<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported): March 24, 1999
-----------------
HomeCom Communications, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-29204 58-2153309
- -------------------------------------------------------------------------------
(State or Other Jurisdiction of (Commission file Number) (I.R.S. Employer
Incorporation or Organization Identification No.)
3535 Piedmont Road, Atlanta, Georgia 30305
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (404) 237-4646
-------------------
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 6, 1998, HomeCom Communications, Inc., a Delaware
corporation (the "Company") signed a definitive agreement and plan of merger
(the "Merger Agreement") to acquire, among other things, all of the outstanding
shares of First Institutional Marketing, Inc. and certain of its affiliates
("FIMI") for 1,252,174 shares of common stock. In addition, the Company 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, the Company completed the closing of the
Merger.
The acquisition will be accounted for as a purchase. The purchase price
will be allocated to assets acquired and liabilities assumed based on their
estimated fair values. Results of operations for FIMI will be included with
those of the Company for periods subsequent to the date of acquisition. The
Company has filed a Registration Statement on Form S-3 with respect to the
resale of the shares of HomeCom Communications, Inc. Common Stock issued in the
Merger.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
<TABLE>
<CAPTION>
Page
<S> <C>
Premier Financial Services, Inc., First Institutional Marketing, Inc. and
All Things Financial, Inc. Combined FIMI Financial Statements:
Independent Auditors' Report....................................... 3
Combined Balance Sheets............................................ 4
Combined Statement of Income and Retained Earnings................. 6
Combined Statement of Cash Flows................................... 7
Notes to the Combined Financial Statements......................... 8
FIMI Securities, Inc. Financial Statements:
Independent Auditors' Report....................................... 12
Statements of Financial Condition.................................. 13
Statements of Income............................................... 14
Statements of Changes in Stockholders' Equity...................... 15
Statements of Cash Flows........................................... 16
Notes to the Financial Statements.................................. 17
Schedule I......................................................... 19
Schedule II........................................................ 20
Schedule III....................................................... 21
Report on Internal Control Structure............................... 22
(b) Pro Forma Financial Information
Page
Unaudited Pro Forma Condensed Balance Sheet at December 31, 1998..................... 24
Unaudited Pro Forma Condensed Statement of Operations for the three
months ended March 31, 1999................................................ 25
Unaudited Pro Forma Condensed Statement of Operations for the year
ended December 31, 1998.................................................... 26
(c) Exhibits
</TABLE>
1
<PAGE> 3
10.48 Agreement and Plan of Merger by and among HomeCom
Communications, Inc, FIMI Securities Acquisition Corp., Inc.,
ATF Acquisition Corp., Inc. and Daniel A. Delity, James Wm.
Ellsworth, and David B. Frank dated as of November 6, 1999,
together with exhibits was previously filed on Form 8-K dated
November 18, 1998.
23.1 Consent of Andrew Shebay & Company, PLLC.
2
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Premier Financial Services, Inc.
First Institutional Marketing, Inc.
All Things Financial, Inc.
Houston, Texas
We have audited the accompanying statements of financial condition of Premier
Financial Services, Inc., First Institutional Marketing, Inc., All Things
Financial, Inc., as of December 31, 1998 and 1997, and the related statements of
income, and changes in financial condition for the period then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Premier Financial Services,
Inc., First Institutional Marketing, Inc., All Things Financial, Inc., as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the period then ended in conformity with generally accepted accounting
principles.
Andrew Shebay & Company, PLLC
Houston, Texas
June 4, 1999
3
<PAGE> 5
PREMIER FINANCIAL SERVICES, INC.
FIRST INSTITUTIONAL MARKETING, INC.
ALL THINGS FINANCIAL, INC.
COMBINED BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 17,447 $ 55,912
Certificates of Deposit 52,901 50,325
Accounts Receivable 164,173 265,465
-------- --------
Total current assets 234,521 371,702
PROPERTY AND EQUIPMENT:
Computer Equipment 281,621 207,448
Office Equipment and Fixtures 120,734 120,660
Automobiles 30,853 30,853
-------- --------
433,208 358,961
Less: Accumulated Depreciation 313,558 290,326
-------- --------
Net Property and Equipment 119,650 68,635
OTHER ASSETS: 1,879 1,879
-------- --------
TOTAL ASSETS $356,050 $442,216
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
PREMIER FINANCIAL SERVICES, INC.
