SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission File No. 0-25007
FULLCOMM TECHNOLOGIES, INC.*
--------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 65-0655628
-------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
110 West Franklin Avenue, Pennington, New Jersey** 08534
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(609) 730-9900**
--------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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: X No:
----- -----
State the number of shares outstanding of each of the Issuer's classes of
common stock, as of August 1, 2000:
Class Number of Shares
----- ----------------
Common Stock, $.0001 par value 8,490,557
Transitional Small Business Disclosure Format (check one):
Yes: No: X
----- -----
---------------
* On June 20, 2000, the Registrant changed its name from "Contessa Corporation"
to "Fullcomm Technologies, Inc."
** On June 12, 2000, the Registrant relocated its principal executive office
from 11 Chambers Street, Princeton, New Jersey 08542 to 110 West Franklin
Avenue, Pennington, New Jersey 08534 and changed its telephone number from (609)
252-0657 to (609) 730-9900.
<PAGE>
FULLCOMM TECHNOLOGIES, INC. AND SUBSIDIARY
------------------------------------------
TABLE OF CONTENTS
-----------------
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements........................................... 1
CONDENSED CONSOLIDATED BALANCE SHEET
as of June 30, 2000 (unaudited), and December 31, 1999................. 2
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2000 and 1999,
For the Six Months Ended June 30, 2000, From Inception on
January 15, 1999 through June 30, 1999, and From Inception on
January 15, 1999 through June 30, 2000 (unaudited)..................... 3
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY (DEFICIT) From Inception on January 15, 1999 through
June 30, 2000 (unaudited).............................................. 4
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2000, From Inception on
January 15, 1999 through June 30, 1999, and From Inception on
January 15, 1999 through June 30, 2000 (unaudited)..................... 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)................................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Plan of Operation................................ 8
Liquidity and Capital Resources........................................ 10
Results of Operations.................................................. 12
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds...................... 13
Item 4. Submission of Matters to a Vote of Security Holders............ 13
Item 5. Other Information.............................................. 14
Item 6. Exhibits and Reports on Form 8-K............................... 15
SIGNATURES .......................................................... 16
- i -
<PAGE>
PART I. FINANCIAL INFORMATION.
------------------------------
ITEM 1. FINANCIAL STATEMENTS.
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission, although Fullcomm Technologies, Inc. (the
"Company") and its subsidiary Fullcomm, Inc., a Delaware corporation
("Fullcomm"), believe that the disclosures are adequate to assure that the
information presented is not misleading in any material respect.
The results of operations for the interim periods presented herein are not
necessarily indicative of the results to be expected for the entire year.
-1-
<PAGE>
FULLCOMM TECHNOLOGIES, INC. AND SUBSIDIARY
------------------------------------------
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- ------------
(unaudited)
ASSETS
------
<S> <C> <C>
Cash................................................................. $ 453,354 $ 1,439
Furniture and equipment, net of accumulated depreciation............. 13,475 14,594
Other................................................................ 4,670 1,917
----------- ----------
TOTAL ASSETS..................................................... $ 471,499 $ 17,950
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Accounts payable..................................................... $ 71,143 $ 57,168
Loan from shareholder................................................ -- 25,315
----------- ----------
Total Current Liabilities........................................ 71,143 82,483
----------- ----------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, 5,000,000 shares, $0.001 par value, authorized;
no shares issued................................................... -- --
Common stock, 20,000,000 shares, $0.0001 par value,
authorized; 8,372,624 and 4,584,250 shares issued
and outstanding, respectively...................................... 837 458
Capital in excess of par............................................. 2,050,891 249,778
Deficit accumulated during the development stage..................... (922,204) (314,769)
Deferred compensation................................................ (729,168) --
------------ ----------
Total Stockholders' Equity (Deficit)............................... 400,356 (64,533)
