<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q.--QUARTERLY REPORT UNDER SECTION 13 OR (15)D
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 1998
--------------
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 0-19578
-------
INTERNET COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-1095516
- ------------------------------- ---------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification No.)
7100 E. BELLEVIEW AVENUE, SUITE 201, GREENWOOD VILLAGE, COLORADO 80111
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 770-7600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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. [X] Yes [_] No
AT MAY 8, 1998, 5,458,437 SHARES OF COMMON STOCK, NO PAR VALUE, WERE
OUTSTANDING.
Page 1 of 12 pages.
<PAGE>
INTERNET COMMUNICATIONS CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Form 10-Q Cover Page 1
Index Page 2
Part I Condensed Consolidated Balance Sheets 3
March 31, 1998 and December 31, 1997
Condensed Consolidated Statements of Operations 4
Three months ended March 31, 1998 and April 30, 1997
Condensed Consolidated Statements of Cash Flows 5
Three months ended March 31, 1998 and April 30, 1997
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Part II Other Information
Item 1 - Legal Proceedings 11
Item 2 - Changes in Securities and use of Proceeds 11
Item 3 - Defaults upon Senior Securities 11
Item 4 - Submission of Matters to a Vote of 11
Security Holders
Item 5 - Other Information 11
Item 6 - Exhibits and Reports on Form 8-K 11
Signature Page 12
</TABLE>
2
<PAGE>
INTERNET COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited)
---------------- ----------------
<S> <C> <C>
ASSETS
Current Assets:
Trade receivables, net of allowance for doubtful
accounts and sales returns $ 6,320 4,907
Inventory 3,301 3,255
Prepaid expenses and other 425 328
Costs and estimated earnings in excess of billings 1,291 1,825
---------------- ----------------
Total current assets 11,337 10,315
Equipment, net 1,805 2,015
Goodwill, net 2,162 2,198
Spares inventory 472 507
Net assets of discontinued operations 1,394 2,078
Other, net 908 1,000
---------------- ----------------
Total assets $ 18,078 18,113
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 6,639 4,435
Accounts payable and accrued expenses 6,253 4,706
Billings in excess of costs and estimated earnings 1,150 1,537
Unearned income and deposits 992 1,125
---------------- ----------------
Total current liabilities 15,034 11,803
Notes Payable and other long term obligations 429 209
Deferred Revenue 184 117
---------------- ----------------
Total liabilities 15,647 12,129
Stockholders equity:
Common stock, no par value 13,965 13,965
Stockholders' notes (31) (31)
Accumulated deficit (11,503) (7,950)
---------------- ----------------
Total stockholders' equity 2,431 5,984
---------------- ----------------
Total liabilities and stockholders' equity $ 18,078 18,113
================ ================
</TABLE>
See accompanying notes to these condensed financial statements
3
<PAGE>
INTERNET COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
For the three months ended
--------------------------
March 31, April 30,
1998 1997
(Unaudited) (Unaudited)
------------------ ---------------
<S> <C> <C>
Net sales:
Equipment $ 3,645 4,207
Installation 867 1,213
Services 3,722 3,269
------------------ ---------------
Total sales 8,234 8,689
Cost of sales (5,993) (6,022)
------------------ ---------------
Gross margin 2,241 2,667
------------------ ---------------
Operating expenses:
Selling 1,710 1,520
General and administrative 1,911 1,457
Restructuring 1,608 --
Interest expense, net 122 143
------------------ ---------------
Total expenses 5,351 3,120
------------------ ---------------
Loss from continuing operations (3,110) (453)
Discontinued operations --
Loss from operations (206) (190)
Estimated loss on disposal (237) --
------------------ ---------------
Net loss $ (3,553) (643)
================== ===============
Loss per share basic and diluted:
Weighted average common shares outstanding 5,398,000 4,756,000
Loss from continuing operations $ (0.58) $(0.10)
Loss from discontinued operations $ (0.08) $(0.04)
Net loss $ (0.66) $(0.14)
</TABLE>
See accompanying notes to these condensed financial statements
4
<PAGE>
INTERNET COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
For the three months ended
--------------------------
March 31, April 30,
1998 1997
(Unaudited) (Unaudited)
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss from continuing operations $(3,110) (453)
Adjustments to reconcile net loss from continued operations
to net cash provided by (used in) operating activities:
Depreciation and amortization 352 358
Allowance for doubtful accounts and sale returns 36 67
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables- net (1,449) 1,254
Inventory (46) (1,371)
Prepaid expenses and other (23) 458
Costs in excess of billings and estimated earnings 534 (97)
Increase (decrease) in:
Accounts payable 1,343 645
Unearned income (66) (10)
Accrued expenses 444 332
Billings in excess of costs and estimated earnings (387) --
---------------- ----------------
Net cash provided by (used in) operating activities (2,372) 1,183
Net cash provided by (used in) operating activities of
discontinued operations 241 (630)
Cash flows from investing activities:
Capital expenditures (53) (166)
---------------- ----------------
Net cash used in investing activities (53) (166)
Cash flows from financing activities:
Proceeds from sale of common stock -- 3,000
Expenses from sale of common stock -- (150)
Repayment of debt (2,241) (2,958)
Proceeds from debt 4,425 --
---------------- ----------------
Net cash provided by (used in) financing activities 2,184 (108)
---------------- ----------------
Increase (decrease) in cash: -- 279
Cash, beginning of period -- 643
---------------- ----------------
Cash, end of period -- 922
================ ================
</TABLE>
See accompanying notes to these condensed financial statements.