FIRST INSTITUTIONAL MARKETING, INC.
ALL THINGS FINANCIAL, INC.
COMBINED BALANCE SHEETS
December 31, 1998 and 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 279,520 $217,646
Bank Overdraft 25,007 --
Commissions Payable 71,037 73,547
Payroll Taxes Payable 6,135 7,561
Other Accrued Liabilities 13,166 2,738
Current Portion of Capital Leases 13,242 1,925
Note Payable 15,815 15,815
--------- --------
Total Current Liabilities 423,922 319,232
LONG-TERM LEASE OBLIGATION-NET 68,933 --
STOCKHOLDERS' EQUITY:
Premier Financial Services, Inc. -Common stock
authorized 100,000 shares of $1 par value,
930 shares issued 930 930
First Institutional Marketing, Inc. - Common stock
authorized 10,000 shares of $1 par value, 930
shares issued 930 930
All Things Financial, Inc., - Common stock
authorized 10,000 shares of $1 par
value, 930 shares issued 895 895
Paid in Capital--Premier Financial Services, Inc. 100 100
Retained earnings (139,660) 120,129
--------- --------
Total stockholders' equity (136,805) 122,984
--------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 356,050 $442,216
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 7
PREMIER FINANCIAL SERVICES, INC.
FIRST INSTITUTIONAL MARKETING, INC.
ALL THINGS FINANCIAL, INC.
COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
For the years ending December 31, 1998 and 1997
<TABLE>
<CAPTION>
<S> <C> <C>
REVENUE $ 3,944,618 $ 4,277,324
COST OF REVENUES 3,155,312 3,211,206
----------- -----------
GROSS PROFIT 789,306 1,066,118
OPERATING EXPENSES 883,180 986,771
----------- -----------
NET OPERATING INCOME (93,874) 79,347
OTHER INCOME (EXPENSE)
Interest Income 3,854 2,495
Interest Expense (2,788) (815)
----------- -----------
Total Other Income 1,066 1,680
----------- -----------
COMBINED NET INCOME (92,808) 81,027
Retained Earnings - beginning of year 120,129 151,298
Stockholder Distributions (166,981) (112,196)
----------- -----------
RETAINED EARNINGS - END OF YEAR $ (139,660) $ 120,129
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 8
PREMIER FINANCIAL SERVICES, INC.
FIRST INSTITUTIONAL MARKETING, INC.
ALL THINGS FINANCIAL, INC.
COMBINED STATEMENT OF CASH FLOWS
For the Years ending December 31, 1998 and 1997
<TABLE>
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (92,808) $ 81,027
Adjustments to Reconcile Combined Net Income
to Net Cash Provided by Operating Activities:
Depreciation 39,761 23,895
Decrease (Increase) In:
Accounts Receivable 101,292 231,537
Employee Advances -- 16,433
Due from Affiliate -- 2,437
(Decrease) Increase In:
Accounts Payable 59,365 (111,578)
Bank Overdraft 25,007 --
Commission Payable -- (52,709)
Payroll Taxes Payable 9,002 2,824
Other Accrued Liabilities -- (15,340)
--------- ---------
Net cash provided by operating activities 141,619 178,526
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in CD (2,579)
Purchase of Equipment (94,022) (10,176)
--------- ---------
Net Cash (used) in Investing Activities (96,601) (10,176)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to Shareholders (163,733) --
Proceeds from New Notes and Leases 80,250 15,000
Repayments of Capital Lease Obligations (23,521)
--------- ---------
Net Cash (used) in Financing Activities (83,483) (8,521)
--------- ---------
NET INCREASE IN CASH (38,465) 159,829
Cash Balance - beginning of year 55,912 (103,917)
--------- ---------
CASH BALANCE - END OF YEAR $ 17,447 $ 55,912
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 9
PREMIER FINANCIAL SERVICES, INC.
FIRST INSTITUTIONAL MARKETING, INC.
ALL THINGS FINANCIAL, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
For the Year Ended December 31, 1998 and 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Business - Premier Financial Services, Inc., First
Institutional Marketing, Inc., All Things Financial, Inc., (the
Companies) begin operations in 1989. The Companies are marketing
organizations dedicated to providing fixed and variable annuities,
insurance products and full service brokerage to banks, savings and
loan and credit unions. Associated brokerage services are provided
by FIMI Securities, Inc., an uncombined company related through
common ownership. First Institutional Marketing, Inc.,(FIMI),
Premier Financial Services, Inc.,(PFS), and All Things Financial,
Inc., (ATF) operated exclusively in the United States.
