SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Commission File No. 0-25007
FULLCOMM TECHNOLOGIES, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 65-0656268
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
110 West Franklin Avenue, Pennington, New Jersey 08534
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(Address of Principal Executive Offices) (Zip Code)
(609) 730-9900
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(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:
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State the number of shares outstanding of each of the Issuer's classes of
common stock, as of November 9, 2000:
Class Number of Shares
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Common Stock, $.0001 par value 8,583,189
Transitional Small Business Disclosure Format (check one):
Yes: No: X
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FULLCOMM TECHNOLOGIES, INC. AND SUBSIDIARY
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TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements........................................... 1
CONDENSED CONSOLIDATED BALANCE SHEET
as of September 30, 2000 (unaudited), and December 31, 1999............ 2
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 2000 and 1999,
For the Nine Months Ended September 30, 2000, From Inception on
January 15, 1999 through September 30, 1999, and From Inception on
January 15, 1999 through September 30, 2000 (unaudited)................ 3
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY (DEFICIT) From Inception on January 15, 1999 through
September 30, 2000 (unaudited)......................................... 4
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2000, From Inception on
January 15, 1999 through September 30, 1999, and From Inception on
January 15, 1999 through September 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 1. Legal Proceedings.............................................. 14
Item 2. Changes in Securities and Use of Proceeds...................... 14
Item 5. Other Information.............................................. 15
Item 6. Exhibits and Reports on Form 8-K............................... 17
SIGNATURES .......................................................... 18
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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.
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FULLCOMM TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
-----------------------------
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(unaudited)
ASSETS
------
<S> <C> <C>
Cash................................................................. $ 72,374 $ 1,439
Furniture and equipment, net of accumulated depreciation............. 12,969 14,594
Other................................................................ 10,906 1,917
----------- ----------
TOTAL ASSETS..................................................... $ 96,249 $ 17,950
=========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable..................................................... $ 2,119 $ 57,168
Accrued Expenses..................................................... 44,797 --
Loan Payable......................................................... 200,000 25,315
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Total Current Liabilities........................................ 246,916 82,483
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STOCKHOLDERS' 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; 8,583,189 and 4,584,250 shares issued
and outstanding, respectively...................................... 859 458
Capital in excess of par............................................. 2,160,869 249,778
Deficit accumulated during the development stage..................... (1,692,601) (314,769)
Deferred compensation................................................ (619,794) --
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Total Stockholders' Deficit........................................ (150,667) (64,533)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT........................ $ 96,249 $ 17,950
=========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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FULLCOMM TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
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(unaudited)
<TABLE>
<CAPTION>
From Inception From Inception
For the Three For the Three For the Nine on January 15, on January 15,
Months Ended Months Ended Months Ended 1999 through 1999 through
September 30, September 30, September 30, September 30, September 30,
2000 1999 2000 1999 2000
------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue....................... $ -- $ -- $ -- $ -- $ --
Operating Expenses:
General and administrative.. 288,213 151,333 786,535 174,610 1,083,320
Research and development.... 486,957 21,924 601,243 42,295 619,243
---------- ---------- ----------- ----------- -----------
Total Operating Expenses...... 775,170 173,257 1,387,778 216,905 1,702,563
Other Income and Expense:
Interest income............... 4,773 24 13,051 562 13,613
Interest expense.............. -- -- (3,105) -- (3,651)
Net loss...................... $ (770,397) $ (173,233) $(1,377,832) $ (216,343) $(1,692,601)
========== ========== =========== =========== ===========
Basic and diluted net loss
per share..................... $ (0.09) $ (0.04) $ (0.18) $ (0.05)
========== ========== =========== ===========
Basic and diluted weighted
average number of shares
outstanding................... 8,463,406 4,529,304 7,531,542 4,497,520
========== ========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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FULLCOMM TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
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FROM INCEPTION ON JANUARY 15, 1999 THROUGH SEPT. 30, 2000 (unaudited)
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<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........................... 517,124 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 -- (619,794) 255,206