5
<PAGE>
INTERNET COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Unaudited)
NOTE 1 -- BASIS OF PRESENTATION
---------------------
The financial statements included herein have been prepared by Internet
Communications Corporation ("Internet" or the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
and include all adjustments which are, in the opinion of management, necessary
for a fair presentation. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The Company believes that the disclosures are adequate
to make the information presented not misleading; however, it is suggested that
these financial statements be read in conjunction with the financial statements
and the notes thereto which are incorporated by reference in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997. The
financial data for the interim periods may not necessarily be indicative of
results to be expected for the year.
CHANGE IN FISCAL YEAR END
The Company elected to change its fiscal year end to December 31 from January
31, effective February 1, 1997. References to the first quarter of 1997 relate
to the three month period ended April 30, 1997.
DISCONTINUED OPERATIONS
In March 1998, the Company's Board of Directors adopted a formal plan to sell
its non-core business segments ("Segments"). The Segments have been accounted
for as discontinued operations in accordance with APB 30. Remaining assets and
liabilities of the Segments referred to as Omega Business Communications
Services, Inc. ("Omega") and Interwest Cable Network Systems, Inc. ("ICNS"),
primarily consist of accounts receivable and accounts payable. The April 30,
1997 consolidated financial statements have been restated to conform with the
March 31, 1998 presentation.
6
<PAGE>
INTERNET COMMUNICATIONS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
- ----------------------------------------------------------------------
SECURITIES LITIGATION REFORM ACT OF 1995
- ----------------------------------------
This 10-Q contains "forward-looking statements" within the meaning of the
federal securities laws. These forward-looking statements include statements of
expectations, beliefs, future plans and strategies, anticipated events or trends
and similar expressions concerning matters that are not historical facts. The
forward-looking statements in this 10-Q are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed in or
implied by the statements.
With regard to the Company, the most important factors include, but are not
limited to, the following:
- Changing technology.
- Competition.
- Possible future government regulation.
- Competition for talented employees.
- Company's ability to fund future operations.
- Company's need to refinance debt.
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and results of
operations during the periods included in the accompanying condensed financial
statements.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
CAPITAL RESOURCES
In March 1998, the Company received $1.6 million from a related party, in
exchange for a convertible promissory note, due March 1999. The note bears
interest at 10% and interest payments are due quarterly. If the Company
defaults on the promissory note, the remaining principal outstanding may be
converted into common stock of the Company at $4.25 per share. Proceeds from
the note were used for working capital.
The Company has a borrowing agreement with a lending institution which provides
for a $5.0 million credit facility. At March 31, 1998, the Company had borrowed
$5,000,000 against the facility. The borrowing agreement expires in September
1998. The Company's intention is to renew the line of credit with the bank,
however, there is no assurance that the Company will be successful.
LIQUIDITY
During the first quarter of 1998 the Company experienced a deterioration of its
liquidity position. The Company's liquidity problem was due to a significant
increase in accounts receivable and an increase in
7
<PAGE>
inventory, resulting in the Company extending the time in which it paid its
vendors. A number of factors contributed to the above mentioned problems
including the Company's high cost structure, the management information system
conversion undertaken by the Company in January and inventory procurement
issues. The high cost structure of the Company was addressed in March when the
Company announced a restructuring which included divesting of non-core
businesses and sales channels and re-sizing its operations to concentrate on
areas which generate recurring revenue and profits. The conversion of the
primary management information system in January created problems in order
entry, materials management, contracts management, labor utilization, customer
invoicing and receivable collections. The inability to invoice customers on a
timely basis added to the Company's liquidity problem. The Company is addressing
the above mentioned conversion issues including those related to invoicing and
collection. Management expects to have the billing and collections issues solved
by the end of the second quarter. The increase in inventory is due in part to a
lack of effective policies and procedures for the procurement of materials in
one of the purchasing organizations of the Company. Since the restructuring, the
separate purchasing organizations have been combined into one department and
have adopted consistent policies and procedures for materials procurement so as
to avoid this problem in the future.
The liquidity problem was partially alleviated by the $1.6 million cash received
from the issuance of a convertible promissory note issued to a related party, as
discussed above. The Company believes that as a result of the streamlining of
its corporate operations, which include the reduction of corporate overhead and
the elimination of the discontinued operations, the Company will generate
positive cash flows from its operating activities.
The Company incurred capital expenditures of $53,000 during the quarter ended
March 31, 1998. There are no material commitments for capital expenditures and
the Company is maintaining tight controls over its capital purchases.
RESULTS OF OPERATIONS:
- ----------------------
For the quarter ended March 31, 1998, the Company recorded a loss from
continuing operations of $3,110,000, which included a restructuring provision of
$1,608,000, versus a loss from continuing operations of $453,000 for the
quarter ended April 30, 1997. In addition, the Company recorded a loss from
discontinued operations of $206,000 and an estimated loss on disposal of the
discontinued operations of $237,000. The discontinued operations had a loss of
$190,000 for the quarter ended April 30, 1997.
