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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: September 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 November 10, 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/
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<PAGE>
Table of Contents
10QSB
PART I................................................................2
Item 1................................................................2
Item 2................................................................2
Consolidated Balance Sheets......................................7
Consolidated Balance Sheets......................................8
Consolidated Statement of Operations.............................9
Consolidated Statement of Cash Flows............................10
Part II..............................................................11
Item 1...............................................................11
Item 2...............................................................11
Item 3...............................................................11
Item 4...............................................................11
Item 5...............................................................11
Item 6...............................................................12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. 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 nine months
ended September 30, 2000 and 1999, (b) the financial position at September 30,
2000 and(c) the cash flows for the nine months ended September 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 29, 2000, March 30, 2000, and
April 14, 2000, Form 10QSB filed on April 16, 2000, Form SB-2 Registration
Statements filed on June 9, 2000, which became effective June 29, 2000, and Form
10QSB filed on August 15, 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 an expanding 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"), 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,
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.
2
<PAGE>
Results of Operations:
Dollars in Thousands Quarter ended Nine Months ended
-------------------- September 30 September 30
2000 1999 2000 1999
---- ---- ---- ----
Net Revenues
------------
Data & Voice Services $8,536 $4,187 $20,907 $11,603
Recruitment Services $ 689 $1,221 $ 2,186 $ 3,718
-------------------- ------ ------ ------- -------
Total Revenues $9,225 $5,408 $23,093 $15,321
Our revenues were $9,225,400 and $5,408,100 for the three months ended
September 30, 2000 and 1999, respectively, representing an increase of 70.5%
This increase was due primarily to a 103% increase in Data and Voice Services
revenue for the period, offset by a 43% decline in Recruitment Services revenue.
Compared with the second quarter ended June 30, 2000 revenue of $7,915,300, our
third quarter revenue increased 16.5%. 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 remains flat with the previous quarter and down compared with
the comparable period in 1999 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 nine months ended September 30, 2000 and 1999, our revenues
were $23,093,500 and $15,321,100, respectively, representing a 50% increase.
This increase was due primarily to an 80% increase in Data and Voice Services
revenue for the period, offset by a 41% decline in Recruitment Services revenue.
<TABLE>
<CAPTION>
Dollars in Thousands Quarter ended September 30: Nine Months ended September 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 $2,735 32.0% $1,354 32.3% $8,302 39.7% $3,753 32.3%
Recruitment Services $ 274 39.7% $ 395 32.3% $ 804 36.8% $1,051 28.2%
--------------------- ------ ---- ------ ---- ------ ---- ------ ----
Total Gross Profits $3,009 32.6% $1,750 32.3% $9,106 39.4% $4,805 31.3%
</TABLE>
Cost of revenues was $6,216,000 and $3,658,200 for the three months
ended September 30, 2000 and 1999, respectively, representing an increase of
70%. Conversely, our Gross Profit for the comparable periods was $3,009,400 and
$1,749,900, respectively, representing an increase of 71%. Gross profit and
margin for Data and Voice Services were $2,735,500 and 32.0%, respectively, for
the three months ended September 30, 2000 as compared with $1,354,500 and 32.3%,
respectively, for the three months ended September 30, 1999. The slight decrease
in margin was due to more favorable pricing on services and more efficient
management of technical labor, offset by greater comparable product sales in the
quarter, which typically carry a much lower gross profit margin. Gross profit
and margin for Recruitment Services were $274,000 and 39.7%, respectively for
the three months ended September 30, 2000 as compared with $395,400 and 32.3%,
respectively for the three months ended September 30, 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 decreased 8% from
$2,572,700 for the three months ended September 30, 1999 to $2,466,100 for the
three months ended September 30, 2000. The three months ended September 30, 1999
had one-time non-cash administrative and consulting charges of $1,217,500, which
if excluded
3
<PAGE>
would show an increase in SG&A expenses for the current period of 63%. This also
compares with $1,838,300 of similar expense in the previous quarter ended June
30, 2000, or an increase of 37%. The increase was due to a planned expansion of
our sales and 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. It is anticipated that our sales and
marketing team will incrementally increase our revenues and gross profits to a
level which should exceed the increased permanent costs relating to this team.
Also included in our SG&A expenses are our holding company expenses,
which increased by $323,500 from $145,400 for the three months ended September
30, 1999 to $468,900 for the three months ended September 30, 2000. Our prior
quarter holding company expenses were $228,600 for the period ended June 30,
2000. The increased expense was due to legal and due diligence costs related to
merger and acquisition activities. SG&A expenses for ICF's operations increased
from $1,402,400 for the three months ended September 30, 1999 to $1,997,200 for
the three months ended September 30, 2000.