Issuance of common stock for
stockholder's loan............. 5,000 1 26,491 -- -- 26,492
Issuance of common stock for
Placement and Merger Fees...... 118,433 12 (12) -- -- --
Issuance of common stock for
Services....................... 92,632 9 109,991 -- -- 110,000
Net loss....................... -- -- -- (1,692,601) -- (1,692,601)
--------- ------- ----------- ----------- --------- -----------
Balance at September 30, 2000.. 8,583,189 $ 859 $ 2,160,869 $(1,692,601) $(619,794) $ (150,667)
========= ======= =========== =========== ========= ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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FULLCOMM TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
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(unaudited)
<TABLE>
<CAPTION>
For the Nine From Inception From Inception
Months Ended on January 15, 1999 on January 15, 1999
September 30, through through
2000 September 30, 1999 September 30, 2000
------------- ------------------- -------------------
<S> <C> <C> <C>
Cash flows used in operating activities:
Net loss........................................ $ (1,377,832) $ (216,343) $ (1,692,601)
Adjustments to reconcile net loss
to net cash used in operating activities:
Deferred compensation........................... 255,206 -- 255,206
Stock Issued for Services....................... 110,000 -- 110,000
Depreciation.................................... 1,625 134 1,703
Increase (decrease) in operating assets:
Other........................................... (8,989) (1,423) (10,906)
Increase in operating liabilities:
Accounts payable................................ (55,049) -- 2,119
Accrued expenses................................ 44,797 -- 44,797
------------ ------------ ------------
Net cash used in operating activities........... (1,030,242) (217,632) (1,289,682)
------------ ------------ ------------
Cash flows from investing activity:
Purchase of furniture and equipment............. -- (1,961) (14,672)
------------ ------------ ------------
Cash flows provided by financing activity:
Proceeds from issuance of common stock.......... 900,000 250,236 1,150,236
Proceeds from notes payable..................... 500,000 -- 500,000
Repayment of notes payable...................... (300,000) -- (300,000)
Proceeds from loan from shareholder............. 1,177 -- 26,492
------------ ------------ ------------
Cash flows provided by financing activities:.... 1,101,177 250,236 1,376,728
------------ ------------ ------------
Net increase in cash............................ 70,935 30,643 72,374
Cash at beginning of period..................... 1,439 -- --
------------ ------------ ------------
Cash at end of period........................... $ 72,374 $ 30,643 $ 72,374
============ ============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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FULLCOMM TECHNOLOGIES, INC. AND SUBSIDIARY
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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 September 30, 2000, the results of its operations for
the three months ended September 30, 2000 and 1999, the results of its
operations and cash flows for the nine months ended September 30, 2000 and for
the period from inception on January 15, 1999 through September 30, 1999 and its
operations and cash flows for the period from inception on January 15, 1999
through September 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 September 30, 1999, there were no
dilutive securities outstanding. During the three months and nine months ending
September 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.
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NOTE 3 - SIGNIFICANT EVENTS
On August 4, 2000, the Company executed a $200,000 promissory note in favor
of Viking Investment Group II, Inc., a Delaware corporation ("Viking ") in
exchange for a loan in the amount of $200,000 (the "Principal Amount") from
Viking to the Company. The Note provided that interest on the Principal Amount
accrues at the rate of 10.5% per annum. The Principal Amount and all accrued
interest were payable upon the earlier of (i) August 3, 2001 or (ii) the
consummation of an equity or debt financing by the Company in an amount equal to
or greater than $200,000. This loan was repaid on August 16, 2000.
On August 16, 2000, the Company executed a $200,000 promissory note (the
"Note") in favor of Jenadosa Holdings, a British VI Corporation ("Jenadosa") in
exchange for a loan in the amount of $200,000 (the "Principal Amount") from
Jenadosa to the Company. The Note provides that interest on the Principal Amount
shall accrue at the rate of 10.5% per annum. The Principal Amount and all
accrued interest are payable upon the earlier of (i) August 3, 2001 or (ii) the
consummation of an equity or debt financing by the Company in an amount equal to
or greater than $200,000.
On September 29, 2000, the Company issued 92,632 shares of restricted
common stock of the Company as payment for certain amounts due by the Company to
Intrinsix Corporation totaling $110,000. The amount of shares was calculated by
the closing price on the day of issuance with a $.25 per share discount.
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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 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,
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
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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 and
is in the final stages of completing its prototype. The delivery date of the
completed prototype is expected in the fourth quarter. 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 concurrently with the Beta-testing. On September
29, 2000, the Company renegotiated its contract with Intrinsix for a fixed price
and the issuance to Intrinsix of 92,632 shares of restricted common stock of the
Company totaling $110,000.