RESTRUCTURING
In March, 1998, the Company announced a restructuring plan aimed principally at
tightening the strategic focus on the data communications network service
market. Management determined the Company had over-extended resources in the
Rocky Mountain region and had evolved into an overly complex organization.
Accordingly, the number of departments was reduced and 50 employees were
separated from the Company, representing 21% of the Company's workforce
(excluding discontinued operations). The personnel reductions were largely in
the sales department and the administration department. In addition, during the
fourth quarter of the fiscal year ended December 31, 1997, the Company had
launched an entirely separate wholesale engineering services business. The
closure of this entity was integral to the restructuring.
8
<PAGE>
In conjunction with the restructuring, Thomas C. Galley resigned from his
position as president and CEO. John M. Couzens replaced Mr. Galley as president
and CEO on an interim basis. Mr. Couzens was the president and CEO of Interwest
Communications Corporation at the time of the merger with the Company.
These restructuring actions resulted in the Company recognizing an expense for
the three months ended March 31, 1998 in the amount of $1,608,000. The
restructuring expense is comprised of several items, including: employee
severance, reduction in manufacturers' product lines, closure of the wholesale
engineering services company, and consolidation of facilities. The restructuring
expenses are detailed in the following table:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- ------
<S> <C>
Employee Severance $ 653,000
Product Line Reduction 409,000
Closure of Wholesale Engineering Company 274,000
Facilities Consolidation 229,000
Other 43,000
----------
TOTAL $1,608,000
==========
</TABLE>
DISCONTINUED OPERATIONS
Pursuant to a plan adopted in March 1998, the Company executed two separate
divestiture agreements on April 30, 1998 for its non-strategic subsidiaries,
Omega and ICNS. The Segments have been accounted for as discontinued operations
in accordance with APB 30 for the three months ended March 31, 1998 and April
30, 1997. The remaining assets and liabilities of the Segments at March 31, 1998
primarily consisted of accounts receivable and accounts payable.
Summarized results of Omega and ICNS for the quarters ending March 31, 1998 and
April 30, 1997 are as follows:
<TABLE>
<CAPTION>
OMEGA ICNS
----- ----
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Loss from operations $77,000 20,000 129,000 170,000
</TABLE>
In addition, the Company also recorded charges of $237,000 during the quarter
ending March 31, 1998 to provide for estimated losses on the discontinuation of
Omega and ICNS which includes anticipated operating results to the date of
disposal as well as losses expected upon disposition.
The Company executed a Stock Purchase Agreement on April 30, 1998 for the sale
of its 80% ownership of the common stock of Omega to Omega's vice president and
sole minority shareholder. The consideration for the sale of Company's common
stock ownership of Omega was $209,000.
The Company executed an Agreement on April 30, 1998 for the transition of the
business activities of its wholly-owned subsidiary, ICNS, to a newly formed
corporation ("Newco") owned and operated by the principal managers of ICNS. The
Agreement specifies that Newco shall satisfactorily complete the existing ICNS
contracts at April 30, 1998, and on June 1, 1998, employ the majority of the
remaining ICNS employees. ICNS shall pay Newco incentive compensation for the
completion and final customer acceptance of ICNS contracts.
9
<PAGE>
CONTINUING OPERATIONS
For the three months ended March 31, 1998, sales decreased by $455,000 or 5%.
The decrease in sales, as compared to the first quarter of 1997, is due in part
to the completion of a significant fiber infrastructure construction contract in
the prior year which was outside the normal scope of the Company's business,
representing $512,000 of sales. The increase in services revenue is a result of
the Company's strategy to cross-sell services to its customers.
Gross margin for the three months ended March 31, 1998 was 27.2% of sales versus
30.7% for the comparable period in the prior year. The higher margin in 1997 is
related to, in part, the contract discussed above. Additionally, during the
quarter ended March 31, 1998, the engineering services and operations department
increased management positions and incurred higher training expenses compared
with the prior year period.
Selling expenses increased by $190,000 or 12.5%, for the three months ended
March 31, 1998. Selling expenses as a percentage of revenue were higher in the
current period (20.8%) as compared to the same period in the prior year (17.5%).
The higher selling expenses are due to an increase in the sales force as of
January 1, 1998, which was subsequently eliminated in the restructuring in
March.
For the three months ended March 31, 1998, general and administrative costs
increased by $454,000 or 31.2% over the prior year. This increase is primarily
due to increased payroll, related benefits and training of $206,000, increased
allowances for bad debt and inventory obsolescence of $93,000, and expenses
related to the settlement of certain disputes of $132,000.
10
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
-----------------
NONE
ITEM 2. CHANGES IN SECURITIES
---------------------
In March, 1998, the Company received $1.6 million from a related party, in
exchange for a convertible promissory note, due March 1999. The note bears
interest at 10% and interest payments are due quarterly. If the Company
defaults on the promissory note, the remaining principal outstanding may be
converted into common stock of the Company at $4.25 per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
NONE
ITEM 5. OTHER INFORMATION
-----------------
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
<TABLE>
<S> <C> <C>
10.12 Employment Agreement between John M. Couzens and Filed herewith.
Internet Communications Corporation dated April 28, 1997
10.13 Employment Agreement between Timothy A. Griffin and Filed herewith.
Internet Communications Corporation dated May 15, 1997.
