<PAGE>
================================================================================
THE SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: June 30, 2000
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO __________
Commission File No. 0-16472
COMC, INC.
(Exact Name of Registrant as Specified in its Charter)
Illinois 95-4628378
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2840 Howe Road, Suite D
Martinez, California 94553
----------------------------------------
(Address of principal executive offices)
(925) 335-4000
---------------------------
(Issuer's telephone number)
Check whether the issuer 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
has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
As of August 14, 2000, a total of 20,957,741 shares of
our common stock was issued and outstanding. Of this
number, 3,564,987 shares are held in treasury.
Transitional Small Business Disclosure Format. Yes / / No /X/
================================================================================
1
<PAGE>
Table of Contents
10QSB
PART I................................................................2
Item 1................................................................2
Consolidated Balance Sheets......................................2
Consolidated Balance Sheets......................................3
Consolidated Statement of Operations.............................4
Consolidated Statement of Cash Flows.............................5
Item 2................................................................6
Part II...............................................................9
Item 1................................................................9
Item 2................................................................9
Item 3................................................................9
Item 4................................................................9
Item 5................................................................9
Item 6................................................................9
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
COMC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------------- ---------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,864,700 $ 385,100
Accounts receivable, net of allowance for doubtful accounts
of $247,771 and $273,100, respectively 7,779,000 4,521,400
Inventories 185,000 194,000
Prepaid expenses and other current assets 131,900 34,900
Loans receivable from officer 150,400 -
Deferred income taxes 213,500 213,500
-------------- ---------------
TOTAL CURRENT ASSETS 16,324,500 5,348,900
PROPERTY AND EQUIPMENT, Net 671,100 561,200
OTHER ASSETS 339,200 368,900
-------------- ---------------
TOTAL ASSETS $17,334,800 $ 6,279,000
============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank borrowings $ 1,210,000 $ 879,200
Accounts payable 2,015,500 648,000
Accrued liabilities 974,800 572,800
Current portion of long-term debt 10,500 10,500
Customer deposits 8,768,200 -
Accrued interest - Related party - 30,100
Income taxes payable 335,000 270,000
Other current liabilities - 19,800
-------------- ---------------
TOTAL CURRENT LIABILITIES 13,314,000 2,430,400
-------------- ---------------
LONG-TERM DEBT, net of current portion 15,400 20,400
NOTES PAYABLE TO SHAREHOLDERS 750,000 3,500,000
DEFERRED INCOME TAXES 89,500 89,500
-------------- ---------------
TOTAL LIABILITIES 14,168,900 6,040,000
-------------- ---------------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; authorized - 40,000,000 shares
authorized, 21,193,991 and 20,054,946 shares issued and 211,900 194,000
outstanding, respectively
Additional paid-in capital 14,692,700 12,918,100
Accumulated deficit (9,486,400) (11,093,600)
Treasury Stock (2,252,300) (1,779,800)
-------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 3,165,900 238,700
-------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 17,334,800 $ 6,279,000
============== ===============
- -
</TABLE>
3
See accompanying notes to consolidated financial statements.