Principles of Combination - The combined financial statements
include the combined accounts of the Companies, which are related
through common ownership. All material intercompany transactions
have been eliminated.
Cash and Cash Equivalents - The Companies define cash equivalents
as short-term, highly liquid investments that are readily
convertible to cash with a maturity of less than three months.
Property and Equipment - Property and equipment are stated at cost
less accumulated depreciation. Depreciation expense is provided
using accelerated and straight-line methods for financial reporting
purposes. Major classifications and estimated useful lives are as
follows:
Computer equipment 5-7 years
Office equipment and fixtures 7 years
Automobiles 5 years
Cost of assets includes capital expenditures, which improve the
efficiency of the assets or lengthen their useful lives. Normal or
recurring expenditures for repair and maintenance and capital
expenditures of insignificant amounts are expenses when incurred.
Cost and related accumulated depreciation of assets sold or retired
are eliminated from the accounts, and gains or losses on disposal
are reflected in income. Depreciation expense totaled $39,761 and
$23,895 in 1998 and 1997 respectively and includes amortization of
capital leases.
Advertising costs - Advertising costs are charged to operations
when the advertising first takes place. No direct-response
advertising is used by the Companies. Total advertising expense for
the years ending December 31, 1998 and 1997 was $43,038 and $59,468
respectively.
8
<PAGE> 10
PREMIER FINANCIAL SERVICES, INC.
FIRST INSTITUTIONAL MARKETING, INC.
ALL THINGS FINANCIAL, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
For the Year Ended December 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTD'
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 revenues and expenses during
the reporting periods. Actual results could differ from those
estimates.
2. LEASES
Operating lease - The Companies currently lease office space in a
Houston, Texas facility under a five year operating lease. The
lease continues through July 14, 2002, and provides for minimum
monthly rental payments of $2,998, plus an annual increase based on
the increase in building operating costs. Rental expense for the
year ending December 31, 1998 and 1997 was $85,825 and $83,792.
Capital leases - The Companies lease computer equipment under
capital leases expiring 1998 through 2004. At December 31, 1998 and
1997 the lease obligations were as follows:
<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
Capital lease for equipment payable to Bevenco, dated June
1995, interest at 10%, payable in 36 monthly installments
of $330 $ -- $1,925
Capital lease for equipment payable to Bevenco, dated
May 1998, interest at 15%, payable in 60 monthly
installments of $657
25,357 --
Capital lease for equipment payable to Bevenco, dated
May 1998, interest at 15%, payable in 60 monthly
installments
of $1,417 56,818 --
------- ------
Total Lease Obligation 82,175
Less amount shown as current 13,242 1,925
------- ------
Long-term obligation $68,933 $ --
======= ======
</TABLE>
9
<PAGE> 11
PREMIER FINANCIAL SERVICES, INC.
FIRST INSTITUTIONAL MARKETING, INC.
ALL THINGS FINANCIAL, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
For the Year Ended December 31, 1998
Future minimum commitments, by year and in the aggregate related to
capital and non-cancelable operating leases at December 31, 1998,
is as follows:
<TABLE>
<CAPTION>
Capital Operating
Year ending December 31, Lease Lease
------- --------
<S> <C> <C>
1999 $13,921 $ 35,976
2000 15,433 35,976
2001 17,987 35,976
2002 20,963 17,988
2003 13,871
------- --------
Total minimum lease payments $82,175 $161,892
======= ========
</TABLE>
3. LONG-TERM DEBT
The note payable represents an agreement between First
Institutional Marketing, Inc. and one of its insurance carriers.
The unsecured note is dated April 14, 1997, and is payable in
monthly installments of $1,356, beginning May, 1998. As of the date
of this report no payments have been made on the note because of a
dispute with the insurance carrier. The note is reflected as a
current liability on the combined balance sheet.
4. INCOME TAXES
The Companies have elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Under those provisions,
the Companies do not pay Federal Corporate income taxes on its
taxable income. Instead, the stockholders are liable for individual
federal income taxes on their respective shares of income.
