<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
COMMISSION FILE NUMBER 0-29204
HOMECOM COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 58-2153309
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
BUILDING 14, SUITE 100,
3535 PIEDMONT ROAD
ATLANTA, GEORGIA 30305
(Address of principal executive offices and zip code)
(404) 237-4646
(Registrant's telephone number, including area code)
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) and has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of May 5, 1998, there were 4,040,683 outstanding shares of the
Registrant's Common Stock, par value $.0001 per share.
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HOMECOM COMMUNICATIONS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
<S> <C>
1) Balance Sheets as of March 31, 1998 and December 31, 1997 3
2) Statements of Operations for the three months ended March 31,
1998 and 1997 4
3) Statements of Cash Flows for the three months ended March 31,
1998 and 1997 5
4) Notes to Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit Index 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOMECOM COMMUNICATIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
(unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C>
Cash and cash equivalents $ 2,221,000 $ 3,187,948
Accounts receivable, net of allowance for uncollectible accounts of
$119,243 and $160,551 as of March 31, 1998 and December 31, 1997,
respectively 582,040 470,839
----------- -----------
Total current assets 2,803,040 3,658,787
FURNITURE, FIXTURES AND EQUIPMENT, NET 728,046 627,624
SOFTWARE DEVELOPMENT COSTS, NET 24,629 31,778
DEPOSITS 50,231 55,731
DEFERRED DEBT ISSUE COSTS 167,320 248,359
OTHER NON-CURRENT ASSETS 91,245 42,500
----------- -----------
Total assets $ 3,864,511 $ 4,664,779
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 584,917 $ 427,886
Accrued payroll liabilities 329,209 264,180
Unearned revenue 235,308 190,878
Current portion of obligations under capital leases 63,104 53,813
----------- -----------
Total current liabilities 1,212,538 936,857
CONVERTIBLE DEBENTURES, NET OF DISCOUNT OF $0 AND $122,778 AS OF MARCH 31, 1998 AND
DECEMBER 31, 1997, RESPECTIVELY 1,000,000 1,577,222
OTHER LIABILITIES 76,435 119,141
OBLIGATIONS UNDER CAPITAL LEASES 76,157 74,787
----------- -----------
Total liabilities 2,365,130 2,708,007
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.0001 par value, 15,000,000 shares authorized, 3,286,147
and 2,956,396 shares issued and outstanding at March 31, 1998 and
December 31, 1997, respectively 329 295
Preferred stock, $.01 par value, 1,000,000 shares authorized, 20,000
shares issued and outstanding at March 31, 1998 and December
31, 1997; participating; $2,000,000 liquidation value 200 200
Additional paid-in capital 8,471,572 7,800,542
Subscriptions receivable (337,501) (337,501)
Accumulated deficit (6,635,219) (5,506,764)
----------- -----------
Total stockholders' equity 1,499,381 1,956,772
----------- -----------
Total liabilities and stockholders' equity $ 3,864,511 $ 4,664,779
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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HOMECOM COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
(Unaudited)
1998 1997
---- ----
<S> <C> <C> <C> <C>
NET SALES:
Service sales $ 762,746 $ 893,145
Equipment sales 119,681 16,032
----------- ----------
Total net sales 882,427 909,177
COST OF SALES:
Cost of services 316,992 332,106
Cost of equipment sold 82,562 8,787
----------- ----------
Total cost of sales 399,554 340,893
----------- ----------
GROSS PROFIT 482,873 568,284
----------- ----------
OPERATING EXPENSES:
Sales and marketing 238,000 297,249
Product development 53,460 47,639
General and administrative 1,013,596 543,031
Depreciation and amortization 78,393 35,364
----------- ----------
Total operating expenses 1,383,449 923,283
----------- ----------
OPERATING LOSS (900,576) (354,999)
OTHER EXPENSES (INCOME)
Interest expense 266,029 20,524
Other income, net (38,151) (873)
----------- ----------
LOSS BEFORE INCOME TAXES (1,128,454) (374,650)
INCOME TAXES -- --
----------- ----------
NET LOSS (1,128,454) (374,650)
----------- ----------
PREFERRED STOCK DIVIDEND (441,176) --
----------- ----------
LOSS APPLICABLE TO COMMON SHAREHOLDERS $(1,569,630) $ (374,650)
=========== ==========
BASIC AND DILUTED LOSS PER SHARE $ (0.51) $ (0.19)
=========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,079,382 1,923,063
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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HOMECOM COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1998 1997
---- ----
(unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,128,454) $ (374,650)
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Depreciation 63,185 28,158
Amortization of assets under capital lease 15,208 7,206
Amortization of software development costs 7,945 2,662
Amortization of debt discount 122,778 --
Amortization of debt issue costs 116,434 --
Provision for bad debts 7,675 (10,500)
Deferred rent expense (42,705) (5,502)
Change in operating assets and liabilities:
Accounts receivable (118,876) (305,540)