<PAGE>
COMC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months ended Six Months Ended
June 30th, June 30th,
------------------------------ ------------------------------
2000 1999 2000 1999
-------------- --------------- -------------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES
Data and Voice services $ 7,216,100 $ 3,569,400 $ 12,370,900 $ 7,415,700
Recruiting services 699,200 1,229,300 1,497,100 2,497,300
-------------- --------------- -------------- ---------------
Total Revenues
7,915,300 4,798,700 13,868,000 9,913,000
COSTS AND EXPENSES:
Cost of revenues - Data and Voice services 4,199,500 2,311,800 6,804,800 5,016,700
Cost of revenues - Recruiting services 438,000 896,100 966,500 1,841,100
-------------- --------------- -------------- ---------------
4,637,500 3,207,900 7,771,300 6,857,800
-------------- --------------- -------------- ---------------
Gross profit 3,277,800 1,590,800 6,096,700 3,055,200
-------------- --------------- -------------- ---------------
Selling, general and administrative - Consolidated 1,768,300 1,271,400 3,155,900 2,606,200
Amortization of goodwill - 139,000 - 278,100
Depreciation and amortization 70,000 52,400 126,000 103,800
-------------- --------------- -------------- ---------------
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 1,838,300 1,462,800 3,281,900 2,988,100
-------------- --------------- -------------- ---------------
INCOME FROM OPERATIONS 1,439,500 128,000 2,814,800 67,100
-------------- --------------- -------------- ---------------
OTHER INCOME (EXPENSE):
Interest income 102,200 2,100 104,400 3,700
Interest expense (115,100) (103,700) (274,700) (198,900)
Other, net (2,600) 200 (2,300) 3,100
-------------- --------------- -------------- ---------------
TOTAL OTHER INCOME (EXPENSE) (15,500) (101,400) (172,600) (192,100)
INCOME (LOSS) BEFORE INCOME TAXES 1,424,000 26,600 2,642,200 (125,000)
INCOME TAXES (555,000) (61,300) (1,035,000) (61,200)
-------------- --------------- -------------- ---------------
NET INCOME (LOSS) $ 869,000 $ (34,700) $ 1,607,200 $ (186,200)
============== =============== ============== ===============
NET INCOME (LOSS) PER SHARE - BASIC $ 0.051 $ $ 0.098 - $ (0.009)
============== =============== ============== ===============
NET INCOME (LOSS) PER SHARE - DILUTED $ 0.042 $ $ 0.081 - $ (0.009)
============== =============== ============== ===============
SHARES USED IN PER-SHARE CALCULATION - BASIC 16,929,279 20,054,946 16,382,891 20,054,946
============== =============== ============== ===============
SHARES USED IN PER-SHARE CALCULATION - DILUTED 20,461,967 20,054,946 19,747,780 20,054,946
============== =============== ============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
COMC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30th
-------------------------------------
2000 1999
----------------- ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,607,200 $ (186,200)
Adjustments to reconcile net (loss) to net cash provided by
operating activities:
Depreciation and amortization 186,300 381,900
Allowance for doubtful accounts (25,300) -
Loss on disposition of capital equipment 2,200 -
Changes in operating assets and liabilities:
Accounts receivable (3,232,300) 27,200
Inventories 9,000 (72,000)
Prepaid expenses and other current assets (97,000) (50,700)
Accounts payable and accrued expense 1,769,500 186,600
Income taxes payable 65,000 (278,700)
Customers' deposits 8,768,200 -
Other current liabilities (19,800) -
Accrued interest due related party (30,100) -
----------------- ------------------
Net Cash Provided By Operating Activities 9,002,900 8,100
----------------- ------------------
Cash Flows From Investing Activities:
Sale of property and equipment 1,000 -
Deposit (45,500) (18,300)
Loans receivable from officers (150,400) (5,000)
Purchase of property and equipment (224,200) (34,600)
----------------- ------------------
Net Cash Used in Investing Activities: (419,100) (57,900)
----------------- ------------------
Cash Flows From Financing Activities:
Bank overdraft - (69,400)
Advances from bank loans and other credit institutions 330,800 -
Payment for long-term debt and notes payable (2,755,000) (13,100)
Sales of common stock 1,792,500 -
Repurchase of common stock (472,500) -
----------------- ------------------
Net Cash Used In Financing Activities (1,104,200) (82,500)
----------------- ------------------
Net Increase (Decrease) in Cash and Cash Equivalent 7,479,600 (132,300)
Cash and Cash Equivalents, Beginning of period 385,100 1,018,500
----------------- ------------------
Cash and Cash Equivalents, End of period $ 7,864,700 $ 886,200
================= ==================
Cash Paid For:
Interest $ 274,700 $ 198,859
Income Taxes $ 947,000 $ -
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
COMC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The interim consolidated financial statements presented have been
prepared by COMC, Inc. (the "Company") without audit and, in the opinion of the
management, reflect all adjustments of a normal recurring nature necessary for a
fair statement of (a) the results of operations for the three and six months
ended June 30, 2000 and 1999, (b) the financial position at June 30, 2000 and
(c) the cash flows for the six months ended June 30, 2000 and 1999. Interim
results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 1999 has
been derived from the consolidated financial statements that have been audited
by the Company's independent public accountants. The consolidated financial
statements and notes are condensed as permitted by Form 10-QSB and do not
contain certain information included in the annual financial statements and
notes of the Company. The consolidated financial statements and notes included
herein should be read in conjunction with the financial statements and notes
included in the Company's 1999 Annual Report on Form 10-KSB filed on April 27,
2000, Form 8-K's filed on February 25, 2000, March 30, 2000, March 29, 2000, and
April 14, 2000, Form 10QSB filed on April 16, 2000, and Form SB-2 Registration
Statements filed on June 9, 2000, which became effective June 29, 2000.