5. TREASURY STOCK
During the year the Companies canceled all common stock held in
treasury, resulting in a reduction to the capital stock accounts
and additional paid in capital. Shares in treasury consisted of 405
shares of Premium Financial Services, Inc.; 320 shares of First
Institutional Marketing, Inc.; and 255 shares of All Things
Financial, Inc.
10
<PAGE> 12
PREMIER FINANCIAL SERVICES, INC.
FIRST INSTITUTIONAL MARKETING, INC.
ALL THINGS FINANCIAL, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
For the Year Ended December 31, 1998
6. RELATED PARTY TRANSACTIONS
Pursuant to informal agreements, Premier Financial Services, Inc.
processes payroll, contract labor charges, and various other
general and administrative expenses for affiliated companies,
Premier Financial Services, Inc, is reimbursed for this expense on
a regular basis. Amounts paid by First Institutional Marketing and
All Things Financial, Inc. have been eliminated in the combination.
Additional reimbursements of $607,000 and $922,879 for the years
ending December 31, 1998 and 1997, and are recorded in revenues.
7 EMPLOYEE BENEFITS
The Companies maintain a 401(k)-retirement plan that covers all
eligible employees. This defined contribution plan provides
matching Company contributions equal to 50% of the employee
contribution to a maximum Company contribution of 3%. Additionally,
the Companies may make discretionary contributions. Contributions
by the Companies totaled $3,005 and $25,143, for 1998 and 1997 and
are included in employee benefits.
8. NON-CASH TRANSACTIONS
During the year, the Companies reclassified various shareholder
loans and advances to stockholder distributions. These
reclassifications totaled $112,196 in 1997.
9. PROPOSED SALE OF THE COMPANY
On June 15, 1998 the shareholders of the Company signed a letter of
intent, along with the shareholders of other affiliated Companies,
to exchange all of the their common stock for common stock in
HomeCom Communications, Inc. HomeCom is a Company whose stock is
listed on the NASDAQ. In November 1998 a merger agreement was
executed. On March 1, 1999, HomeCom filed a registration statement
with the Securities and Exchange Commission to cover one-half of
the stock to be issued in the merger. The merger was closed and
became effective on March 24, 1999.
11
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
FIMI Securities, Inc.
Houston, Texas
We have audited the accompanying statements of financial condition of FIMI
Securities, Inc.(an S corporation), as of December 31, 1998 and 1997, and the
related statements of income, changes in stockholders' equity, and changes in
financial condition for the period then ended. 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 audit.
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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of FIMI Securities, Inc., as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the period then ended in conformity with generally accepted accounting
principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information contained in
Schedules I, II, and III is presented for purposes of additional analysis and is
not a required part of the basic financial statements, but is supplementary
information required by rule 17a-5 of the Securities and Exchange Commission.
Such information has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, is fairly stated in
all material respects in relation to the basic financial statements taken as a
whole.
/s/ Andrew Shebay & Company, PLLC
March 2, 1999
12
<PAGE> 14
FIMI SECURITIES, INC.
STATEMENTS OF FINANCIAL CONDITION
December 31, 1998 and 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Current Assets:
Cash $44,339 $29,621
Prepaid expense --
------- -------
Total current assets 44,339 29,621
Other Assets:
Organizational Cost 15,268 15,269
------- -------
$59,607 $44,890
======= =======
Common stock - authorized 10,000 shares
of $1 par value, 1,000 shares issued
and outstanding $ 1,000 $ 1,000
Contributed capital 19,000 19,000
Retained earnings 39,607 24,890
------- -------
Total stockholders' equity $59,607 $44,890
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE> 15
FIMI SECURITIES, INC.