Accounts payable and accrued expenses 157,031 387
Accrued salaries and payroll taxes payable 65,029 102,207
Unearned revenue 44,329 138,216
Other (44,040) (2,609)
------------ ------------
Net cash used in operating activities (734,461) (419,965)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture, fixtures and equipment (154,916) (21,251)
Software development costs -- (57,614)
------------ ------------
Net cash used in investing activities (154,916) (78,865)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of deferred offering costs (28,937) (20,000)
Payment of deferred debt issue costs (35,395) --
Repayment of note payable -- (2,485)
Proceeds from notes payable to stockholders -- 270,000
Repayment of notes payable to stockholders -- (41,488)
Repayment of capital lease obligations (13,239) (30,139)
------------ ------------
Net cash (used in) provided by financing activities (77,571) 175,888
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (966,948) (332,942)
CASH AND CASH EQUIVALENTS at beginning of period 3,187,948 332,377
------------ ------------
CASH AND CASH EQUIVALENTS at end of period $ 2,221,000 $ 9,435
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
AND NON CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for interest $ 2,484 $ 723
============ ============
</TABLE>
During the three month periods ended March 31, 1998 and 1997, capital
lease obligations of $23,900 and $21,800, respectively, were incurred
when the Company entered into leases on computer equipment.
During the three months ended March 31, 1998, $700,000 of convertible
debentures were converted into 329,751 shares of common stock.
The accompanying notes are an integral part of these financial statements.
5
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HOMECOM COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to Article 10 of Regulation
S-X of the Securities and Exchange Commission. The accompanying unaudited
financial statements reflect, in the opinion of management, all adjustments
necessary to achieve a fair statement of the financial position and results of
operations of HomeCom Communications, Inc. (the "Company") for the interim
periods presented. All such adjustments are of a normal and recurring nature.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K.
2. RENEGOTIATION OF TERMS OF CONVERTIBLE DEBENTURES
The Company has renegotiated certain of the terms of the Company's 5%
convertible debentures issued in September 1997. Under the terms of a letter
agreement dated April 8, 1998 by and among the Company and the purchasers, the
conversion price of the debentures was reduced to the lessor of (a) a
twenty-five percent (25%) discount from the average closing bid price of the
Company's common stock on the Nasdaq SmallCap(TM) Market for the three (3)
trading days preceding notice of conversion; or (b) $2.625 (compared to $4.00 in
the original agreement). In addition, the purchasers have agreed not to convert
any portion of the remaining debentures held by each of them for a period
beginning April 8, 1998 and ended May 8, 1998 and thereafter not to convert more
than 25% of the remaining debentures held by each of them in any thirty (30) day
period (the "Debenture Gating Restrictions"). However, in the event that the
closing bid price of the Common Stock as reported by Nasdaq or on other
securities exchanges or markets on which the Common Stock is listed for the
previous five (5) days is $3.50 or greater, following May 8, 1998 the foregoing
Debenture Gating Restrictions shall not apply as long as the closing bid price
for the previous five (5) days is $3.50 or greater.
3. RENEGOTIATION OF TERMS OF CONVERTIBLE PREFERRED STOCK
The Company has renegotiated certain of the terms of the Company's
Series A preferred stock issued in December 1997. Under the terms of a letter
agreement dated April 17, 1998 by and among the Company and the holders, the
conversion price of the preferred stock was reduced to the lessor of (a) a
twenty-five percent (25%) discount from the average closing bid price of the
Company's common stock on the Nasdaq SmallCap(TM) Market for the five (5)
trading days preceding notice of conversion; or (b) $3.50 (compared to $14.50625
in the original agreement). However, in the event that a Registration Statement
on Form S-1 for the common stock issuable upon conversion of the preferred stock
is not declared effective by the Securities and Exchange Commission by May 16,
1998, item (b) above is reduced to $3.00. In addition, the holders have agreed
not to convert on a non-cumulative basis more than twenty-five percent (25%)
during any thirty (30) day period following the effective date of the
registration statement (the "Preferred Stock Gating Restrictions"). However, in
the event that the closing bid price of the Common Stock as reported by Nasdaq
or on other securities exchanges or markets on which the Common Stock is listed
for the previous five (5) days is $3.50 or greater, following the effective date
of the registration statement the foregoing Preferred Stock Gating Restrictions
shall not apply as long as the closing bid price for the previous five (5) days
is $3.50 or greater.