10.14 Executive Employment Agreement between Mary Beth Loesch and Filed herewith.
Internet Communications Corporation dated January 9, 1998.
</TABLE>
11
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNET COMMUNICATIONS CORPORATION
-----------------------------------
(Registrant)
Date: May 15, 1998 By: /s/ John M. Couzens
--------------------------------------
John M. Couzens, Interim President
Date: May 15, 1998 By: /s/ T. Timothy Kershisnik
--------------------------------------
T. Timothy Kershisnik,
Chief Financial Officer
12
<PAGE>
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
Agreement made, effective as of April 24, 1997, by and between Internet
Communications Corporation, a Colorado corporation, hereinafter referred to as
employer, and John Couzens, hereinafter referred to as employee.
RECITALS
The parties recite and declare:
A. Employer is engaged in the business of selling full service voice and
data communications products and services at 7100 East Belleview
Avenue, Suite 201, Greenwood Village, Colorado, 80111.
B. Employee is desirous of performing services as an employee for
employer in such business under the terms hereof.
C. Employer is willing to employ employee, upon the terms, covenants, and
conditions set forth in this agreement.
For the reasons set forth above, and in consideration of the mutual promises and
agreements set forth in this agreement, employer and employee agree as follows:
1. EMPLOYMENT
A. Employer hereby employs employee as Vice President, General Manager to
------------------------------
perform business management activities and employee hereby accepts and agrees to
such employment, subject to the general supervision and pursuant to the orders,
advice, and direction of employer.
B. Employee shall perform such other duties as are customarily performed
by one holding such position in similar businesses as that engaged in by
employer, and shall also render such unrelated services and duties as may be
assigned to him/her from time to time by employer.
2. BEST EFFORTS OF EMPLOYEE
Employee agrees that he/she will at all times faithfully, industriously,
and to the best of his/her ability, experience, and talents, perform all of the
duties that may be required of and from him/her pursuant to the express and
implied terms of this agreement, to the reasonable satisfaction of employer.
Such duties shall be rendered at 7100 East Belleview Avenue, City of Greenwood
Village, State of Colorado, and at such other place or places as employer shall
in good faith require or as the interest, needs, business or opportunities of
employer shall require.
3. COMPENSATION OF EMPLOYEE
Employer shall pay employee, and employee shall accept from employer, in
payment for employee's services under this agreement, base compensation at the
rate of One Hundred Fifteen Thousand Dollars ($115,000) per year, payable twice
---------------------------- --------
a month on the 15th and last day of each month while this agreement is in force.
Employer shall reimburse employee for all necessary expenses incurred by
employee while traveling pursuant to employer's direction.
1
<PAGE>
EXHIBIT 10.12
4. OTHER EMPLOYMENT DURING TERM
Employee shall devote all of his/her time, attention, knowledge, and skills
solely to the business and interest of employer, and employer shall be entitled
to all of the benefits and profits arising from or incident to all work,
services, and advice of employee, and employee shall not, during the term of
this agreement, be interested directly or indirectly, in any manner, as partner,
officer, director, owner, shareholder, advisor, employee, or in any other
capacity in any other business similar to employer's business or any allied
trade; provided, however, that nothing contained in this section shall be deemed
to prevent or to limit the right of employee to invest any of his/her money in
the capital stock or other securities of any corporation whose stock or
securities are publicly owned or are regularly traded on any public exchange.
5. NON-COMPETITION AFTER TERMINATION
Employee agrees that, in addition to any other limitation herein, for a
period of two years after the termination of his/her employment under this
agreement, and unless otherwise specified in this agreement, employee will not
directly or indirectly engage in, or in any manner be connected with or employed
by any person, firm, corporation, or other entity in competition with employer
or within a radius of 100 miles of any office of employer, its affiliates or its
subsidiaries.
6. SOLICITATION AFTER TERMINATION
Employee agrees that, in addition to any other limitation, for a period of
two years after the termination of his/her employment under this agreement, and
unless otherwise specified in this agreement, employee will not, on behalf of
himself/herself or on behalf of any other person, firm, corporation, or other
entity, call on any of the customers of employer, or any of its affiliates or
subsidiaries for the purpose of soliciting and/or providing to any of such
customers any voice and data communication products and services, nor will
he/she in any way, directly or indirectly, for himself/herself, or on behalf of
any other person, firm, corporation, or other entity solicit, divert, or take
away any customer of employer, its affiliates or its subsidiaries.
7. RECOMMENDATIONS FOR IMPROVING OPERATIONS
Employee shall make known to employer all information of which employee
shall have any knowledge and shall make all suggestions and recommendations that
will be of mutual benefit to employer and employee. Employee acknowledges that
all work performed by him/her during the term of this agreement is the property
of employer and that upon termination of employment, he/she will promptly supply
employer with all notes, memoranda, files, reports, customer lists and other
lists, correspondence, technical data, and any other tangible product or
document which the employee produced, received, or otherwise had access to while
employed.