STATEMENTS OF INCOME
For the Years Ending December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
-------- ---------
<S> <C> <C>
REVENUE
Commissions $634,336 $ 868,823
Interest and other income 95 4,001
-------- ---------
TOTAL REVENUE 634,431 872,824
EXPENSES
Management fee 607,000 947,000
Broker fees 0 1,448
Accounting 3,800 3,000
Licenses & permits 8,115 1,220
Office supplies & expense 248 214
Taxes 101 331
Professional fees 450 500
-------- ---------
TOTAL EXPENSES 619,714 953,713
-------- ---------
NET INCOME $ 14,717 $ (80,889)
======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 16
FIMI SECURITIES, INC
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
For the Years Ending December 31, 1998 and 1997
<TABLE>
<CAPTION>
Additional
Common Paid in Retained
Stock Capital Earnings Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1996 $ 1,000 $ 19,000 $105,779 $125,779
Net income (loss) (80,889) (80,889)
-------- -------- -------- --------
BALANCE, December 31, 1997 1,000 19,000 24,890 44,890
Net income (loss) 14,717 14,717
-------- -------- -------- --------
BALANCE, December 31, 1998 $ 1,000 $ 19,000 $ 39,607 $ 59,607
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 17
FIMI SECURITIES, INC
STATEMENTS OF CASH FLOWS
For the Years Ending December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $14,717 $ (80,889)
Change in prepaid expenses -- 3,000
------- ---------
Net cash provided (used) by operating activities 14,717 (77,889)
------- ---------
CASH
Net increase (decrease) in cash 14,717 (77,889)
Balance - beginning of year 29,622 107,511
------- ---------
Balance - end of year $44,339 $ 29,622
======= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 18
FIMI SECURITIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Years Ended December 31, 1998 and 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the business - The Company was formed in 1994 primarily
for the purpose of qualifying and operating as a broker-dealer. The
Company is a member of the National Association of Security Dealers
and is registered with the Securities and Exchange Commission and
with various states' securities commissions. The Company's primary
business is in the wholesale brokerage of variable annuities.
Income taxes - The Company has elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code. Under
those provisions, the Company does not pay federal corporate income
taxes on its taxable income. Instead, the stockholders are liable
for individual federal income taxes on their respective shares of
income.
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 revenues and expenses during
the reporting periods. Actual results could differ from those
estimates.
2. NET CAPITAL REQUIREMENTS
Pursuant to the net capital provisions of Rule 15c3-1 of the
Securities Exchange Act of 1934, the Company is required to
maintain a minimum net capital, as defined under such provisions.
Net capital and the related net capital ratio may fluctuate on a
daily basis. At December 31, 1997, the Company had net capital and
net capital requirements of approximately $29,621 and $5,000
respectively. At December 31, 1998, the Company had net capital and
net capital requirements of approximately $44,338 and $5,000
respectively. The net capital rules may effectively restrict the
payment of cash dividends.
3. TRANSACTIONS WITH AFFILIATES
The management fee reported on the Statements of Income represents
billings from various affiliated companies for the fair market
value of management and administrative services rendered.
4. SIGNIFICANT CUSTOMER
A significant portion of the commission income is derived from
transactions with one company. Approximately 79% in 1998 and 20% in
1997 of commission income is attributable to one unrelated
Brokerage Company.
17
<PAGE> 19
FIMI SECURITIES, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
For the Years Ended December 31, 1998 and 1997
5. LITIGATION
During 1998 the Company was named in a lawsuit with certain
affiliated companies arising from a breach of contract dispute. At
this time no estimate of the potential outcome can be made by the
Company's legal counsel. The Company intends to vigorously defend
its position.
6. PROPOSED SALE OF THE COMPANY
On June 15, 1998 the shareholders of the Company signed a letter of
intent, along with the shareholders of other affiliated Companies,
to exchange all of the their common stock for common stock in
HomeCom Communications, Inc. HomeCom is a Company whose stock is
listed on the NASDAQ. In November 1998 a merger agreement was
executed. In January 1999 HomeCom filed a registration statement
with the Securities and Exchange Commission to cover the stock to
be issued in the merger. The merger is expected to be closed in
early 1999.
18
<PAGE> 20
FIMI SECURITIES, INC.
COMPUTATION OF NET CAPITAL UNDER RULE 15c3-1
OF THE SECURITIES AND EXCHANGE COMMISSION For the
Years Ending December 31, 1998 and 1997
SCHEDULE I
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Net capital:
Stockholders' Equity $59,607 $44,890
Less non-allowable assets: 15,268 15,269
------- -------
Net capital before haircuts on securities position 44,339 29,621
------- -------
Haircuts on securities: -0- -0-
------- -------
Net capital $44,339 $29,621
======= =======
Net capital requirement $ 5,000 $ 5,000
Net capital in excess of required amount 39,339 24,621
------- -------
Net capital $44,339 $29,621
======= =======
Aggregate indebtedness -0- -0-
======= =======
Ratio of aggregate indebtedness to net capital 0 to 1 0 to 1
======= =======
</TABLE>
Note - This computation does not differ from the computation of net capital
under Rule 15c3-1 as of December 31, 1998 filed by FIMI Securities, Inc. with
the National Association of Securities Dealers on part II of Form X-17A-5.