A discount results from the beneficial conversion feature of the
preferred stock. This discount is analogous to a dividend and will be
recognized as a return to the preferred holders over the minimum period such
holders realize that return. This assumed dividend increases the amount of net
loss applicable to common shareholders. Due to the above renegotiation, this
dividend, originally calculated as $500,000 increases to $666,667. For the
three months ended March 31, 1998, the preferred stock dividend increased the
net loss applicable to common shareholders by $441,176. The remaining preferred
stock dividend of $225,491 will be recorded in the three months ended June 30,
1998.
4. ACQUISITION OF THE INSURANCE RESOURCE CENTER, INC.
On April 16, 1998, the Company acquired all of the outstanding capital
stock of The Insurance Resource Center, Inc. ("IRC") for 351,391 shares of the
Company's common stock. IRC provides Internet development and hosting services
to the insurance industry. The Company intends to account for this acquisition
as a pooling of interests transaction.
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5. BASIC AND DILUTED LOSS PER SHARE
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share" in 1997. The adoption of SFAS No. 128 had
no effect on previously reported unaudited net loss per share for the three
month period ended March 31, 1997. Options to purchase shares of common stock
were outstanding at March 31, 1998 and 1997 but were not included in the
computation of loss per share because the Company reported a loss and therefore
the effect would be anti-dilutive.
6. INCOME TAXES
There was no provision for or cash payment of income taxes for the
three months ended March 31, 1998 and 1997, respectively, as the Company
anticipates a net taxable loss for the year ended December 31, 1998.
7. SUBSEQUENT EVENTS (UNAUDITED):
As of May 15, 1998, all of the Company's 5% convertible debentures,
originally issued in September 1997 in the aggregate amount of $1,700,000, have
now been converted into shares of the Company's common stock.
7
<PAGE> 8
ITEM 2. 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. The Company notes that a
variety of risk factors could cause the Company's actual results and experience
to differ materially from the anticipated results or other expectations
expressed in the Company's forward-looking statements. Reference is made in
particular to the discussion set forth below in this report and set forth in the
Company's Annual Report on Form 10-K and to the Company's Registration
Statements on Forms S-1 (File Nos. 333-12219, 333-42599 and 333-45383).
GENERAL
The Company generates revenues through Internet and Intranet customized
software application development, web site development, web site hosting
services, computer hardware resales, consulting services and fees charged for
the maintenance of web sites. Most customized software application projects are
generally completed within six to eight weeks, although certain past, current
and future projects have taken and are expected to take longer to complete.
Revenues on customized application and web site development projects are
recognized using the percentage of completion method. Web site maintenance and
hosting revenues represent recurring revenues and are deferred and recognized
ratably over the period.
The Company's revenues and operating results have varied substantially
from period to period, and should not be relied upon as an indication of future
results. The Company historically has operated with no significant backlog
because its services are provided as requested by customers. As a result,
revenues in any quarter are substantially affected by the amount of services
requested by its customers. Moreover, unanticipated variations in the number and
timing of the Company's projects or in employee utilization rates may cause
significant variations in revenues in any particular quarter. An unanticipated
termination of a major project, a client's decision not to pursue a new project
or proceed to succeeding stages of a current project, or the completion during a
quarter of several major client projects, could require the Company to pay
underutilized employees and therefore have a material adverse effect on the
Company's results of operations and financial condition.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Net Sales. Net sales decreased 2.9% from $909,177 in the first quarter of
1997 to $882,427 in the first quarter of 1998. Revenues from service sales
decreased 14.6% from $893,145 in the first quarter of 1997 to $762,746 in the
first quarter of 1998. This decrease of $130,399 is primarily attributable to
decreases in web development revenues of approximately $310,000, offset by
increases in hosting revenues of approximately $180,000. The decrease in web
development revenues is due primarily to reductions in sales and marketing
resources in the third quarter of 1997 which impacted sales efforts in the
current quarter. Revenue from equipment sales increased from $16,032 in the
first quarter of 1997 to $119,681 in the first quarter of 1998. This increase of
$103,649 was attributable to increased sales of security hardware and software.
Cost of Sales. Cost of sales for services includes salaries for
programmers, technical staff and customer support. Cost of sales for services
decreased from $332,106, or 36.5% of revenues in the first quarter of 1997 to
$316,992, or 35.9% of revenues in the first quarter of 1998, reflecting lower
service sales.