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)............... $ 471,499 $ 17,950
=========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-2-
<PAGE>
FULLCOMM TECHNOLOGIES, INC. AND SUBSIDIARY
------------------------------------------
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
----------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
From Inception From Inception
For the Three For the Three For the Six on January 15, on January 15,
Months Ended Months Ended Months Ended 1999 through 1999 through
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue....................... $ -- $ -- $ -- $ -- $ --
Operating Expenses:
General and administrative.. 335,844 16,207 498,322 23,277 795,107
Research and development.... 67,288 15,371 114,286 20,371 132,286
---------- ---------- ---------- ---------- ----------
Total Operating Expenses...... 403,132 31,578 612,608 43,648 927,393
Other income and expense:
Interest income............... 7,780 192 8,278 538 8,840
Interest expense.............. (842) -- (3,105) -- (3,651)
Net loss...................... $ (396,194) $ (31,386) $ (607,435) $ (43,110) $ (922,204)
========== ========== ========== ========== ==========
Basic and diluted net loss
per share..................... $ (0.05) $ (0.01) $ (0.09) $ (0.01)
========== ========== ========== ==========
Basic and diluted weighted
average
Number of shares outstanding... 8,367,679 4,500,000 7,061,489 4,500,000
========== ========== ========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-3-
<PAGE>
FULLCOMM TECHNOLOGIES, INC. AND SUBSIDIARY
------------------------------------------
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
------------------------------------------------------------------
FROM INCEPTION ON JANUARY 15, 1999 THROUGH JUNE 30, 2000 (unaudited)
--------------------------------------------------------------------
<TABLE>
<CAPTION>
Capital in Excess Accumulated Deferred
Common Stock of Par Value Deficit Compensation Total
------------ ----------------- ----------- ------------ -----
Shares Amount
------ ------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock..... 4,500,000 $ 450 $ 59,550 $ -- $ -- $ 60,000
Issuance of common stock for
cash......................... 517,624 52 1,090,184 -- -- 1,090,236
Issuance of common stock in
reverse merger............... 3,000,000 300 (300) -- -- --
Issuance of common stock for
consulting services.......... 350,000 35 874,965 -- (729,168) 145,832
Issuance of common stock for
stockholder's loan........... 5,000 -- 26,492 -- -- 26,492
Net loss..................... -- -- -- (922,204) -- (922,204)
--------- -------- ----------- ----------- --------- ---------
Balance at June 30, 2000..... 8,372,624 $ 837 $ 2,050,891 $ (922,204) $(729,168) $ 400,356
========= ======== =========== =========== ========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-4-
<PAGE>
FULLCOMM TECHNOLOGIES, INC. AND SUBSIDIARY
------------------------------------------
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
From Inception From Inception
For the Six on January 15, 1999 on January 15, 1999
Months Ended through through
June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------------- -------------------
<S> <C> <C> <C>
Cash flows used in operating activities:
Net loss........................................ $ (607,435) $ (43,110) $ (922,204)
Adjustments to reconcile net loss
to net cash used in operating activities:
Deferred compensation........................... 145,832 -- 145,832
Depreciation.................................... 1,119 89 1,197
Increase in operating assets:
Other........................................... (2,753) (1,424) (4,670)
Increase in operating liabilities:
Accounts payable................................ 13,975 -- 71,143
Accrued expenses................................ -- -- --
---------- ---------- ------------
Net cash used in operating activities........... (449,262) (44,445) (708,702)
---------- ---------- ------------
Cash flows from investing activity:
Purchase of furniture and equipment............. -- (1,960) (14,672)
---------- ---------- ------------
Cash flows provided by financing activity:
Proceeds from issuance of common stock.......... 900,000 60,000 1,150,236
Proceeds from note payable...................... 100,000 -- 100,000
Repayment of note payable....................... (100,000) -- (100,000)
Proceeds from loan from shareholder............. 1,177 -- 26,492
---------- ---------- ------------
Cash flows provided by financing activities:.... 901,177 60,000 1,176,728
---------- ---------- ------------
Net increase in cash............................ 451,915 13,595 453,354
Cash at beginning of period..................... 1,439 -- --
---------- ---------- ------------
Cash at end of period........................... 453,354 13,595 453,354
========== ========== ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-5-
<PAGE>
FULLCOMM TECHNOLOGIES, INC. AND SUBSIDIARY
------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. 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 such rules and
regulations.