Item 2. Management Discussion and Analysis of Financial Condition and Results of
Operations
This report contains certain statements of a forward-looking nature
relating to future performance of the Company. Prospective investors are
cautioned that such statements are only predictions, and actual events or
results may differ materially.
Overview
The Company is a technology service company in the telecommunications
industry with a rapidly expanding national geographic service coverage area. We
design, implement, support and manage LAN/WAN computer network systems, voice
communication network systems, and premise wiring for both data and voice. In
addition, we distribute and maintain equipment on behalf of major
telecommunication equipment manufacturers. Service-related revenues, maintenance
and client outsourcing services, through our wholly owned subsidiary, ICF
Communication Solutions, Inc. ("ICF"), which now represents 100% of our total
revenues. Our gross margin varies significantly depending on the percentage of
service revenues versus revenues from the sale and installation of products
(with respect to which we obtain a lower margin). For our major customers, we
typically provide services under contracts with duration of one or more years.
In addition to the services described above, our Recruitment Services
division provides our customers with permanent and temporary technical
professional recruitment and placement services to fill their internal staffing
needs.
Our assets are our employees. Our investments are in our employees. In
further recognition of this, we have improved our employee benefits and training
programs in the current year. We have recently created an in-house training
institute to further the education and certification of our technical, sales and
managerial personnel specific to cable, voice and data systems, time management,
total quality management and leadership.
While we do not design or take the research and development risk borne
by the manufacturers of the equipment we service, we continue to invest in the
latest training and certification for the networks we support. Specifically for
data, we support products designed by Cisco Systems, Inc., Lucent Technologies,
6
<PAGE>
Inc., Bay Networks (a division of NorTel Networks) and 3Com. For voice products,
we support products designed by Lucent Technologies, Inc. and NorTel Networks,
Inc.
Under an acquisition and consolidation strategy, we intend to build our
operations and to expand our presence primarily in high growth markets of the
United States.
Results of Operations:
Dollars in Thousands Quarter ended June 30 Six Months ended June 30
--------------------
2000 1999 2000 1999
---- ---- ---- ----
Net Revenues
------------
Data & Voice Services $7,216 $3,569 $12,371 $7,416
Recruitment Services $ 699 $1,229 $ 1,497 $2,497
-------------------- ------ ------ ------- ------
Total Revenues $7,915 $4,799 $13,868 $9,913
Our revenues were $7,915,269 and $4,798,700 for the three months ended
June 30, 2000 and 1999, respectively, representing an increase of 64%. This
increase was due primarily to a 102% increase in Data and Voice Services revenue
for the period, offset by a 43% decline in Recruitment Services revenue.
Compared with the first quarter ended March 31, 2000 revenue of $5,952,742, our
second quarter revenue increased 32%. Data and Voice Services continued to
benefit from a number of new client project billings, as well as significant
period project work relating to one of our larger existing clients. Recruitment
Services revenue continued to decline due to a tightening of the labor market,
which has effected our ability to identify qualified professionals for our
clients in the period.
