18,
1999.
++++++ Incorporated herein by reference to exhibit of the same number on
Form 8-K of the Registrant filed with the Commission on November 5,
1999.
42
(B) Reports on Form 8-K
During the fourth quarter of 2000, we filed the following reports on Form
8-K:
(i) On October 10, 2000, we filed a current report on Form 8-K to report
the resignation of William Walker from the Board of Directors on
September 25, 2000.
(ii) On November 20, 2000, we filed a current report on Form 8-K to report
the resignation of Daniel Delity from the Board of Directors on
November 14, 2000.
(iii) On November 28, 2000, we filed a current report on Form 8-K to report
the resignation of Claude Thomas from the Board of Directors on
November 22, 2000.
(iv) On December 21, 2000, we filed a current report on Form 8-K to report
the resignation of James Wm. Ellsworth from the Board of Directors on
December 18, 2000.
43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HOMECOM COMMUNICATIONS, INC.
BY: /s/ TIMOTHY R. ROBINSON
---------------------------
Timothy R. Robinson
Executive Vice President --
Chief Financial Officer
April 10, 2001
--------------
Date
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ TIMOTHY R. ROBINSON Executive Vice President-- April 10, 2001
- ----------------------- Chief Financial Officer
Timothy R. Robinson
/s/ GIA BOKUCHAVA, PH.D. Chief Technical Officer; April 10, 2001
- ------------------------ Director
Gia Bokuchava, Ph.d.
44
EXHIBIT INDEX
-------------
Exhibit Description
- ------- --------------------------------------------------------------------
2.1 Asset Purchase Agreement, dated January 31, 2001, for the
Acquisition of Certain Assets of HomeCom Communications, Inc.,
InsureRate, Inc. and FIMI Securities, Inc. by Digital Insurance,
Inc.
2.2 Asset Purchase Agreement by and between Netzee, Inc. and HomeCom
Communications, Inc. dated as of March 15, 2001.
3.1 Restated Certificate of Incorporation of the Registrant.*
3.2 Restated Bylaws of the Registrant.*
3.3 Certificate of Designation of Series A Convertible Preferred
stock.***
3.4 Certificate of Designation of Series B Convertible Preferred
Stock.**
3.5 Certificate of Designation of Series C Convertible Preferred Stock
(previously filed).
3.6 Certificate of Designation of Series D Convertible Preferred Stock
(previously filed).