In the opinion of the Company's management, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting solely of
those which are of a normal recurring nature, necessary to present fairly its
financial position as of June 30, 2000, the results of its operations for the
three months ended June 30, 2000 and 1999, the results of its operations and
cash flows for the six months ended June 30, 2000 and for the period from
inception on January 15, 1999 through June 30, 1999 and its operations and cash
flows for the period from inception on January 15, 1999 through June 30, 2000.
Interim results are not necessarily indicative of results for the full
fiscal year.
On June 20, 2000, the Company changed its name from Contessa Corporation to
Fullcomm Technologies, Inc.
Fullcomm, a wholly-owned subsidiary of the Company, was incorporated on May
13, 1999 and is the successor entity to Fullcomm, L.L.C., a New Jersey limited
liability company, which was formed on January 15, 1999. This transfer was
accounted for at historical cost in a manner similar to a pooling of interest
with the recording of net assets acquired at their historical book value.
The Company is a development stage company that was organized to
commercially exploit technology developed in connection with the secure
transmission of digital media and other data on the Internet.
NOTE 2 - LOSS PER SHARE
Basic loss per common share is computed by dividing the loss by the
weighted average number of common shares outstanding during the period. During
the period from January 15, 1999 through June 30, 1999, there were no dilutive
securities outstanding. During the three months and six months ending June 30,
2000, shares to be issued upon the exercise of options and warrants are not
included in the computation of loss per share as their effect is anti-dilutive.
-6-
<PAGE>
NOTE 3 - SIGNIFICANT EVENTS
On January 21, 2000, Fullcomm entered into a loan agreement with South Edge
International Limited providing for a loan in the aggregate amount of $100,000.
The loan was evidenced by a promissory note bearing interest at the rate of
10.5% per annum. This loan was repaid on April 6, 2000.
On January 28, 2000, the Company consummated a merger with Fullcomm, Inc.,
a New Jersey corporation ("Old Fullcomm"). The Company issued 4,601,100 shares
of Common Stock for all of the outstanding capital of Old Fullcomm. Pursuant to
the merger, the shareholders of Old Fullcomm acquired majority control of the
Company. For accounting purposes, the merger has been treated as a
recapitalization of the Company with Old Fullcomm as the acquirer (reverse
acquisition). The merger was completed on March 1, 2000.
In connection with the merger, the Company entered into two separate
advisory agreements. Pursuant to the agreements, the Company issued 350,000
restricted shares of its Common Stock.
On March 28, 2000, the Company consummated a private placement with twelve
investors pursuant to which such investors purchased an aggregate of 416,000
restricted shares of the Company's Common Stock, at a price per share of $2.50,
for an aggregate purchase price of $1,040,000. The Company paid placement fees
totaling $140,000 and received net proceeds from the placement of $900,000. In
connection with such private placement, the Company became obligated to
compensate RK Grace & Company, as its placement agent ("RK Grace"), and Grace
Securities, Inc., as its consultant ("Grace"). On April 28, 2000, RK Grace and
Grace agreed to reduce certain aspects of their respective fees relating to such
private placement and Merger. Subsequent to the end of the quarter, on July 21,
2000, the Company issued to (i) RK Grace and its designees an aggregate of
41,600 common stock purchase warrants at an exercise price of $2.75 per share
and to RK Grace an aggregate of 118,433 restricted shares of its Common Stock
and (ii) Grace an aggregate of 58,333 common stock purchase warrants at an
exercise price of $2.75 per share.
On June 30, 2000, the Company issued 5,000 shares of restricted common
stock of the Company as repayment for a shareholder loan aggregating $26,492.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN
OF OPERATION.
OVERVIEW
History and Organization
Fullcomm Technologies, Inc. (the "Company") was formed on March 7, 1996
under the name "United Health Management, Inc." to operate as a managed health
care provider. On September 16, 1997, the board of directors of the Company
changed the business of the Company to that of a holding company and
subsequently changed the name of the Company to "Contessa Corporation."