19
<PAGE> 21
FIMI SECURITIES, INC.
COMPUTATION FOR DETERMINATION OF
RESERVE REQUIREMENT UNDER RULE 15c3-3
OF THE SECURITIES AND EXCHANGE COMMISSION
As of December 31,1998 and 1997
SCHEDULE II
The Company is in compliance with the exemptive provisions of SEC Rule
15c3-3(k)(2)(i) in that it carried no margin accounts, handled no customers'
funds or securities, and held no funds or securities for or owed no money or
securities to its customers.
20
<PAGE> 22
FIMI SECURITIES, INC.
STATEMENT OF CHANGES IN LIABILITIES
SUBORDINATED TO CLAIMS OF GENERAL CREDITORS
As of December 31, 1998 and 1997
SCHEDULE III
NONE
21
<PAGE> 23
ANDREW SHEBAY & COMPANY, PLLC
CERTIFIED PUBLIC ACCOUNTANTS
6445 HIGH STAR - HOUSTON, TEXAS 77074-8099
713-777-4524 - FAX: 713-777-5695 - [email protected]
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL STRUCTURE
REQUIRED BY SEC RULE 17a-5
To the Board of Directors
FIMI Securities, Inc.
In planning and performing our audit of the financial statements of FIMI
Securities, Inc. for the period ended December 31, 1998, we considered its
internal control structure in order to determine our auditing procedures for the
purpose of expressing our opinion on the financial statements and not to provide
assurance on the internal control structure.
We also made a study of the practices and procedures followed by the Company in
making the periodic computations of aggregate indebtedness and net capital under
rule 17a-3(a)(11)and the procedures for determining compliance with the
exemptive provisions of rule 15c3-3. We did not review the practices and
procedures followed by the Company in making the quarterly securities
examinations, counts, verifications and comparisons and the recordation of
differences required by rule 17a-13 or in complying with the requirements for
prompt payment for securities under section 8 of regulation T of the Board of
Governors of the Federal Reserve System, because the Company does not carry
security accounts for customers or perform custodial functions relating to
customer securities.
The management of the Company is responsible for establishing and maintaining an
internal control structure and the practices and procedures referred to in the
preceding paragraph. In fulfilling the responsibility, estimates and judgements
by management are required to assess the expected benefits and related costs of
internal control structure policies and procedures and of the practices and
procedures referred to in the preceding paragraph and to assess whether those
practices and procedures can be expected to achieve the Commission's
above-mentioned objectives. Two of the objectives of an internal control
structure and the practices and procedures are to provide management with
reasonable, but not absolute, assurance that assets for which the Company has
responsibility are safeguarded against loss from unauthorized use or disposition
and that transactions are executed in accordance with management's authorization
and recorded properly to permit preparation of financial statements in
conformity with generally accepted accounting practices and procedures. Rule
17a-5(g) lists additional objectives of the practices and procedures listed in
the preceding paragraph.
Because of inherent limitations in any internal control structure or the
practices and procedures referred to above, errors or irregularities may occur
and not be detected. Also, projection of any evaluation of them for the future
periods is subject to the risk that they may become inadequate
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<PAGE> 24
because of changes in conditions or that the effectiveness of their design and
operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce to
a relatively low level the risk that errors or irregularities in the amounts
that would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control structure that we consider to be material
weakness as defined above.
We understand that practices and procedures that accomplish the objectives
referred to in the second paragraph of this report are considered by the
Commission to be adequate for its purposes in accordance with the Securities
Exchange Act of 1934 and related regulations, and that practices and procedures
that do not accomplish such objectives in all material respects indicate a
material inadequacy for such purposes. Based on this understanding and on our
study, we believe that the Company's practices and procedures were adequate at
December 31, 1998, to meet the Commission's objectives.
This report is intended solely for the use of management, the Securities and
Exchange Commission, the NASD and other regulatory agencies which rely on Rule
17a-5(g) under the Securities Exchange Act of 1934 and should not be used for
any other purpose.