8. TRADE SECRETS
Employee shall not at any time, either directly or indirectly, divulge,
disclose or communicate to any person, firm, corporation, or other entity in any
manner whatsoever any information concerning any matters affecting or relating
to the business of employer, including without limitation, the identity of its
customers and prospective customers, their communication systems, needs,
preferences and personnel, the prices it obtains or has obtained from the sale
of, or at which it sells or has sold, its products and services, marketing
strategies, product development, financing, expansions, business policies and
practices or any other information concerning the business of employer, it's
manner of operation, its plans, processes, or other data without regard to
whether all of the above-stated matters will be deemed confidential, material,
or important, employer and employee specifically and expressly stipulating that
as between them such matters are important, material, and confidential and
gravely affect the effective and successful conduct of the business of employer,
and employer's good will, and that any breach of the terms of this section shall
be a material breach of this agreement.
2
<PAGE>
EXHIBIT 10.12
9. INJUNCTIVE RELIEF AND LIQUIDATED DAMAGES
Employee hereby agrees that for violation of any of the provisions of this
agreement, employer shall, in addition to any other rights and remedies
available under this agreement, at law or otherwise, be entitled to an
injunction to be issued by any court of competent jurisdiction enjoining and
restricting employee from committing any violation of the agreement and employee
hereby consents to the issuance of such injunction.
10. AGREEMENTS OUTSIDE OF CONTRACT
This agreement contains the complete agreement concerning the employment
arrangement between the parties and shall, as of the effective date hereof,
supersede all other arrangements between the parties. The parties stipulate
that neither of them has made any representation with respect to the subject
matter of this agreement except such representations as are specifically set
forth in this agreement and each of the parties acknowledges that he/she or it
has relied on its own judgment in entering in to this agreement. The parties
further acknowledge that any payments or representations that may have been made
by either of them to the other prior to the date of executing this agreement are
of no effect an that neither of them has relied thereon in connection with
his/her or it's dealings with the other.
11. MODIFICATION OF AGREEMENT
Any modification of this agreement or additional obligation assumed by
either party in connection with this agreement shall be binding only if
evidenced by a writing signed by each party or an authorized representative of
each party.
12. TERMINATION
A. Employee's employment may be terminated without cause by either party
on sixty (60) calendar days written notice to the other. In such event,
employee shall be entitled to compensation for such sixty (60) days provided
he/she continue to perform his/her services during such period.
B. In the event that employee is terminated for felonious or fraudulent
reasons, such as embezzlement or other theft of company property, employer may
terminate employment without notice and with compensation to employee only to
the date of such termination.
C. In the event of any violation by employee of any of the terms of this
agreement, employer may terminate employment without notice and with
compensation to employee only to the date of such termination
D. It is further agreed that any breach or evasion of any of the terms of
this agreement by either party will result in immediate and irreparable injury
to the other party and will authorize recourse to injunction and or specific
performance as well as to all other legal or equitable remedies to which such
injured party may be entitled under this agreement.
13. EFFECT OF PARTIAL INVALIDITY
The invalidity of any portion of this agreement will not and shall not be
deemed to affect the validity of any other provision. In the event that any
provision of this agreement is held to be invalid, the parties agree that the
remaining provisions shall be deemed to be in full force and effect as if they
had been executed by both parties subsequent to the expungement of the invalid
provision.
14. CHOICE OF LAW
It is agreed that this agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Colorado.
3
<PAGE>
EXHIBIT 10.12
15. NO WAIVER
The failure of either party to this agreement to insist upon the
performance of any of its terms and conditions or the waiver of any breach of
any of its terms and conditions shall not be construed as thereafter waiving any
such terms and conditions, but the same shall continue and remain in full force
and effect as if no such forbearance or waiver had occurred.
16. PARAGRAPH HEADINGS
The titles to the paragraphs of this agreement are solely for the
convenience of the parties and shall not be used to explain, modify, simplify,
or aid in the interpretation of the provisions of this agreement.
17. BINDING EFFECT
This agreement shall be binding on and shall insure to the benefit of any
successor or successors of employer and the personal representatives of
employee.
In witness whereof, each party to this agreement has caused it to be
executed at 7100 E. Belleview Avenue, Suite 201, Greenwood Village, Colorado,
-----------------------------------------------------------------
80111 on the date indicated below.
- -----
INTERNET COMMUNICATIONS CORPORATION
By: /s/ Thomas C. Galley
---------------------------------
Employer
/s/ John M. Couzens
- ------------------------------------
Employee
April 28, 1997
- ------------------------------------
Date
4
<PAGE>
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
Agreement made, effective as of April 24, 1997, by and between Internet
Communications Corporation, a Colorado corporation, hereinafter referred to as
employer, and Timothy A. Griffin, hereinafter referred to as employee.
RECITALS
The parties recite and declare:
A. Employer is engaged in the business of selling full service voice and
data communications products and services at 7100 East Belleview
Avenue, Suite 201, Greenwood Village, Colorado, 80111.
B. Employee is desirous of performing services as an employee for
employer in such business under the terms hereof.
C. Employer is willing to employ employee, upon the terms, covenants, and
conditions set forth in this agreement.
For the reasons set forth above, and in consideration of the mutual promises and
agreements set forth in this agreement, employer and employee agree as follows:
1. EMPLOYMENT
A. Employer hereby employs employee as Vice President, General Manager to
-------------------------------
perform business management activities and employee hereby accepts and agrees to
such employment, subject to the general supervision and pursuant to the orders,
advice, and direction of employer.