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 sites have yet to be determined by the
Company. The Company, in conjunction with Bradmark, Inc., intends to identify
potential beta sites and enter into an agreement for one or more beta sites
before the end of the fourth 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, legal and
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medical records, 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.
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 four 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 $72,374 and working capitaldeficit was
$(174,542) at September 30, 2000.
As of September 30, 2000, the Company had a tax loss carry-forward of
$(1,692,601) 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
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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.
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 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. 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 August 4, 2000, the Company executed a $200,000 promissory note in favor
of Viking Investment Group II, Inc., a Delaware corporation ("Viking ") in
exchange for a loan in the amount of $200,000 (the "Principal Amount") from
Viking to the Company. The Note provided that interest on the Principal Amount
accrue at the rate of 10.5% per annum. The Principal Amount and all accrued
interest were payable upon the earlier of (i) August 3, 2001 or (ii) the
consummation of an equity or debt financing by the Company in an amount equal to
or greater than $200,000. This loan was repaid on August 16, 2000.
On August 16, 2000, the Company executed a $200,000 promissory note (the
"Note") in favor of Jenadosa Holdings, a British VI Corporation ("Jenadosa") in
exchange for a loan in the amount of $200,000 (the "Principal Amount") from
Jenadosa to the Company. The Note provides that interest on the Principal Amount
shall accrue at the rate of 10.5% per annum. The Principal Amount and all
accrued interest are payable upon the earlier of (i) August 3, 2001 or (ii) the
consummation of an equity or debt financing by the Company in an amount equal to
or greater than $200,000.
The Company anticipates that it will be able to fund operations through the
middle of the Fourth Quarter. 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 fourth
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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.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 2000 and 1999
---------------------------------------------
The Company is a development stage company and revenues for the each of the
quarters ended September 30, 2000 and September 30, 1999 was zero. Operating
expenses consist of general and administrative expenses and research and
development expenses. Operating expenses during the nine months ended September
30, 2000 and the period from inception on January 15, 1999 through September 30,
1999 were $1,387,778 and $216,905, respectively, an increase of $1,170,873, or
540%.
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 nine months ended September 30, 2000 and the
period from inception on January 15, 1999 through September 30, 1999 were
$786,535 and $174,610, respectively, an increase of $611,925, or 350%. 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 nine months ended September 30,
2000 and the period from inception on January 15, 1999 through September 30,
1999 were $601,243 and $42,295, respectively, an increase of $558,948, or
1,322%. The increase in research and development expenses resulted primarily
from a significant increase in operating activities.
Period From Inception on January 15, 1999 through September 30, 2000
--------------------------------------------------------------------
The Company is a development stage company. From inception through
September 30, 2000, the Company had no revenues.
The Company has incurred losses each year since inception and has an
accumulated deficit of $1,692,601 at September 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
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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.
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PART II. OTHER INFORMATION.
---------------------------
ITEM 1. LEGAL PROCEEDINGS.
On August 23, 2000, Richard Case, the former Chief Executive Officer of the
Company, notified the Company with respect to his claim for certain payments
relating to his employment/consulting agreement with the Company. On August 25,
2000, the Company received a letter of representation from Mr. Case's counsel in
connection with Mr. Case's claims. The Company disputes the position taken by
Mr. Case and is currently negotiating with Mr. Case to resolve such dispute.
While Mr. Case has not instituted a legal proceeding with respect to such
dispute, Mr. Case, through his counsel, has threatened to submit such dispute to
arbitration. In the event a legal proceeding with respect to such dispute is
initiated, the Company intends to vigorously defend such proceeding.
On October 31, 2000, the Company filed a police report relating to Howard
Weinstein, the former Chief Executive Officer of the Company, for theft of a
computer, cell phone and three hundred dollars in petty cash. In addition, on
November 1, 2000, the Company filed a complaint in the Superior court of New
Jersey, Chancery Division, Mercer County, naming Mr. Weinstein as a defendant.
The complaint alleges, among other things, that the defendant breached his
employment obligations to the Company and seeks injunctive relief with respect
to the return of Company property. Subsequent to the filing of the complaint, on
November 7, 2000, Mr. Weinstein returned the computer and three hundred dollars
in petty cash.