Gross Profit. Gross profit decreased by $85,411 from $568,284 in the first
quarter of 1997 to $482,873 in the first quarter of 1998, reflecting lower
service sales. Gross profit margins decreased from 62.5% during the first
quarter of 1997 to 54.7% during the first quarter of 1998. This decrease as a
percentage of revenues primarily reflects a less than proportional reduction in
technical production staff as compared to service sales, due to anticipated
growth.
Sales and Marketing. Sales and marketing expenses include salaries,
variable commissions and bonuses for the sales force, advertising and
promotional marketing materials, travel and telephone charges. Sales and
marketing expenses decreased 19.9%
8
<PAGE> 9
from $297,249 in the first quarter of 1997 to $238,000 in the first quarter of
1998. This decrease was primarily attributable to a decrease in advertising and
marketing activities. As a percentage of revenues, these expenses decreased from
32.7% of revenues in the first quarter of 1997 to 27.0% of revenues in the first
quarter of 1998.
Product Development. Product development expenses consist of personnel
costs required to conduct the Company's product development effort. Management
believes that continuing investments in product development are required to
compete effectively in the Company's industry. Total expenditures for product
development were $53,460, or 6.1% of net sales in the first quarter of 1998, of
which none were capitalized. This compares to total product development
expenditures of $105,253, or 11.6% of sales, in the first quarter of 1997, of
which $57,614 were capitalized.
General and Administrative. General and administrative expenses include
salaries for administrative personnel, rents, telephone charges, insurance and
other administrative expenses. General and administrative expenses increased
from $543,031 in the first quarter of 1997 to $1,013,596 in the first quarter of
1998. As a percentage of net sales, these expenses increased from 59.7% in the
first quarter of 1997 to 114.9% in the first quarter of 1998. This increase as a
percentage of net sales primarily reflects increases for operational and
administrative support personnel incurred to support anticipated growth.
Depreciation and Amortization. Depreciation and amortization includes
depreciation and amortization of computers, network equipment, office equipment
and equipment under capital leases. Depreciation and amortization increased from
$35,364, or 3.9% of revenues in the first quarter of 1997 to $78,393, or 8.9% in
the first quarter of 1998, reflecting increased expenditures on capital
equipment. The Company expects additional capital investments during 1998 as it
continues to develop the infrastructure needed to support higher levels of
operations. However, the Company may choose to forego additional capital
investments if sales do not increase to the levels targeted by management.
Interest Expense. Interest expense increased from $20,524 in the first
quarter of 1997 to $266,029 during the first quarter of 1998, principally
reflecting interest and the amortization of the discount ($122,778) and debt
issue costs ($116,434) associated with the Company's 5% convertible debentures
issued in September 1997.
LIQUIDITY AND CAPITAL RESOURCES
General
The Company has substantially limited unused sources of capital. As of
March 31, 1998, the Company had net working capital of approximately $1.6
million. Management has undertaken steps to address the Company's ongoing cash
requirements including concentrating the Company's market focus, identifying
additional operational and administrative efficiencies, and actively managing
working capital. The Company also may consider raising additional capital
through exercise of outstanding warrants, sales of non-strategic business lines,
and additional debt and equity offerings.
Because the Company expects to continue to incur substantial operating
losses, the Company will continue to use substantial sums of cash in its
operations for an indefinite period. Accordingly, the Company will be required
to obtain additional capital. No assurance can be given that the Company will be
successful in its efforts to obtain additional capital, or that capital will be
available on terms acceptable to the Company or on terms that will not
significantly dilute the interests of existing stockholders. If the Company
exhausts its current sources of capital and is not able to obtain additional
capital, the Company will be required to undertake certain steps to continue its
operations. Such steps may include immediate reduction of the Company's
operating costs and other expenditures, including potential reductions of
personnel and suspension of salary increases and capital expenditures. If such
measures are not sufficient, the Company may elect to implement other cost
reduction actions as the Company may determine are necessary and in the
Company's best interests, including the possible sale of certain of the
Company's business lines. Any such actions undertaken may limit the Company's
opportunities to realize continued increases in sales and the Company may not be
able to reduce its costs in amounts sufficient to achieve break-even or
profitable operations. If the Company exhausts its sources of capital, and
subsequent cost reduction measures are not sufficient to allow the Company to
achieve break-even or profitable operations, the Company will be forced to seek
protection from its creditors.