B. Employee shall perform such other duties as are customarily performed
by one holding such position in similar businesses as that engaged in by
employer, and shall also render such unrelated services and duties as may be
assigned to him/her from time to time by employer.
2. BEST EFFORTS OF EMPLOYEE
Employee agrees that he/she will at all times faithfully, industriously,
and to the best of his/her ability, experience, and talents, perform all of the
duties that may be required of and from him/her pursuant to the express and
implied terms of this agreement, to the reasonable satisfaction of employer.
Such duties shall be rendered at 7100 East Belleview Avenue, City of Greenwood
Village, State of Colorado, and at such other place or places as employer shall
in good faith require or as the interest, needs, business or opportunities of
employer shall require.
3. COMPENSATION OF EMPLOYEE
Employer shall pay employee, and employee shall accept from employer, in
payment for employee's services under this agreement, base compensation at the
rate of One Hundred Fifteen Thousand Dollars ($115,000) per year, payable twice
---------------------------- --------
a month on the 15th and last day of each month while this agreement is in force.
Employer shall reimburse employee for all necessary expenses incurred by
employee while traveling pursuant to employer's direction.
1
<PAGE>
EXHIBIT 10.13
4. OTHER EMPLOYMENT DURING TERM
Employee shall devote all of his/her time, attention, knowledge, and skills
solely to the business and interest of employer, and employer shall be entitled
to all of the benefits and profits arising from or incident to all work,
services, and advice of employee, and employee shall not, during the term of
this agreement, be interested directly or indirectly, in any manner, as partner,
officer, director, owner, shareholder, advisor, employee, or in any other
capacity in any other business similar to employer's business or any allied
trade; provided, however, that nothing contained in this section shall be deemed
to prevent or to limit the right of employee to invest any of his/her money in
the capital stock or other securities of any corporation whose stock or
securities are publicly owned or are regularly traded on any public exchange.
5. NON-COMPETITION AFTER TERMINATION
Employee agrees that, in addition to any other limitation herein, for a
period of two years after the termination of his/her employment under this
agreement, and unless otherwise specified in this agreement, employee will not
directly or indirectly engage in, or in any manner be connected with or employed
by any person, firm, corporation, or other entity in competition with employer
or within a radius of 100 miles of any office of employer, its affiliates or its
subsidiaries.
6. SOLICITATION AFTER TERMINATION
Employee agrees that, in addition to any other limitation, for a
period of two years after the termination of his/her employment under this
agreement, and unless otherwise specified in this agreement, employee will not,
on behalf of himself/herself or on behalf of any other person, firm,
corporation, or other entity, call on any of the customers of employer, or any
of its affiliates or subsidiaries for the purpose of soliciting and/or providing
to any of such customers any voice and data communication products and services,
nor will he/she in any way, directly or indirectly, for himself/herself, or on
behalf of any other person, firm, corporation, or other entity solicit, divert,
or take away any customer of employer, its affiliates or its subsidiaries.
7. RECOMMENDATIONS FOR IMPROVING OPERATIONS
Employee shall make known to employer all information of which employee
shall have any knowledge and shall make all suggestions and recommendations that
will be of mutual benefit to employer and employee. Employee acknowledges that
all work performed by him/her during the term of this agreement is the property
of employer and that upon termination of employment, he/she will promptly supply
employer with all notes, memoranda, files, reports, customer lists and other
lists, correspondence, technical data, and any other tangible product or
document which the employee produced, received, or otherwise had access to while
employed.
8. TRADE SECRETS
Employee shall not at any time, either directly or indirectly, divulge,
disclose or communicate to any person, firm, corporation, or other entity in any
manner whatsoever any information concerning any matters affecting or relating
to the business of employer, including without limitation, the identity of its
customers and prospective customers, their communication systems, needs,
preferences and personnel, the prices it obtains or has obtained from the sale
of, or at which it sells or has sold, its products and services, marketing
strategies, product development, financing, expansions, business policies and
practices or any other information concerning the business of employer, it's
manner of operation, its plans, processes, or other data without regard to
whether all of the above-stated matters will be deemed confidential, material,
or important, employer and employee specifically and expressly stipulating that
as between them such matters are important, material, and confidential and
gravely affect the effective and successful conduct of the business of employer,
and employer's good will, and that any breach of the terms of this section shall
be a material breach of this agreement.
2
<PAGE>
EXHIBIT 10.13
9. INJUNCTIVE RELIEF AND LIQUIDATED DAMAGES
Employee hereby agrees that for violation of any of the provisions of this
agreement, employer shall, in addition to any other rights and remedies
available under this agreement, at law or otherwise, be entitled to an
injunction to be issued by any court of competent jurisdiction enjoining and
restricting employee from committing any violation of the agreement and employee
hereby consents to the issuance of such injunction.
10. AGREEMENTS OUTSIDE OF CONTRACT
This agreement contains the complete agreement concerning the employment
arrangement between the parties and shall, as of the effective date hereof,
supersede all other arrangements between the parties. The parties stipulate
that neither of them has made any representation with respect to the subject
matter of this agreement except such representations as are specifically set
forth in this agreement and each of the parties acknowledges that he/she or it
has relied on its own judgment in entering in to this agreement. The parties
further acknowledge that any payments or representations that may have been made
by either of them to the other prior to the date of executing this agreement are
of no effect an that neither of them has relied thereon in connection with
his/her or it's dealings with the other.