For the six months ended June 30, 2000 and 1999, our revenues were
$13,868,011 and $9,913,000, respectively, representing a 39% increase. This
increase was due primarily to a 66% increase in Data and Voice Services revenue
for the period, offset by a 40% decline in Recruitment Services revenue.
<TABLE>
<CAPTION>
Dollars in Thousands Quarter ended June 30 Six Months ended June 30
--------------------
Gross Gross Gross Gross
Profit Profit Profit Profit
2000 Margin 1999 Margin 2000 Margin 1999 Margin
---- ------ ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross Profits
-------------
Data & Voice Services $ 3,017 41.8% $1,257 35.2% $5,566 44.9% $2,399 32.2%
Recruitment Services $ 261 37.3% $ 333 27.1% $ 530 35.4% $ 656 26.2%
--------------------- ------- ------ ------ ------
Total Gross Profits $3,278 41.4% $1,590 33.1% $6,096 43.9% $3,055 30.8%
</TABLE>
Cost of revenues was $4,637,500 and $3,207,900 for the three months
ended June 30, 2000 and 1999, respectively, representing an increase of 44%.
Conversely, our Gross Profit for the comparable periods was $3,277,800 and
$1,590,800, respectively, representing an increase of 106%. Gross profit and
margin for Data and Voice Services were $3,016,600 and 41.8%, respectively, for
the three months ended March 31, 2000 as compared with $1,257,600 and 35.2%,
respectively, for the three months ended March 31, 1999. The increase in margin
was due to more favorable pricing on services, more efficient management of
technical labor and lower comparable product sales, which typically carry a much
lower gross profit margin. Gross profit and margin for Recruitment Services were
$261,200 and 37.1%, respectively for the three months ended March 31, 2000 as
compared with $333,200 and 27.1%, respectively for the three months ended March
31, 1999. The increase in margin was due to a higher percentage of permanent
placement revenue as compared to the prior period, which had significantly
higher margin.
Selling, general and administrative ("SG&A") expenses increased 39%
from $1,271,400 for the three months ended March 31, 1999 to $1,768,30 for the
three months ended March 31, 2000 in light of revenue growth of 16%. This
compares with $1,387,600 of similar expense in the previous quarter ended March
31, 2000, or an increase of 27%. The increase was due to a planned expansion of
our sales and
7
<PAGE>
marketing team company-wide, as well as the development of an in-house training
institution and staff in the current quarter. These increases are anticipated to
be permanent in nature.
Also included in our SG&A expenses are our holding company expenses,
which increased by $116,000 from $112,600 for the three months ended March 31,
1999 to $228,600 for the three months ended March 31, 2000. Our prior quarter
holding company expenses were $194,900 for the period ended March 31, 2000. SG&A
expenses for ICF's operations increased from $1,158,700 for the three months
ended March 31, 1999 to $1,539,700 for the three months ended March 31, 2000.
Depreciation expenses were $57,000 and $52,400 for the three months
ended June 30, 2000 and 1999, respectively. This slight increase was due to the
purchase additional field service and new office equipment. We expect that
depreciation will continue to increase in dollar terms as a result of additional
investments in capital equipment required to support the anticipated growth in
our business.
Amortization expense relating to goodwill was $13,000 and $139,100 for
the three months ended June 30, 2000 and 1999, respectively. The reduction of
goodwill amortization in 2000 was primarily due to the write-off of goodwill in
the fiscal year ended December 31, 1999. In December 1999, under the guidelines
of Statement of Financial Accounting Standards No. 121, we assessed the
recoverability of certain of our long-lived assets, namely goodwill. We
estimated the fair value of our goodwill based on comparable assets within the
industry, our economic outlook and discounted future cashflows. These procedures
resulted in the determination that the aforementioned asset had been permanently
impaired, and a charge to earnings of $10,382,300 resulted in 1999 with the
write-off of all of our amortizable goodwill. The $13,000 of amortization
related to capitalized expenses associated with the restructuring of notes in
1999.