Thereafter, on June 20, 2000, pursuant to the Merger (as described below) the
Company changed its name to "Fullcomm Technologies, Inc." During September 1997,
the Company acquired all of the issued and outstanding shares of capital stock
of Gastronnomia Bocca Di Rosa, Inc. ("GBDR"), a Florida corporation, in order to
make GBDR the basis of its restaurant operations. After the development of the
Company's restaurant business proceeded behind schedule, the Company decided to
abandon its restaurant development efforts. Thereafter, on February 23, 2000,
after several contingencies and conditions were satisfied, the Company disposed
of its interest in GBDR and redeemed its shares of common stock which were
issued as consideration for GBDR.
On January 28, 2000, the Company entered into an Agreement and Plan of
Merger that was amended and restated by an Amended and Restated Agreement and
Plan of Merger (the "Merger Agreement") by and among Fullcomm, Inc., a New
Jersey corporation and the successor entity to Fullcomm, L.L.C., a New Jersey
limited liability company ("Old Fullcomm"), Fullcomm Acquisition Corp.
("Fullcomm"), a Delaware corporation and wholly-owned subsidiary of the Company
and the principal stockholders of the Company and Old Fullcomm (the "Merger").
Pursuant to the Merger Agreement, Old Fullcomm was merged with and into Fullcomm
with Fullcomm continuing as the surviving entity under the name "Fullcomm, Inc."
and remaining a wholly-owned subsidiary of the Company. The Merger was completed
on March 1, 2000.
Business of the Company
The business of the Company is currently operated through Fullcomm. The
primary business of the Company is to commercially exploit technology developed
in connection with the secure transmission of digital media and other data on
the Internet. The Company's technology combines client-side security hardware,
server-side security software and authentication party software in order to
facilitate the secure transmission of any and all digital data via the Internet.
The Company is a development stage enterprise. The Company has devoted the
majority of its efforts to research and development, prototype development,
production scheduling, sourcing inventory and its marketing program, acquiring
additional equipment, hiring management talent, inventory and working capital.
These activities have been funded by the Company's management and through the
private placements of its common stock. The Company has not yet generated any
revenues to fund its ongoing operating expenses, repay outstanding indebtedness
or entirely fund its research and product development activities. There can be
no
-8-
<PAGE>
assurance that development of the Company's products will be completed and fully
tested in a timely manner and within the budget constraints of management. In
addition, there can be no assurance that the Company's marketing research will
provide a profitable path to utilize the Company's marketing plans. The Company
believes that further investments into its technology and marketing research
will reduce the cost of development, preparation and processing of purchases and
orders by enabling the Company to effectively compete in the electronic market
place.
The Company has completed a detailed schematic of its hardware device. The
device, in conjunction with proprietary server-side software, client-side
software and authentication party software is expected to achieve data
protection while in transit and data protection from duplication at the
consumers' personal computer. The device will have two distinct modes of
operational security. The first mode will feature security in which copyright
protection is the major concern. In this mode, a user would be able to view
data, but would be barred from duplicating such data. The second mode supports
information sharing over public and private networks and allows authorized users
to access and manipulate data files which have been decrypted at the hardware
device.
On May 30, 2000, the Company entered into an agreement with Intrinsix
Corporation ("Intrinsix"), a Westboro, Massachusetts-based design center with a
branch office located in Hazlet, New Jersey. Pursuant to the agreement,
Intrinsix will develop a proof-of-concept prototype, expected to be delivered in
the fourth quarter of 2000. The Company intends to commence Beta-testing of the
proof-of-concept prototype upon delivery by Intrinsix. The Company estimates
that Beta testing will take four to six months. The Company expects that work
will begin on the end product upon completion of such Beta-testing.
The Company is currently looking for beta test sites that will verify the
proof-of-concept prototype in a practical applications environment. The size,
location, and industry of the beta site has yet to be determined by the Company.
The Company intends to identify potential beta sites and enter into an agreement
for one or more beta sites before the end of the third quarter of this year.
The Company has entered into a letter of intent with Creative Web
Solutions, Inc. ("CWS"), a subsidiary of Bradmark, Inc., a Houston, Texas-based
Internet/Network Security Applications distributor that provides technically
advanced security solutions to Fortune 500 and 1000 companies. Under the letter
of intent, CWS will market the Company's initial product for the
business-to-business applications sector.