11. MODIFICATION OF AGREEMENT
Any modification of this agreement or additional obligation assumed by
either party in connection with this agreement shall be binding only if
evidenced by a writing signed by each party or an authorized representative of
each party.
12. TERMINATION
A. Employee's employment may be terminated without cause by either party
on sixty (60) calendar days written notice to the other. In such event,
employee shall be entitled to compensation for such sixty (60) days provided
he/she continue to perform his/her services during such period.
B. In the event that employee is terminated for felonious or fraudulent
reasons, such as embezzlement or other theft of company property, employer may
terminate employment without notice and with compensation to employee only to
the date of such termination.
C. In the event of any violation by employee of any of the terms of this
agreement, employer may terminate employment without notice and with
compensation to employee only to the date of such termination
D. It is further agreed that any breach or evasion of any of the terms of
this agreement by either party will result in immediate and irreparable injury
to the other party and will authorize recourse to injunction and or specific
performance as well as to all other legal or equitable remedies to which such
injured party may be entitled under this agreement.
E. In the event the employer chooses to terminate the employee with or
without cause the above section 5 will no longer be valid.
13. EFFECT OF PARTIAL INVALIDITY
The invalidity of any portion of this agreement will not and shall not be
deemed to affect the validity of any other provision. In the event that any
provision of this agreement is held to be invalid, the parties agree that the
remaining provisions shall be deemed to be in full force and effect as if they
had been executed by both parties subsequent to the expungement of the invalid
provision.
14. CHOICE OF LAW
3
<PAGE>
EXHIBIT 10.13
It is agreed that this agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Colorado.
15. NO WAIVER
The failure of either party to this agreement to insist upon the
performance of any of its terms and conditions or the waiver of any breach of
any of its terms and conditions shall not be construed as thereafter waiving any
such terms and conditions, but the same shall continue and remain in full force
and effect as if no such forbearance or waiver had occurred.
16. PARAGRAPH HEADINGS
The titles to the paragraphs of this agreement are solely for the
convenience of the parties and shall not be used to explain, modify, simplify,
or aid in the interpretation of the provisions of this agreement.
17. BINDING EFFECT
This agreement shall be binding on and shall insure to the benefit of any
successor or successors of employer and the personal representatives of
employee.
In witness whereof, each party to this agreement has caused it to be
executed at 7100 E. Belleview Avenue, Suite 201, Greenwood Village, Colorado,
-----------------------------------------------------------------
80111 on the date indicated below.
- -----
INTERNET COMMUNICATIONS CORPORATION
By: /s/ Thomas C. Galley
---------------------------------
Employer
/s/ Timothy A. Griffin
- ------------------------------------
Employee
May 15, 1997
-----------------------------------
Date
4
<PAGE>
EXHIBIT 10.14
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 9th day of January, 1998, by
and between Internet Communications Corporation, a Colorado corporation ("the
Company"), and Mary Beth Loesch ("President of Engineering Services Company").
IN CONSIDERATION of the mutual covenants and agreements herein contained,
it is agreed as follows:
1. Employment
----------
(a) The Company hereby employs Mary Beth Loesch as its President of
Engineering Services Company and President of Engineering Services
Company hereby accepts such employment on the terms and conditions
hereinafter set forth and subject to the general supervision,
advice, and direction of the President/CEO of the Company.
(b) President of Engineering Services Company agrees that she will at
all times faithfully, industriously, and to the best of her
ability, experience and talents, perform all of the duties that
may be required of her pursuant to the express and implicit terms
hereof to the reasonable satisfaction of the Company. President of
Engineering Services Company shall devote her full business time,
attention, and energies to the business of the Company. Such
duties shall be rendered at 7100 East Belleview, Suite 201,
Englewood, Colorado 80111 and at such other place or places as the
Company shall in good faith require or as the interest, needs,
business, or opportunity of the Company shall require.
(c) All information relating to the business of the Company, including
but not limited to the identity of its customers, business
associate, its arrangements with such customers or business
associates, its manner of operation and technical data relating to
its operations and services, shall be treated as confidential by
President of Engineering Services Company both during and after
the cessation of President of Engineering Services Company's
employment under this Agreement. Except in the ordinary course of
President of Engineering Services Company's employment under this
Agreement or with the prior written consent of the Company,
President of Engineering Services Company shall not disclose any
of such information at any time to any person except authorized
personnel of the Company or its affiliates.
2. Term
----
The term of employment hereunder shall be at will, subject to certain
severance payments as outlined in section 8.
3. Compensation
------------
(a) The Company shall pay to President of Engineering Services
Company an initial base annual salary at the rate of $175,000 per
--------
year, commencing January 16, 1998.
1
<PAGE>
EXHIBIT 10.14
(b) In addition to her annual compensation, President of Engineering
Services Company shall earn an annual performance bonus based
upon criteria established by Tom Galley.
4. Benefits
--------
(a) The Company shall reimburse President of Engineering Services
Company for all reasonable expenses incurred by President of
Engineering Services Company in connection with the Company's
business affairs in accordance with guidelines established by the
Company.
(b) President of Engineering Services Company shall be entitled to
vacations and to participate in other employee benefits in
accordance with the policies set by the Board of Directors of the
Company from time to time in effect.