<TABLE>
<CAPTION>
Dollars in Thousands Quarter ended June 30 Six Months ended June 30
--------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings Before Interest, Tax,
Depreciation and Amortization $1,510 $319 $2,941 $449
</TABLE>
Earnings before interest expense, income tax, depreciation and
amortization expenses ("EBITDA") increased by 373% to $1,509,500 for the three
months ended June 30, 2000 from $319,400 for the three months ended June 30,
1999. For the six months ended June 30, 2000 EBIT increased 550% to $2,940,800
from $449,000 in the comparable six month period ended June 30, 1999.
Interest Income increased from $2,100 for the three months ended June
30, 1999 to $102,200 for the three months ended June 30, 2000 due to
significantly higher average daily cash balances, with earned interests rates
remaining relatively constant throughout the comparable periods.
Interest Expense increased for the three months ended June 30, 2000 to
$115,100 from $103,700 for the three months ended June 30, 1999, due to
increased borrowing of our working capital line of credit which was utilized to
accelerate the repayment of ICF's income tax liabilities relating to years prior
to 1998, as well as to fund the growth in our working capital.
Other Income (Expense) is comprised mostly of bank fees and charges
associated with our line of credit, offset by miscellaneous income for the
period, which resulted in an expense of $2,600 for the three months ended June
30, 2000, versus income of $200 for the three months ended June 30, 1999.
An Income Tax provision of $555,000 was taken for the three months
ended June 30, 2000 due to our increase in taxable income versus a year ago.
Net Income increased to $869,000, or $.042 per share, fully-diluted,
for the three months ended June 30, 2000 versus a Net Loss of $34,700 for the
three months ended June 30, 1999. This is a 17% increase over the first quarter
ended March 31, 2000 Net Income of $738,200.
8
<PAGE>
Liquidity and Capital Resources
Cash and cash equivalents increased to $7,864,700 at June 30, 2000
compared to $385,100 at December 31, 1999.
Cash Flows From Operating Activities: For the six months ended June 30,
2000, cash provided by operating activities was $9,002,900 which resulted
primarily from our net income for the first six months of $1,607,200, increased
by noncash charges of $163,200, decreased by our growth in operating assets of
$3,320,300 and increased by our growth in liabilities, primarily increases in
customer deposits, of $10,552,800.
Accounts receivables increased $3,232,300 due to greater activity in
the first six months of 2000 as well as overall growth in our business. Payables
and accruals increased $1,784,600 due to greater purchases and accrued payroll,
as well as an increase in customer deposits of $8,768,200.
Cash Flows From Investing Activities: For the six months ended June 30,
2000, net cash used for investing activities was $419,100 as a result of
$224,200 in new equipment and leasehold improvement purchases, $150,400 in a
bridge loan to an officer, and deposit increases of $45,500, offset by asset
sales $1,000.
Cash Flows From Financing Activities: For the six months ended June 30,
2000, net cash used from our financing activities was $1,104,200, due primarily
from the prepayment of Notes to Stockholders in the amount of $2,755,000 in the
second quarter, partially funded with our line of credit of ($330,800) and a
private sale of $1,320,000 worth of our common stock.
In September of 1999, ICF secured a $3 million Line of Credit facility
("Line of Credit Facility") with Coast Business Credit, a division of Southern
Pacific Bank. This credit facility has a two-year term and all amounts borrowed
will accrue interest at 2% over the prime rate. The Line of Credit Facility is
secured by substantially all of ICF's assets and contains customary covenants
and restrictions. The Line of Credit Facility is being used to support working
capital and may be used to finance small acquisitions. Specific uses of the Line
of Credit Facility to date includes: (i) the payment of the balance of income
taxes due to the IRS and California Franchise Tax Board; (ii) the consolidation
of various notes payable; and (iii) various working capital purposes including
additional acquisition financing.