The Company anticipates revenues to be generated from licensed technology
products, transaction fees and information services delivered over the Internet,
private Intranets or other networks. The Company expects that its online
security system will be used to facilitate the distribution of information over
the Internet, including music, movies and television programming, books,
newspapers and periodicals, software, voice communication and other areas of
e-commerce, including financial transactions. The Company also expects that its
technology will be used to secure wireless voice and data transmission.
-9-
<PAGE>
The Company expects to license its technology to future business partners
in order to build digital commerce services and applications. The Company also
intends to leverage such business partners' activities as they bring in their
business partners and customers. While the Company expects to receive initial
license fees from such business partners, the Company believes that its revenues
will eventually be derived primarily from transaction fees resulting from such
partners' and their customers' commercial deployment of the Company's
applications and services.
Employees
The Company currently has five employees. In the near future, the Company
anticipates the hiring of clerical, sales and marketing, and technical staff.
Safe Harbor Statement
Certain statements included in this Form 10-QSB, including, without
limitation, statements regarding the anticipated growth in the markets for the
Company's services, the continued development of the Company's technology, the
anticipated longer term growth of the Company's business, and the timing of the
projects and trends in future operating performance, are forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. Such forward looking statements may be identified by, and
among other things, the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy that involve risks and uncertainties. The factors discussed herein and
others expressed from time to time in the Company's filings with the Securities
and Exchange Commission could cause actual results and developments to be
materially different from those expressed in or implied by such statements.
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Company's cash balance was $453,354 and working capital was $382,211 at
June 30, 2000.
As of June 30, 2000, the Company had a tax loss carry-forward of $922,204
to off-set future taxable income. There can be no assurance, however, that the
Company will be able to take advantage of any or all of such tax loss
carry-forward, if at all, in future fiscal years.
Financing Needs
To date, the Company has not generated any revenues. The Company has not
been profitable since inception, may incur additional operating losses in the
future, and may require additional financing to continue the development and
commercialization of its technology. While the Company does not expect to
generate significant revenues from the sale of products in the near future, the
Company may enter into licensing or other agreements with marketing and
distribution partners that may result in license fees or other related revenue.
-10-
<PAGE>
The Company expects its capital requirements to increase significantly over
the next several years as it commences new research and development efforts,
undertakes new product developments, increases its sales and administration
infrastructure and embarks on developing in-house business capabilities and
facilities. The Company's future liquidity and capital funding requirements will
depend on numerous factors, including, but not limited to, the levels and costs
of the Company's research and development initiatives and the cost and timing of
the expansion of the Company's sales and marketing efforts.
On January 21, 2000, Fullcomm entered into a loan agreement with South Edge
International Limited providing for a loan in the aggregate amount of $100,000.
The loan was evidenced by a promissory note bearing interest at the rate of
10.5% per annum. This loan was repaid by the Company on April 6, 2000.
On March 28, 2000, the Company consummated a private placement of its
common stock with twelve investors pursuant to which such investors purchased an
aggregate of 416,000 restricted shares of the Company's common stock, $0.0001
par value ("Common Stock"), at a price per share of $2.50, for an aggregate
purchase price of $1,040,000. The Company paid placement fees totaling $140,000
and received net proceeds from the placement of $900,000. In connection with
such private placement, the Company became obligated to compensate R.K. Grace &
Company, as its placement agent ("RK Grace") and Grace Securities, Inc. as its
consultant ("Grace"). On April 28, 2000, RK Grace and Grace agreed to reduce
certain aspects of their respective fees relating to such private placement and
Merger. Subsequent to the end of the quarter, on July 21, 2000, the Company
issued to (i) RK Grace and its designees an aggregate of 41,600 common stock
purchase warrants at an exercise price of $2.75 per share and to RK Grace an
aggregate of 118,433 restricted shares of its Common Stock and (ii) Grace an
aggregate of 58,333 common stock purchase warrants at an exercise price of $2.75
per share.
On June 30, 2000, the Company issued 5,000 shares of restricted common
stock of the Company as repayment for a shareholder loan aggregating $26,492.