/s/ Andrew Shebay & Company, PLLC
Andrew Shebay & Company, PLLC
Houston, Texas
March 2, 1999
23
<PAGE> 25
The following unaudited pro forma financial statements give effect to the
acquisition by the Company of FIMI in a transaction accounted for as a
purchase. The unaudited pro forma balance sheet is based on the individual
balance sheets of the Company appearing in the Company's Annual Report on Form
10-K, and of FIMI, appearing elsewhere in this Current Report on Form 8-K, and
has been prepared to reflect the acquisition by the Company of FIMI as of
December 31, 1998. The unaudited pro forma statements of income are based on
the individual statements of income of the Company appearing in the Company's
Annual Report on Form 10-K and of FIMI, appearing elsewhere in this Current
Report on Form 8-K, and combines the results of operations of the Company and
of FIMI (acquired by the Company as of March 24, 1999) for the year ended
December 31, 1998 and for the three months ended March 31, 1999, as if the
acquisition occurred on January 1, 1998. These unaudited pro forma financial
statements should be read in conjunction with the historical financial
statements and notes thereto of the Company appearing in the Company's Annual
Report on Form 10-K, and of FIMI, appearing elsewhere in this Current Report on
Form 8-K.
HomeCom Communications, Inc.
Pro Forma Unaudited Combined Condensed Balance Sheet
December 31, 1998
<TABLE>
<CAPTION>
Pro forma Pro forma
HomeCom FIMI Adjustments As adjusted
------------ --------- ----------- ------------
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,291,932 $ 114,687 $ (370,000)(e) $ 2,036,619
Restricted cash 250,000 250,000
Accounts receivable, net 680,790 164,173 -- 844,963
Loans to shareholders -- -- 370,000 (e) 370,000
Other current assets 4,796 -- -- 4,796
------------ --------- ----------- ------------
Total current assets 3,227,518 278,860 -- 3,506,378
FURNITURE, FIXTURES AND EQUIPMENT, NET 797,263 119,650 916,913
77,198 (b)
INTANGIBLE ASSETS, NET 351,320 -- 4,236,104 (a) 4,664,622
OTHER NON-CURRENT ASSETS 189,389 17,147 -- 206,536
------------ --------- ----------- ------------
Total assets $ 4,565,490 $ 415,657 $ 4,313,302 $ 9,294,449
============ ========= =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 424,094 $ 317,693 $ 741,787
Accrued payroll liabilities 300,927 77,172 378,099
Unearned revenue 128,345 -- 128,345
Other current liabilities 108,427 29,057 -- 137,484
------------ --------- ----------- ------------
Total current liabilities 961,793 423,922 -- 1,385,715
OBLIGATIONS UNDER CAPITAL LEASES 88,242 68,933 157,175
OTHER LIABILITIES 67,006 -- -- 67,006
------------ --------- ----------- ------------
Total liabilities 1,117,041 492,855 -- 1,609,896
------------ --------- ----------- ------------
STOCKHOLDERS' EQUITY (DEFICIT):
(3,755)(b)
Common stock 507 3,755 125 (a) 632
(19,100)(b)
Additional paid-in capital 10,355,724 19,100 4,235,979 (a) 14,591,703
Subscriptions receivable (196,878) -- -- (196,878)
Accumulated deficit (6,710,904) (100,053) 100,053 (b) (6,710,904)
------------ --------- ----------- ------------
Total stockholders' equity (deficit) 3,448,449 (77,198) 4,313,302 7,684,553
------------ --------- ----------- ------------
Total liabilities and stockholders' equity
(deficit) $ 4,565,490 $ 415,657 $ 4,313,302 $ 9,294,449
============ ========= =========== ============
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
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<PAGE> 26
HomeCom Communications, Inc.
Pro forma Unaudited Combined Condensed Statement of Operations
for the three months ended March 31, 1999
<TABLE>
<CAPTION>
FIMI
(through Pro forma Pro forma
HomeCom March 24, 1999) Adjustments As adjusted
---------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 1,042,337 $ 682,933 $ -- $ 1,725,270
Cost of Sales 676,725 498,350 -- 1,175,075
----------- ----------- --------- -----------
Gross Profit 365,612 184,583 -- 550,195
Operating Expenses 1,745,017 332,329 154,971 (d) 2,232,317
----------- ----------- --------- -----------
Operating Loss (1,379,405) (147,746) (154,971) (1,682,122)
Other Expenses (Income), Net (7,819) -- -- (7,819)
----------- ----------- --------- -----------
Loss Before Income Taxes (1,371,586) (147,746) (154,971) (1,674,303)
Income Taxes -- -- -- --
----------- ----------- --------- -----------
Net Loss (1,371,586) (147,746) (154,971) (1,674,303)
Preferred Stock Dividend -- -- -- --
----------- ----------- --------- -----------
Loss Applicable to Common Shareholders $(1,371,586) $ -- $(154,971) $(1,526,557)
=========== =========== ========= ===========
Basic and Diluted Loss Per Share $ (0.26) $ -- $ -- $ (0.24)
=========== =========== ========= ===========
Weighted Average Common Shares Outstanding 5,231,058 1,252,174 -- 6,483,232
=========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
25
<PAGE> 27
HomeCom Communications, Inc.