There is no other material litigation pending to which the Company is a
party or by which any of its property is subject.
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, $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. 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 September 29, 2000, the Company issued 92,632 shares of restricted
common stock of the Company as payment for certain amounts due by the Company to
Intrinsix Corporation
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totaling $110,000. The amount of shares was calculated by the closing price on
the day of issuance with a $.25 per share discount.
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 5. OTHER INFORMATION.
On August 4, 2000, the Company executed a $200,000 promissory note in favor
of Viking Investment Group II, Inc., a Delaware corporation ("Viking ") in
exchange for a loan in the amount of $200,000 (the "Principal Amount") from
Viking to the Company. The Note provided that interest on the Principal Amount
accrue at the rate of 10.5% per annum. The Principal Amount and all accrued
interest were payable upon the earlier of (i) August 3, 2001 or (ii) the
consummation of an equity or debt financing by the Company in an amount equal to
or greater than $200,000. This loan was repaid on August 16, 2000.
On August 16, 2000, the Company executed a $200,000 promissory note (the
"Note") in favor of Jenadosa Holdings, a British VI Corporation ("Jenadosa") in
exchange for a loan in the amount of $200,000 (the "Principal Amount") from
Jenadosa to the Company. The Note provides that interest on the Principal Amount
shall accrue at the rate of 10.5% per annum. The Principal Amount and all
accrued interest are payable upon the earlier of (i) August 3, 2001 or (ii) the
consummation of an equity or debt financing by the Company in an amount equal to
or greater than $200,000.
On September 14, 2000, Richard Case resigned as a member of the Board of
Directors (the "Board") of the Company. The resignation of Mr. Case did not
involve any disagreement with the Company on any matter relating to the
Company's operations, policies or practices. Mr. Case served as the Company's
Chief Executive Officer from January 2000 until May 2000, and had served as a
member of the Board since June 20, 2000. The resignation of Mr. Case reduced the
Company's Board to five members.
On September 29, 2000, the Company issued 92,632 shares of restricted
common stock of the Company as payment for certain amounts due by the Company to
Intrinsix Corporation totaling $110,000. The amount of shares was calculated by
the closing price on the day of issuance with a $.25 per share discount.
On October 31, 2000, Howard M. Weinstein resigned as the Chairman of the
Board, Chief Executive Officer and as a member of the Board of Directors (the
"Board") of the Company. Mr. Weinstein's resignation did not involve any
disagreement with the Company on
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any matter relating to the Company's operations, policies or practices and did
not request any matter to be disclosed. Mr. Weinstein served as the Company's
Chief Executive Officer from May 22, 2000 through October 31, 2000, and had
served as a member of the Board since June 20, 2000. Mr. Weinstein's resignation
from the Board reduces the Board to four members. As a result, there are
currently two vacancies on the Board.
As set forth in his letter of resignation dated October 31, 2000, Mr.
Weinstein claimed that his resignation was based upon his assertion that the
Company is currently in breach of, and would not be able to satisfy its future
obligations to him under, certain provisions of his employment agreement with
the Company, including payment of salary and bonuses. The Company believes that
it is not currently in breach of its obligations to Mr. Weinstein under Mr.
Weinstein's employment agreement.
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Promissory Note dated August 4, 2000 by and between the Company
and Viking Investment Group II, Inc.
10.2 Promissory Note dated August 16, 2000 by and between the Company
and Jenadosa Holdings.
27 Financial Data Schedule for the period ended September 30, 2000.
(b) Reports on Form 8-K.
On September 1, 2000, the Company filed a report on Form 8-K relating
to the Company's change of independent accountants on April 19, 2000
from Thomas P. Monahan to Goldstein Golub Kessler LLP.
On September 14, 2000, the Company filed a report on Form 8-K relating
to the resignation of Richard Case as a member of the Board of
Directors of the Company.
On November 7, 2000, the Company filed a report on Form 8-K relating
to the resignation of Howard Weinstein as Chief Executive Officer and
Chairman of the Board of the Company.
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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: November 13, 2000 By: /s/ Brendan G. Elliott
---------------------------------------------
Brendan G. Elliott,
President
(Principal Executive Officer)
DATE: November 13, 2000 By: /s/ Wayne H. Lee
---------------------------------------------
Wayne H. Lee
Executive Vice President
(Principal Financial and Accounting Officer)
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