4.1 See Exhibits 3.1 and 3.2 for provisions of the Restated Certificate
of Incorporation and Bylaws of the Registrant defining rights of the
holders of Common Stock of the Registrant.*
4.2 Specimen Stock Certificate.*
4.3 Form of Warrant.*
10.1 HomeCom Communications, Inc. Stock Option Plan and form of Stock
Option Certificate.*
10.2 HomeCom Communications, Inc. Non-Employee Directors Stock Option
Plan and form of Stock Option Certificate.*
10.3 Employment Agreement between the Registrant and Harvey W. Sax, dated
January 1, 1996.*
10.4 Form of Employment Agreement entered into between the Registrant and
each of its executive officers except Harvey W. Sax.*
10.5 Lease Agreement between Property Georgia OBJLW One Corporation and
the Registrant dated January 22, 1996.*
10.6 Lease and Services Agreement between Alliance Greensboro, L.P. and
the Registrant, dated June 25, 1996.*
10.7 Business Alliance Program Agreement between Oracle Corporation and
the Registrant, dated May 30, 1996, together with the Sublicense
Addendum, Application Specific Sublicense Addendum, Full Use and
Deployment Sublicense Addendum and License Transfer Policy, each
dated May 30, 1996.*
10.8 Network Enrollment Agreement between Apple Computer, Inc. and the
Registrant, effective May 1996.*
10.9 Member Level Agreement between Microsoft Corporation and the
Registrant, effective May 1996.*
Exhibit Description
- ------- --------------------------------------------------------------------
10.10 Master Agreement for internet Services and Products between BBN
Planet Corporation and the Registrant, dated February1, 1996.*
10.11 Authorized Business Partners Agreement between BBN Planet
Corporation and the Registrant, dated May 14, 1996.*
10.12 Stock Purchase Agreement between the Registrant and the stockholders
of HomeCom internet Security Services, Inc., dated August 31, 1996.*
10.13 Form of Promissory Notes issued by the Registrant and held by Mark
Germain.*
10.14 Form of Promissory Notes issued by the Registrant and held by Esther
Blech and the Edward A. Blech Trust.*
10.15 Marketing Associate Solution Alliance Agreement dated February 6,
1997 between the Registrant and Unisys Corporation.*
10.16 Marketing Associate Agreement dated February 6, 1997 between the
Registrant and Unisys Corporation.**
10.17 Letter agreement dated January 16, 1997 between the Registrant,
David A. Blech, Esther Blech and the Edward A. Blech Trust.*
10.18 HomeCom Communications, Inc. Employee Stock Purchase Plan.*
10.19 5% Convertible Debenture Purchase Agreement dated effective
September 19, 1997 between the Registrant, Euro Factors
International, Inc., Beauchamp Finance, FTS Worldwide Corporation
and COLBO.***
10.20 Form of 5% Convertible Debenture issued by the Registrant and held
by Euro Factors International, Inc., Beauchamp Finance, FTS
Worldwide Corporation and COLBO.***
10.21 Registration Rights Agreement dated effective September19, 1997
between the Registrant, Euro Factors International, Inc., Beauchamp
Finance, FTS Worldwide Corporation and COLBO.***
10.22 Letter agreement dated September 23, 1997 between the Registrant,
Euro Factors International, Inc., Beauchamp Finance, FTS Worldwide
Corporation and COLBO.***
10.23 Letter agreement dated September 27, 1997 between the Registrant,
Euro Factors International, Inc., Beauchamp Finance, FTS Worldwide
Corporation and COLBO.***
10.24 Form of Warrant to purchase 200,000 shares of Common Stock at an
exercise price of $4.00 per share issued by the Registrant to First
Granite Securities, Inc.***
10.25 Form of Warrant to purchase 200,000 shares of Common Stock at an
exercise price of $6.00 per share issued by the Registrant to First
Granite Securities, Inc.***
10.26 Form of Securities Purchase Agreement between the Registrant,
Sovereign Partners, L.P. and Dominion Capital Fund, LTD. dated as of
December 23, 1997.***
10.27 Form of Registration Rights Agreement between the Registrant,
Sovereign Partners, L.P. and Dominion Capital Fund, LTD. dated as of
December 23, 1997.***
Exhibit Description
- ------- --------------------------------------------------------------------
10.28 Form of Warrant to purchase 18,750 shares of Common Stock issued by
the Registrant to Sovereign Partners, L.P.***
10.29 Form of Warrant to purchase 56,250 shares of Common Stock issued by
the Registrant to Dominion Capital Fund, LTD.***
10.30 Common Stock Purchase Agreement dated January 23, 1998 by and among
InsureRate, Inc., the Registrant, Jerome R. Corsi and Hamilton
Dorsey Alston HomeCom.***
10.31 Escrow Agreement dated as of January 23, 1998 by and among
InsureRate, Inc., Hamilton Dorsey Alston HomeCom, the Registrant,
Jerome R. Corsi and SunTrust Bank, Atlanta.***
10.32 Shareholders Agreement dated January 23, 1998 by and among Hamilton
Dorsey Alston HomeCom, the Registrant and InsureRate, Inc.***