The Company anticipates that it will be able to fund operations through
September 30, 2000. However, in order to fund its research and development and
commercialization efforts, including hiring of additional employees, it will be
necessary for the Company to seek to raise additional capital through the
issuance of securities of the Company during the third quarter of 2000. The
Company currently does not have any formal agreement or understanding with any
third party regarding any such offering of securities, and there can be no
assurance that any such offering will, in fact, occur or be consummated. It is
likely that the current stockholders will experience significant and immediate
dilution in their current ownership due to the issuance of such securities.
Additional financing will be required thereafter which may, if and when
consummated by the Company, cause further dilution of ownership.
-11-
<PAGE>
RESULTS OF OPERATIONS
Six Months Ended June 30, 2000 and 1999
---------------------------------------
The Company is a development stage company and revenues for the each of the
quarters ended June 30, 2000 and June 30, 1999 was zero. Operating expenses
consist of general and administrative expenses and research and development
expenses. Operating expenses during the six months ended June 30, 2000 and the
period from inception on January 15, 1999 through June 30, 1999 were $612,608
and $43,648, respectively, an increase of $568,960, or 1,304%.
General and administrative expenses consist primarily of professional
salaries and benefits, depreciation and amortization, professional and
consulting services, office rent and corporate insurance. General and
administrative expenses during the six months ended June 30, 2000 and the period
from inception on January 15, 1999 through June 30, 1999 were $498,322 and
$23,277, respectively, an increase of $475,045, or 2,041%. The increase in
general and administrative expenses, resulted primarily from a significant
increase in operating activities.
Research and development expenses consist of professional salaries and
benefits and allocated overhead charged to research and development projects.
Research and development expenses during the six months ended June 30, 2000 and
the period from inception on January 15, 1999 through June 30, 1999 were
$114,286 and $20,371, respectively, an increase of $93,915, or 461%. The
increase in research and development expenses resulted primarily from a
significant increase in operating activities.
Period From Inception on January 15, 1999 through June 30, 2000
---------------------------------------------------------------
The Company is a development stage company. From inception through June 30,
2000, the Company had no revenues.
The Company has incurred losses each year since inception and has an
accumulated deficit of $922,204 at June 30, 2000. The Company expects to
continue to incur losses over, approximately, the next two to three years from
expenditures on research, product development, marketing and administrative
activities.
The Company does not expect to generate significant revenues from product
sales for, approximately, the next two to three years during which the Company
will engage in significant research and development efforts. However, the
Company may enter into licensing or other agreements with marketing and
distribution partners that may result in license fees and other related
revenues. No assurance can be given, however, that such research and development
efforts will result in any commercially viable products, or that any licensing
or other agreements with marketing and distribution partners will be entered
into and result in revenues. The Company's future success will depend on its
ability to transform its research and development activities into
commercializable products.
-12-
<PAGE>
PART II. OTHER INFORMATION.
---------------------------
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On March 28, 2000, the Company consummated a private placement of its
common stock with twelve investors pursuant to which such investors purchased an
aggregate of 416,000 restricted shares of the Company's Common Stock, at a price
per share of $2.50, for an aggregate purchase price of $1,040,000. The Company
paid placement fees totaling $140,000 and received net proceeds from the
placement of $900,000. In connection with such private placement, the Company
became obligated to compensate RK Grace, as its placement agent, and Grace, as
its consultant. On April 28, 2000, RK Grace and Grace agreed to reduce certain
aspects of their respective fees relating to such private placement and Merger.
Subsequent to the end of the quarter, on July 21, 2000, the Company issued to
(i) RK Grace and its designees an aggregate of 41,600 common stock purchase
warrants at an exercise price of $2.75 per share and to RK Grace an aggregate of
118,433 restricted shares of its Common Stock and (ii) Grace an aggregate of
58,333 common stock purchase warrants at an exercise price of $2.75 per share.
On June 30, 2000, the Company issued 5,000 shares of restricted common
stock of the Company as repayment for a shareholder loan aggregating $26,492.
No underwriter was employed by the Company in connection with the issuance
of the securities described above. The Company believes that the issuance of the
foregoing securities was exempt from registration under either (i) Section 4(2)
of the Securities Act of 1933, as amended (the "Act"), as transactions not
involving a public offering and such securities having been acquired for
investment and not with a view to distribution, or (ii) Rule 701 under the Act
as transactions made pursuant to a written compensatory benefit plan or pursuant
to a written contract relating to compensation. All recipients had adequate
access to information about the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Stockholders of the Company was held on June 20,
2000.