Our long-term liabilities include $750,000 in Related Party Notes
Payable. In consideration for the sale of ICF to us, the two principal owners of
ICF, William M. Burns and Charles E. Lincoln, received an aggregate of
$14,000,000, payable as follows: $1,500,000 in cash at the closing of the
transaction; $1,500,000 in promissory notes due and payable January 5, 1999,
secured by all of our accounts receivable; $1,000,000 in promissory notes due
and payable January 4, 1999; $1,000,000 in promissory notes due and payable
August 17, 1999; and 6,493,506 shares of our common stock valued at $9,000,000
or $1.386 per share. We were unable to pay off the January 4, 1999, and January
5, 1999, promissory notes as of their maturity dates. On August 10, 1999, we
entered into an agreement with the Messrs. Burns and Lincoln, to refinance these
notes with new notes under different terms and conditions. Specifically, we
agreed with Messrs. Burns and Lincoln to extend the term of each note to three
years, payable in full on the third anniversary (i.e., August 10, 2002).
Interest is accruing at 10% per annum on these Notes and is paid monthly. On
April 23, 2000, we prepaid the promissory notes due to Mr. Lincoln in full,
amounting to $1,750,000 plus accrued interest, in connection with the
termination of Mr. Lincoln's employment. On May 10, 2000, we partially prepaid
the promissory notes due to Mr. Burns in the amount of $1,000,000 plus accrued
interest, bringing the current total of Related Party Notes Payable to $750,000.
From April 17, 2000, through May 15, 2000, we raised approximately
$1,320,000 through a private placement of 1,320,000 shares of our common stock
and options to purchase 660,000 shares of our common stock for $1.00 per share
with various accredited investors (the "Investors"). The options are exercisable
at any time within the next five years. On April 26, 2000, some of the Investors
exercised options and purchased 472,500 shares of common stock under their
option agreements. In connection
9
<PAGE>
therewith, 236,250 shares of our common stock were surrendered to us at the
April 26, 2000 OTCBB closing price of $2.00 per share in a "cashless"
transaction and in full payment of the $472,500 due from exercise. Consequently,
only 236,250 shares of common stock were issued as a result of this exercise of
options. As of June 30, 2000, and based upon the above referenced transactions,
we have a total of 20,957,741 shares of common stock issued and outstanding, of
which 3,564,987 are held in Treasury.
Our net working capital at June 30, 2000 was a positive $3,010,500, an
increase of $92,000 over December 31, 1999. We believe that our current cash
flow from operations plus our present sources of liquidity from current assets,
and funds from the Line of Credit Facility, will be sufficient to finance
operations for the foreseeable future and meet our short-term obligations.
We are searching for merger and acquisition candidates that will expand
our existing markets in related products and services. We anticipated funding
acquisitions with a combination of additional bank debt, the issuance of
promissory notes to the sellers of the companies we acquire, and from the
private or public sale of additional equity securities.
We have depended on a few large customers for the majority of our
revenue to date. A loss of any one could have a material effect on our
liquidity. Due to the quality of our major customers, the collectability of
accounts receivable has not been a problem.
Year 2000 Compliance
We converted all of our information systems to be Year 2000 compliant.
During 1999, we incurred approximately $140,000 to complete the information
system conversions. To date, we have not incurred any complications or adverse
effects on our business from Year 2000 software failures.
10
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal proceedings
Not Applicable
Item 2. Changes in Securities
From April 17, 2000, through May 15, 2000, we raised approximately
$1,320,000 through a private placement of 1,320,000 shares of our common stock
and options to purchase 660,000 shares of our common stock for $1.00 per share
with various accredited investors (the "Investors"). The options are exercisable
at any time within the next five years. On April 26, 2000, some of the Investors
exercised options and purchased 472,500 shares of common stock under their
option agreements. In connection therewith, 236,250 shares of our common stock
were surrendered to us at the April 26, 2000 OTCBB closing price of $2.00 per
share in a "cashless" transaction and in full payment of the $472,500 due from
exercise. Consequently, only 236,250 shares of common stock were issued as a
result of this exercise of options. As of June 30, 2000, and based upon the
above referenced transactions, we had a total of 20,957,741 shares of common
stock issued and outstanding, of which 3,564,987 are held in Treasury.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
During a meeting of our Board of Directors that took place on March
27, 2000, our Board of Directors approved resolutions that, among other things,
authorized the following: (i) the sale of Two Million Six Hundred Twenty-five
Thousand Dollars worth of our common stock in a private placement, and (ii) the
termination of Mr. Lincoln's employment with the Company and the negotiation of
a settlement and mutual release agreement by and between the Company, ICF and
Mr. Lincoln. Our Board of Directors determined that the termination of Mr.