10.33 Web Development and Hosting Services Agreement dated January 23,
1998, by and among InsureRate, Inc. and Hamilton Dorsey Alston
HomeCom.***
10.34 Form of Warrant to purchase 25,000 shares of Common Stock for an
aggregate purchase price of $92,500 by the Registrant to Hamilton
Dorsey Alston HomeCom.***
10.35 Loan Agreement dated January 23, 1998 by and between InsureRate,
Inc. and the Registrant.***
10.36 Form of Master Note issued by the Registrant to InsureRate, Inc.***
10.37 Form of Warrant to purchase 50,000 shares of Common Stock issued by
the Registrant to The Malachi Group, Inc.+
10.38 Letter Agreement, dated April 8, 1998 by and among HomeCom,
Eurofactors International Inc., Blauchamp France, FTS Worldwide
Corporation and COLBO.****
10.39 Letter Agreement, dated April 8, 1998 by and between First Granite
Securities, Inc. and HomeCom.****
10.40 Letter Agreement, dated April 17, 1998 by and among Sovereign
Partners, L.P., Dominion Capital Fund and HomeCom.****
10.41 Agreement and Plan of Reorganization by and among The Insurance
Resource Center, Inc., Tim Strong, James Higham, Cameron M. Harris &
HomeCom and HomeCom, dated as of April15, 1998.***
10.42 Employment Agreement by and between HomeCom and Tim Higham, dated as
of April 16, 1998.***
10.44 Asset Purchase Agreement by and between HomeCom and Sage Networks
Acquisition Corp. dated as of June 10, 1998.+
10.45 Escrow Agreement by and between HomeCom and Sage Networks
Acquisition Corp. dated as of June 10, 1998.+
10.46 Transitional Services Agreement by and between HomeCom and Sage
Networks Acquisition Corp. dated as of June 10, 1998.+
Exhibit Description
- ------- --------------------------------------------------------------------
10.47 Co-Location Agreement by and between HomeCom and Sage Networks, Inc.
dated as of June 10, 1998.+
10.48 Agreement and Plan of Merger by and among HomeCom Communications,
Inc, FIMI Securities Acquisitions Corp., Inc., ATF Acquisition
Corp., Inc. and Daniel A. Delity, James Wm. Ellsworth, and David B.
Frank dated as of November 6, 1998, together with exhibits.++
10.50 Securities Purchase Agreement dated as of March 25, 1999 by and
among HomeCom Communications, Inc. and CPR (USA), Inc., Liberty View
Funds, L.P., and Liberty View Fund, L.L.C.++
10.51 Registration Rights Agreement dated as of March 25, 1999 by and
among HomeCom Communications, Inc. and CPR (USA), Inc., Liberty View
Funds, L.P., and Liberty View Fund, L.L.C.++
10.52 Transfer Agent Instructions dated as of March 25, 1999.++
10.53 Transfer Agent Legal Opinion dated as of March 25, 1999.++
10.54 Placement Agency Agreement dated as of March 25, 1999 by and between
HomeCom Communications, Inc. and J.P. Turner & Company, L.L.C.++
10.55 Stock Purchase Agreement by and among HomeCom Communications, Inc.
and Richard L. Chu, Joseph G. Rickard, John R. Winans, Mario
D'Agostino, Karen Moore, and John Kokinis, dated as of April 23,
1999.+++
10.56 Employment Agreement Between Ganymede Corporation and Richard L.
Chu, dated as of April 23, 1999.+++
10.57 Employment Agreement between Ganymede Corporation and John Winans,
dated as of April 23, 1999.+++
10.58 Employment Agreement between Ganymede Corporation and Joseph G.
Rickard, dated as of April 23, 1999.+++
10.59 Escrow Agreement by and among HomeCom Communications, Inc. and
Richard L. Chu, Joseph G. Rickard, John R. Winans, Mario D'Agostino,
Karen Moore, and John Kokinis, dated as of April 23, 1999.+++
10.60 Pledge and Security Agreement by and between HomeCom Communications,
Inc. and Richard L. Chu, Joseph G. Rickard, John R. Winans, Mario
D'Agostino, Karen Moore, and John Kokinis, dated as of April 23,
1999.+++
10.61 Warrant Agreement, dated as of March 25, 1999, by and among CPR
(USA), Inc. and HomeCom Communications, Inc.++++
10.62 Warrant Agreement, dated as of March 25, 1999, by and among Liberty
View Fund, L.L.C. and HomeCom Communications, Inc.++++
10.63 Warrant Agreement, dated as of March 25, 1999, by and among Liberty
View, Funds, L.P. and HomeCom Communications, Inc.++++
10.64 Warrant Agreement, dated as of March 25, 1999, by and among J.P.
Turner & Company, L.L.C and HomeCom Communications, Inc.++++
Exhibit Description
- ------- --------------------------------------------------------------------
10.65 Securities Purchase Agreement dated as of July 23, 1999 by and among
HomeCom Communications, Inc. and MacNab LLC (previously filed).
10.66 Registration Rights Agreement dated as of July 23, 1999 by and among
HomeCom Communications, Inc. and MacNab LLC (previously filed).
10.67 Transfer Agent Instructions dated as of September 28, 1999
(previously filed).
10.68 Transfer Agent Legal Opinion dated as of July 23, 1999 (previously
filed).
10.69 Placement Agency Agreement dated as of July 23, 1999 by and between
HomeCom Communications, Inc. and Greenfield Capital Partners
(previously filed).