There were present at the meeting in person or by proxy stockholders
holding an aggregate of 5,775,409 shares of Common Stock. The results of the
vote taken at such meeting with respect to each nominee for director were as
follows:
Common Stock Nominees For Withheld
--------------------- --- --------
Brendan Elliott 5,775,409 0
Howard M. Weinstein 5,775,409 0
Wayne H. Lee 5,775,409 0
Richard T. Case 4,200,409 1,575,000
David Rector 5,775,409 0
-13-
<PAGE>
A vote was taken on the proposal to amend the Company's Certificate of
Incorporation to change the Company's name from "Contessa Corporation" to
"Fullcomm Technologies, Inc.". Of the shares present at the meeting in person or
by proxy, 5,775,409 shares were voted in favor of such proposal, no shares were
voted against such proposal and no shares abstained from voting.
A vote was taken on the proposal to adopt the Company's 2000 Stock Plan. Of
the shares present at the meeting in person or by proxy, 2,967,150 shares were
voted in favor of such proposal, no shares were voted against such proposal,
1,575,000 shares abstained from voting and there were 1,233,259 broker
non-votes.
Finally, a vote was taken on the proposal to ratify the appointment of
Goldstein Golub Kessler LLP as the independent accountants of the Company for
the fiscal year ending December 31, 2000. Of the shares present at the meeting
in person or by proxy, 4,200,409 shares were voted in favor of such proposal,
1,575,000 shares were voted against such proposal and no shares abstained from
voting.
ITEM 5. OTHER INFORMATION.
On May 22, 2000, Richard T. Case resigned from his position as the
Company's Chief Executive Officer. He had served in such capacity since January
2000.
On May 22, 2000, Howard M. Weinstein was appointed to serve as the
Company's new Chief Executive Officer. From 1989 to April 2000, Mr. Weinstein,
36, was employed by GE Industrial Systems, a division of General Electric, where
he held multiple roles in control engineering, engineering management, project
management and product and strategic marketing. Prior to that, Mr. Weinstein was
employed by Newport News Shipbuilding where he worked on instrumentation and
controls for nuclear propulsion systems for aircraft carriers and fast attack
submarines. Mr. Weinstein graduated from Virginia Tech in 1986 with a BS degree
in electrical engineering. On May 22, 2000, Howard M. Weinstein succeeded Mr.
Case as the Company's Chief Executive Officer.
On June 20, 2000, subsequent to the Company's Annual Meeting of
Stockholders, the Company's Board of Directors (the "Board") elected Patrick
O'Meara to the Board. Mr. O'Meara is the Senior Vice President of Private Client
Services of R.K.Grace & Company. He serves both institutional and individual
investors, managing public and private equity portfolios. Prior to joining R.K.
Grace & Company, from September 1999 to October 1999, Mr. O'Meara was employed
by Bear Stearns & Co. in Boston. From June 1997 to June 1999, Mr. O'Meara was
employed by Raymond James Financial in their Private Client Services Divisions.
Prior to that, from June 1995 to June 1997, Mr. O'Meara was employed by the
Archdiocese of Mobile, Alabama. Mr. O'Meara is a member of Legatus, a national
Catholic CEO organization. Mr. O'Meara has degrees in Philosophy and Theology
from Franciscan University of Steubenville.
-14-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
3.1 Certificate of Amendment to the Company's Certificate of
Incorporation
10.1 2000 Stock Plan of the Company.
27 Financial Data Schedule for the period ended June 30, 2000.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report on Form 10-QSB is filed.
-15-
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FULLCOMM TECHNOLOGIES, INC.
DATE: August 7, 2000 By: /s/ Howard M. Weinstein
------------------------------
Howard M. Weinstein,
Chief Executive Officer
(Principal Executive Officer)
DATE: August 7, 2000 By: /s/ Wayne H. Lee
------------------------------
Wayne H. Lee
Executive Vice President
(Principal Financial and Accounting Officer)