Lincoln was necessary due to differences in management styles between Mr.
Lincoln and our other officers and different visions for the future of the
Company.
On May 10, 2000, we entered into a Settlement and Release Agreement
with Mr. Lincoln. ICF was also a party to this agreement. This Settlement and
Release Agreement provided for, among other things: a) the termination of Mr.
Lincoln's Employment as our President and Chief Executive Officer and the
termination of our Employment Agreement with Mr. Lincoln; b) our agreement to
repay all amounts owing under our note made in favor of Mr. Lincoln in the
original principal amount of $1,750,000; c) our agreement to pay a lump sum of
$185,291.73 to Mr. Lincoln as an aggregate severance payment under Mr. Lincoln's
Employment Agreement; d) our agreement to pay for Mr. Lincoln's continued
participation in our health insurance and disability insurance programs to the
extent such programs were previously offered to Mr. Lincoln and continued
participation is permitted under such programs, until August 10, 2001; and e)
the mutual release of all claims that we or ICF has or may have against Mr.
Lincoln, and vice versa.
On May 11, 2000, Mr. Lincoln tendered his resignation as a member of
our Board of Directors, to be effective immediately. Mr. Lincoln's letter of
resignation does not state any reason for his resignation.
Effective as of May 18, 2000, our Board of Directors appointed Mr.
Smith as our CEO. At this time, Mr. Smith was also appointed as our President
until such time that our Board of Directors is able to locate a successor or a
new President is elected by our directors at the next meeting of our Board of
Directors, whichever occurs earlier.
11
<PAGE>
On June 9, 2000, we filed a Form SB-2 Registration Statement (the
"Registration Statement") with the Securities and Exchange Commission. The
Registration Statement concerned 17,386,456 shares of our common stock,
including 306,666 shares of our common stock issuable upon the exercise of
warrants and 3,752,487 shares of our common stock issuable upon the exercise of
options. The offering price for the shares registered under the Registration
Statement was $1.34 per share, or such other price as the holders of the shares
being registered shall determine. The Registration Statement was filed in order
to satisfy registration rights that the Company granted to those shareholders
identified in the Registration Statement as the "Registering Shareholders." The
Company will not receive any of the proceeds realized from the sale of the
common stock registered under the Registration Statement. However, the Company
will receive funds from the holders of warrants and options related to stock
included under the Registration Statement if and when such warrants and options
are exercised. By agreement with the Registering Shareholders, the Company paid
all of the expenses in connection with the Registration Statement, and the
registration of the shares covered thereby (other than underwriters' commissions
and discounts, if any). The Registration Statement became effective on June 29,
2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(1) Form of Stock Purchase Agreement, incorporated by reference to
our 10QSB filed May 16, 2000
(2) Form of Option Agreement, incorporated by reference to our 10QSB
filed May 16, 2000
(3) Form of Registration Rights Agreement, incorporated by reference
to our 10QSB filed May 16, 2000
(4) Settlement and Release Agreement, incorporated by reference to
our 10QSB filed May 16, 2000
(5) Letter of Resignation submitted by Charles E. Lincoln on May 11,
2000
(b) Reports on Form 8-K
On April 14, 2000, we filed a Form 8-K reporting the delay in the
filing of our annual report (Form 10-KSB) due to the changes of our accountants.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
COMC, INC.
By: /s/ Christopher Smith
------------------------
Christopher Smith, Chief Executive Officer,
President and Chief Financial Officer
Dated: August 14, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below as of August 14, 2000 by the following persons on behalf
of Registrant and in the capacities indicated.
/s/ Christopher Smith
-----------------------
(Principal Financial and Accounting Officer)
13