Depreciation expenses were $68,900 and $52,300 for the three months
ended September 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 and other non-cash charges were $600 and
$1,357,800 (one-time non-cash administrative and consulting charges of
$1,217,500, and goodwill amortization of $140,300) for the three months ended
September 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 cash flows. 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.
Dollars in Thousands Quarter ended Nine Months ended
-------------------- September 30 September 30
2000 1999 2000 1999
---- ---- ---- ----
Earnings Before Interest, Tax,
Depreciation and Amortization $544 $394 $3,482 $846
Earnings before interest expense, income tax, depreciation and
amortization expenses ("EBITDA") increased by 38% to $543,900 for the three
months ended September 30, 2000 from $394,000 for the three months ended
September 30, 1999. For the nine months ended September 30, 2000, EBITDA
increased 311% to $3,482,400 from $846,100 in the comparable nine month period
ended September 30, 1999.
Interest Income increased from $3,900 for the three months ended
September 30, 1999 to $68,900 for the three months ended September 30, 2000 due
to significantly higher average daily cash balances, with earned interests rates
remaining relatively constant throughout the comparable periods.
Interest Expense decreased for the three months ended September 30,
2000 to $111,600 from $177,900 for the three months ended September 30, 1999,
due to decreased 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
4
<PAGE>
associated with our line of credit, offset by miscellaneous income for the
period, which resulted in an expense of $400 for the three months ended
September 30, 2000, versus income of $16,900 for the three months ended
September 30, 1999.
An Income Tax provision of $163,800 was taken for the three months
ended September 30, 2000 due to lower earnings for the quarter and larger,
earlier prepayments of income taxes.
Net Income increased to $267,700, or $.015 per share, fully-diluted,
for the three months ended September 30, 2000 versus a Net Loss of $1,172,500
for the three months ended September 30, 1999. This is a 69% decrease over the
second quarter ended June 30, 2000 Net Income of $869,000 or $.051 per share.
Liquidity and Capital Resources
Cash and cash equivalents increased to $2,209,900 at September 30, 2000
compared to $385,100 at December 31, 1999.
Cash Flows From Operating Activities: For the nine months ended
September 30, 2000, cash provided by operating activities was $3,420,200 which
resulted primarily from our net income for the first nine months of $1,875,000,
increased by non-cash charges of $285,900, decreased by our growth in operating
assets of $7,187,800 and increased by our growth in liabilities, primarily
increases in customer deposits, of $8,492,300.
Accounts receivables increased $6,965,300 due to greater activity in
the first nine months of 2000 as well as overall growth in our business.
Payables and accruals increased $2,868,900 due to greater purchases and accrued
payroll, as well as an increase in customer deposits of $5,623,400.
Cash Flows From Investing Activities: For the nine months ended
September 30, 2000, net cash used for investing activities was $547,300 as a
result of $482,100 in new equipment and leasehold improvement purchases, and
deposit increases of $66,200, offset by asset sales $1,000.
Cash Flows From Financing Activities: For the nine months ended
September 30, 2000, net cash used from our financing activities was $1,048,100,
due primarily from the prepayment of Notes to Stockholders in the amount of
$2,757,500 in the second quarter, partially funded with our line of credit of
($389,400) 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 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.,
5
<PAGE>
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 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 September 30, 2000 was a positive
$3,088,600, an increase of $170,100 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 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.
6
<PAGE>
COMC, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
==========================================================================================================================
September 30, December 31,
2000 1999
--------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 2,209,900 $ 385,100
Accounts receivables, net of allowance for doubtful accounts
of $247,800 and $273,100, respectively 11,512,000 4,521,400
Inventories 316,600 194,000
Prepaid expenses and other current assets 119,700 34,900
Deferred income taxes 213,500 213,500
--------------------------------------------------------------------------------------------------------------------------
Total Current Assets 14,371,700 5,348,900
Property and Equipment, net 900,700 561,200
Other Assets 329,200 368,900
--------------------------------------------------------------------------------------------------------------------------
$15,601,600 $ 6,279,000
==========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
COMC, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
========================================================================================================================
September 30, December 31,
2000 1999
------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Bank borrowing $ 1,268,600 $ 879,200
Accounts payable 3,161,000 648,000
Accrued liabilities 978,600 592,600
Current portion of long-term debt 26,700 10,500
Customer deposit 5,623,400 --
Accrued interest, related party -- 30,100
Income taxes payable 224,800 270,000
-----------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 11,283,100 2,430,400
Long-term Debt, net of current portion 45,300 20,400
Notes Payable to Stockholders 750,000 3,500,000
Deferred Income Tax 89,500 89,500
-----------------------------------------------------------------------------------------------------------------------
Total Liabilities 12,167,900 6,040,300
-----------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock, $0.01 par value; 40,000,000; shares authorized
21,193,991 and 19,401,491 shares issued; and
17,392,154 and 15,836,504 shares outstanding, respectively 211,900 194,000
Additional paid-in capital 14,692,700 12,918,100
Accumulated deficit (9,218,600) (11,093,600)
Treasury stock at cost; 3,801,237 and 3,564,987, respectively (2,252,300) (1,779,800)