10.70 Warrant Agreement, dated as of July 23, 1999, by and between HomeCom
Communications, Inc. and MacNab LLC (previously filed).
10.71 Securities Purchase Agreement dated as of September 27, 1999 by and
among HomeCom Communications, Inc. and Jackson LLC (previously
filed).
10.72 Registration Rights Agreement dated as of September 27, 1999 by and
among HomeCom Communications, Inc. and Jackson LLC (previously
filed).
10.73 Transfer Agent Instructions dated as of September 28,
1999 (previously filed).
10.74 Transfer Agent Legal Opinion dated as of September 28, 1999
(previously filed).
10.75 Placement Agency Agreement dated as of September 27, 1999 by and
between HomeCom Communications, Inc. and Greenfield Capital Partners
(previously filed).
10.76 Warrant Agreement, dated as of September 27, 1999, by and between
HomeCom Communications, Inc. and Jackson LLC (previously filed).
10.77 Asset Purchase Agreement, dated October 1, 1999, by and between
HomeCom Communications, Inc. and Infrastructure Defense, Inc.+++++
10.78 Bill of Sale and Assignment, dated October 1, 1999, by and between
HomeCom Communications, Inc. and Infrastructure Defense, Inc.+++++
10.79 Non-solicitation and Non-compete Agreement, Dated October1, 1999, by
and between HomeCom Communications, Inc. and Infrastructure Defense,
Inc.+++++
10.80 Registration Rights Agreement, October 1, 1999, by and between
HomeCom Communications, Inc. and Infrastructure Defense, Inc.+++++
10.81 Form of Opinion of Purchaser's Counsel.+++++
10.82 Form of Opinion of Seller's Counsel.+++++
10.83 Referral and Service Agreement, dated October 1, 1999, by and
between HomeCom Communications, Inc. and Infrastructure Defense,
Inc.+++++
10.84 Value Added Distributor Agreement, dated October 1, 1999 by and
between HomeCom Communications, Inc. and Infrastructure Defense,
Inc.+++++
Exhibit Description
- ------- --------------------------------------------------------------------
10.85 Resignation Letter of Krishan Puri, dated November 1, 1999.++++++
10.86 Employment Agreement between the Registrant and Timothy R. Robinson
dated August 1, 2000
10.87 Amendment to Employment Agreement between the Registrant and George
Bokuchava dated January 10, 2001
21.1 List of Subsidiaries.***
23.1 Consent of Feldman Sherb, & Co., P.C.
- --------------------------------------------------------------------------------
* Incorporated herein by reference to exhibit of the same number in
the Form S-1 Registration Statement of the Registrant (Registration
No. 333-12219).
** Incorporated herein by reference to exhibit of the same number in
the Form 10-K of the Registrant filed with the Commission on March
31, 1998.
*** Incorporated herein by reference to exhibit of the same number in
the Form S-1 Registration Statement of the Registrant (Registration
No. 333-42599).
**** Incorporated herein by reference to exhibit of the same number in
Form 8-K of the Registrant filed with the Commission on April 28,
1998.
+ Incorporated herein by reference to exhibit of the same number in
Form 8-K of the Registrant filed with the Commission on June 25,
1998.
++ Incorporated herein by reference to exhibit of the same number in
Form 8-K of the Registrant filed with the Commission on November 18,
1998.
+++ Incorporated herein by reference to exhibit of the same number in
Form 10-Q/A of the Registrant filed with the Commission on November
17, 1999.
+ Incorporated herein by reference to exhibit of the same number in
Form S-1 Registration Statement of the Registrant(Registration No.
333-45383).
++ Incorporated herein by reference to exhibit of the same number in
Form 10-K of the Registrant filed with the Commission on March 31,
1999.
+++ Incorporated herein by reference to exhibit of the same number in
Form 8-K of the Registrant filed with the Commission on May 10,
1999.
++++ Incorporated herein by reference to Registration Statement on Form
S-3 of the Registrant (Registration No. 333-79761)
+++++ Incorporated herein by reference to exhibit of the same number on
Form 8-K of the Registrant filed with the Commission on October 18,
1999.
++++++ Incorporated herein by reference to exhibit of the same number on
Form 8-K of the Registrant filed with the Commission on November 5,
1999.