Pro forma Unaudited Combined Condensed Statement of Operations
for the year ended December 31, 1998
<TABLE>
<CAPTION>
Pro forma Pro forma
HomeCom FIMI Adjustments As adjusted
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net Sales $3,292,410 $ 3,972,049 $ -- $ 7,264,459
Cost of Sales 2,601,311 3,168,026 -- 5,769,337
----------- ----------- --------- -----------
Gross Profit 691,099 804,023 -- 1,495,122
Operating Expenses 6,019,041 883,180 619,885 (c) 7,522,106
----------- ----------- --------- -----------
Operating Loss (5,327,942) (79,157) (619,885) (6,026,984)
Other Expenses (Income), Net (4,123,802) (1,066) -- (4,124,868)
----------- ----------- --------- -----------
Loss Before Income Taxes (1,204,140) (78,091) (619,885) (1,902,116)
Income Taxes -- -- -- --
----------- ----------- --------- -----------
Net Loss (1,204,140) (78,091) (619,885) (1,902,116)
Preferred Stock Dividend (666,667) -- -- (666,667)
----------- ----------- --------- -----------
Loss Applicable to Common Shareholders $(1,870,807) $ -- $(619,885) $(2,490,692)
----------- ----------- --------- -----------
Basic and Diluted Loss Per Share $ (0.44) $ -- $ -- $ (0.45)
=========== =========== ========= ===========
Weighted Average Common Shares Outstanding 4,287,183 1,252,174 -- 5,539,357
=========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
(a) To record issuance of 1,252,174 shares of common stock,par value
$.0001, and valued for this transaction at a price per share of
$3.383, for the net assets of the FIMI Companies. This price per
share represents the average of the closing prices of the
Company's common stock for the two days before, the day of , and
the day after the press release announcing the acquisition on
November 11, 1998.
(b) To record elimination of equity accounts for the FIMI
companies.
(c) To record amortization of intangibles for the year ended December
31, 1998, assuming the acquisition had been completed on January
1, 1998. Intangible assets are being amortized over 7 years,
resulting in annual amortization expense of $619,885.
(d) To record amortization of intangibles for the three months ended
March 31, 1999, assuming the acquisition had been completed on
January 1, 1998. Intangible assets are being amortized over 7
years, resulting in annual amortization expense of $619,885, or
$154,971 for the three month period ended March 31, 1999.
(e) To record a $370,000 loan made to the Sellers on January 29, 1999.
26
<PAGE> 28
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 hereunto duly authorized.
HOMECOM COMMUNICATIONS, INC.
(Registrant)
Date: June 11, 1999 By: /s/ Harvey Sax
--------------- ---------------------------
Harvey Sax, President and
Chief Executive Officer
(Principal Executive Officer)
27
<PAGE> 29
Exhibit Index
Exhibit Description
10.48 Agreement and Plan of Merger by and among HomeCom
Communications, Inc, FIMI Securities Acquisition Corp., Inc.,
ATF Acquisition Corp., Inc. and Daniel A. Delity, James Wm.
Ellsworth, and David B. Frank dated as of November 6, 1999,
together with exhibits was previously filed on Form 8-K dated
November 18, 1998.
23.1 Consent of Andrew Shebay & Company, PLLC
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Form 8-K (File No. 0-29204), of our report,
dated March 2, 1999, on our audits of the financial statements of FIMI
Securities, Inc., and our report, dated June 4, 1999, on our audits of the
combined financial statements of Premier Financial Services, Inc., First
Institutional Marketing, Inc., and All Things Financial, Inc.
/s/ Andrew Shebay & Company, PLLC
Houston, Texas
June 10, 1999