-----------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 3,433,700 238,700
-----------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 15,601,600 $ 6,279,000
=======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE>
COMC, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
====================================================================================================================================
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- --------------------------------
2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Data and voice services $ 8,536,400 $ 4,186,900 $ 20,907,400 $ 11,602,600
Recruiting services 689,000 1,221,200 2,186,100 3,718,500
------------------------------------------------------------------------------------------------------------------------------------
9,225,400 5,408,100 23,093,500 15,321,100
Costs and Expenses:
Cost of revenues - data and voice services 5,801,000 2,832,400 12,605,800 7,849,100
Cost of revenues - recruiting services 415,000 825,800 1,381,500 2,666,900
------------------------------------------------------------------------------------------------------------------------------------
6,216,000 3,658,200 13,987,300 10,516,000
------------------------------------------------------------------------------------------------------------------------------------
Gross Profit 3,009,400 1,749,900 9,106,200 4,805,100
------------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Selling, general, and administrative 2,466,100 2,572,700 5,622,000 5,178,800
Noncash expenses:
Depreciation and amortization 69,500 192,600 195,500 574,500
------------------------------------------------------------------------------------------------------------------------------------
2,535,600 2,765,300 5,817,500 5,753,300
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations 473,800 (1,015,400) 3,288,700 (948,200)
------------------------------------------------------------------------------------------------------------------------------------
Other Income (Expense):
Interest income 68,900 3,900 173,400 7,600
Interest expense (111,600) (177,900) (386,400) (376,800)
Other, net 400 16,900 (1,900) 19,900
------------------------------------------------------------------------------------------------------------------------------------
(42,300) (157,100) (214,900) (349,300)
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Income Taxes Provision 431,500 (1,172,500) 3,073,800 (1,297,500)
Income Taxes 163,800 -- 1,198,800 --
------------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 267,700 $ (1,172,500) $ 1,875,000 $ (1,297,500)
====================================================================================================================================
Net Income (Loss) Per Share - Basic 0.015 (0.067) 0.112 (0.068)
------------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) Per Share - Diluted 0.013 (0.067) 0.090 (0.068)
------------------------------------------------------------------------------------------------------------------------------------
Shares Used In Per Share Calculation - Basic 17,392,754 17,591,859 16,737,311 19,214,947
------------------------------------------------------------------------------------------------------------------------------------
Shares Used In Per Share Calculation - Diluted 20,869,851 17,591,859 20,887,175 19,214,947
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE>
COMC, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
====================================================================================================================================
Nine Months Ended September 30th,
---------------------------------
2000 1999
------------------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net (loss) income $ 1,875,000 $(1,297,500)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Amortization of goodwill -- 417,100
Depreciation and amortization expense 285,900 156,100
Refundable income taxes -- 165,700
Loss on disposition of capital assets 10,200 --
Allowance for doubtful accounts (25,300) --
Administrative, consulting and finance charge expense -- 1,235,000
Changes in operating assets and liabilities:
Accounts receivable (6,965,300) (1,074,600)
Inventories (122,600) (74,800)
Prepaid expenses and other current assets (84,800) (40,900)
Income taxes payable (45,200) (592,600)
Accounts payable 2,513,000 322,900
Customer deposits 5,623,400 --
Accrued liabilities and other current liabilities 355,900 503,100
------------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Operating Activites 3,420,200 (280,500)
------------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Proceeds from sale of capital assets 1,000 --
Payments for expenses related to business acquisition -- (21,800)
Expenses related to market evaluation of shares -- (16,700)
Deposits (66,200) --
Proceeds from loans receivable, officer -- 114,300
Payments to acquired capital assets (482,100) (40,600)
------------------------------------------------------------------------------------------------------------------------------------
Net Cash (Used In) Provided By Investing Activities (547,300) 35,200
------------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Proceeds from bank borrowings 389,400 14,100
Principal payments for long-term debts (2,757,500) (18,100)
Proceeds from common stock issuance 1,320,000 --
------------------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (1,048,100) (4,000)
------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 1,824,800 (249,300)
Cash and Cash Equivalents, beginning of period 385,100 1,018,500
Cash and Cash Equivalents, end of period $ 2,209,900 $ 769,200
====================================================================================================================================
Cash Paid For:
Interest $ 296,000 $ 359,200
Income taxes $ 1,225,500 $ 507,400
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
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.
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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.
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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: November 14, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below as of November 14, 2000 by the following persons on behalf
of Registrant and in the capacities indicated.
/s/ Christopher Smith
-----------------------
(Principal Financial and Accounting Officer)
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