Net cash used in operating activities was $734,461 for the three month
period ended March 31, 1998. The Company has primarily financed its operations
to date through public and private sales of equity securities and loans from its
principal stockholders and affiliates. During May 1997, the Company completed an
initial public offering of its common stock, issuing 1,000,000 shares at a price
of $6.00 per share. The net proceeds to the Company from the initial public
offering were approximately $4,700,000. The Company has repaid all outstanding
principal amounts loaned to the Company by stockholders and affiliates. During
September 1997, the Company completed the issuance of an aggregate $1,700,000
principal amount of the
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Company's 5% convertible debentures due September 22, 2000. Net proceeds from
the sale of the debentures were approximately $1.5 million. In December 1997,
the Company issued 20,000 shares of its Series A preferred stock for aggregate
net proceeds of approximately $1.8 million.
The Company spent $154,916 and $21,251 during the three month periods
ended March 31, 1998 and 1997, respectively, for the purchase of capital
equipment. These amounts were expended primarily for computer equipment,
communications equipment and software necessary for the Company to increase its
presence in the Internet and Intranet applications marketplace. The Company's
commitments as of March 31, 1998 consist primarily of leases on its Atlanta,
Vienna, Virginia and New York City facilities.
Accounts receivable, net of allowance for doubtful accounts, totaled
$582,040 as of March 31, 1998. Trade receivables are monitored by the Company
through ongoing credit evaluations of its customers' financial conditions. The
allowance for doubtful accounts is considered by management to be an adequate
reserve for known and estimated bad debts of the Company. A revision in this
reserve due to actual results differing from this estimate could have a material
impact on the results of operations, financial position and liquidity of the
Company.
YEAR 2000 READINESS
Many existing computer programs were originally designed to use only
two digits to identify a year in date fields. If not corrected, these
applications could fail or produce erroneous results when working with dates in
the year 2000 and beyond. This "Year 2000" issue could potentially affect the
Company in three areas: its product and service offerings to its customers,
third-party products used internally, and its suppliers. The Company plans to
undertake an in-depth review of software applications used in order to determine
potential exposure to this issue and develop an appropriate response. Based on
an initial assessment of the technology environment within the Company, it is
not anticipated that the Company's Year 2000 issues, or its response to those
issues, will have a material adverse effect upon the Company's financial
position or results of operations. If the Company's review and remediation
efforts with respect to this issue are not completed on a timely basis, Year
2000 issues could have a material impact on the Company's operations and
financial results.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" ("FAS 130") was issued. FAS 130 establishes
standards for reporting and display of comprehensive income and its components,
and is effective for fiscal years beginning after December 15, 1997. The
Company adopted FAS 130 on January 1, 1998 and had no impact on the Company's
disclosures.
In June 1997, Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information" ("FAS
131") was issued. FAS 131 is designed to improve the information provided in
financial statements about the different types of business activities in which
the enterprise engages and economic environments in which the enterprise
operates. FAS 131 is effective for fiscal years beginning after December 15,
1997. The adoption of FAS 131 is not expected to have a material effect on the
Company's disclosures.
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-2 "Software Revenue Recognition" ("SOP 97-2").
SOP 97-2 provides guidance on applying generally accepted accounting principles
in recognizing revenue on software transactions, and is effective for
transactions entered into in fiscal years beginning after December 31, 1997. The
adoption of SOP 97-2, as amended by Statement of Position 98-4 "Deferral of the
Effective Date of a Provision of SOP 97-2," at January 1, 1998, did not have a
material impact on the Company's financial statements.
In February 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-1 "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
provides guidance on accounting for the costs of computer software developed or
obtained for internal use, and is effective for fiscal years beginning after
December 31, 1998. The adoption of SOP 98-1 is not expected to have a material
effect on the Company's financial statements.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities" ("SOP 98-5"). SOP 98-5 requires costs of start-up activities to be
expensed as incurred instead of being capitalized and amortized, and is
effective for fiscal years beginning after December 15, 1998. The adoption of
SOP 98-5 is not expected to have a material impact on the Company's financial
statements.
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PART II. OTHER INFORMATION
ITEMS 1-5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule (For SEC use only)
(b) Reports on Form 8-K
None
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HomeCom Communications, Inc.
/s/ Harvey W. Sax
Date: May 14, 1998 ___________________________
Harvey W. Sax
President and
Chief Executive Officer
/s/ Norman H. Smith
Date: May 14, 1998 ___________________________
Norman H. Smith
Vice President Finance and
Administration
(Principal Financial Officer)
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HOMECOM COMMUNICATIONS, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <C>
27 Financial Data Schedule (For SEC Use only) 15
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HOMECOM COMMUNICATIONS, INC. FOR THE THREE-MONTH PERIOD
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,221,000
<SECURITIES> 0
<RECEIVABLES> 701,283
<ALLOWANCES> 119,243
<INVENTORY> 0
<CURRENT-ASSETS> 2,803,040
<PP&E> 1,133,420
<DEPRECIATION> 405,374
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0
200
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