(c) The Company shall furnish President of Engineering Services
Company with necessary office facilities including usual office
furniture and equipment, telephone service, business cards,
stationery, secretarial service and assistance, in accordance
with standards adopted by the Board of Directors of the Company
from time to time.
(d) The Company shall provide the President of Engineering Services
Company for business purposes with the use of any automobile
which shall be procured, maintained, and insured by the Company
at its sole cost and expense. Such automobile shall be the
property of the Company and shall be returned to the Company upon
termination of this Agreement.
5. Disability Payments
--------------------
If, during the term of this Agreement, President of Engineering
Services Company shall become disabled because of sickness, injury or
physical or mental disability, so that President of Engineering
Services Company is unable to perform her duties under this Agreement,
the Company agrees to continue to pay President of Engineering
Services Company's salary (less any sums paid to or on behalf of
President of Engineering Services Company pursuant to disability
insurance coverage provided by the Company) during such period for a
maximum of six months.
6. Termination
-----------
(a) It is agreed and understood that the Company may terminate this
agreement at any time, and at such time subject to the severance
compensation referred to in section 8. The following shall be
considered termination for cause:
(i) President of Engineering Services Company, after
receiving notice from the Chief Executive Officer of
the Company that an activity of President of
Engineering Services Company constitutes a conflict of
interest with the Company, continues to engage in such
activity; or
(ii) President of Engineering Services Company breaches any
of the obligations under this Agreement or commits any
acts of willful misconduct or gross nonfeasance or
malfeasance with respect to the Company which are or
could be materially detrimental to the Company or any
of its subsidiaries; or
2
<PAGE>
EXHIBIT 10.14
(iii) President of Engineering Services Company commits
theft or other dishonest or illegal acts or uses any
illegal drugs; or
(iv) President of Engineering Services Company uses alcohol
during employment hours or at other times in such
amounts and/or frequency so as to impair President of
Engineering Services Company's ability to perform her
duties under this Agreement; or
(v) President of Engineering Services Company refuses or
otherwise fails to follow a written directive of the
Chief Executive Officer, to the extent such directive
is capable of being performed, within a reasonable
period after receiving such directive.
7. Severance Compensation
----------------------
In the event the employment of President of Engineering Services
Company is terminated for reasons other than those set forth in
paragraph 6(a), then, President of Engineering Services Company shall
receive, in addition to all other compensation earned as of the date
of such termination, one hundred percent (100%) of President of
Engineering Services Company's current base salary otherwise payable
under paragraph 3(a) for an 18 month period at the election of the
Company, in one lump sum or in normal Company payroll installments;
provided however, if the employment is terminated because of
disability, then in lieu of this severance compensation, President of
Engineering Services Company shall be entitled 6 months compensation.
Should the Company appoint another President of Engineering Services
Company without terminating President of Engineering Services
Company's employment, then the President of Engineering Services
Company shall have the right to voluntarily resign and receive the
severance compensation set forth above as if she had been terminated
without cause as of the date of resignation.
8. Non-Competition and Trade Secrets
---------------------------------
While President of Engineering Services Company is employed hereunder
and during the 18 month period thereafter, President of Engineering
Services Company shall not, without the prior written consent of the
Company:
(a) directly or indirectly engage in any competing
business as defined below, within the United States
whether as an employee, owner, partner, participant,
consultant or advisor of or for any business entity
(which shall include any joint enterprise, sole
proprietorship, trust, partnership, corporation or
other association); or
(b) serve as an officer, director, trustee, employee,
partner or in any similar capacity for any such
business entity which conducts any competing business
within the State of Colorado.
The term "competing business" is hereby defined as activities
substantially similar to any business conducted by the Company while
President of Engineering Services Company is employed by it. The
parties agree that neither the period of time, the scope of
activities, nor the area covered by this paragraph 9 is unreasonable.
If, however, it shall be judicially determined that any provision
hereof is unenforceable in any respect, all provisions hereof shall
not be declared invalid, but, rather this paragraph 9 shall be
modified by the court in
3
<PAGE>
EXHIBIT 10.14
such manner as to become valid and enforceable. The existence of any
claim or cause of action of President of Engineering Services Company
against the Company, whether predicated upon this Agreement or
otherwise, shall not constitute a defense to the enforcement by the
Company of the provisions of this paragraph 9.
9. Notices
-------
All notices and other communications required or permitted to be given
by this Agreement shall be in writing and shall be given and shall be
deemed received if and when either hand delivered and signed receipt
is given therefor or mailed by registered or certified U.S. mail,
return receipt requested, postage prepaid and if to the Company to:
Internet Communications Corporation
7100 East Belleview Avenue, Suite 201
Englewood, CO 80111
and if to President of Engineering Services Company to:
Mary Beth Loesch
9 Golden Eagle Lane
Littleton, CO 80127
or at such other address as either party hereto shall notify the other
of in writing.
10. Entire Agreement: Modification: Waiver
---------------------------------------
This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter contained herein and supersedes all
prior and contemporaneous agreements, representations, and
understandings of the parties. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in
writing by all the parties. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any
other provision, whether or not similar. No waiver shall be binding
unless executed in writing by the party making the same.
11. Assignment
----------
Because of the personal nature of the services to be performed by
President of Engineering Services Company under this Agreement,
President of Engineering Services Company shall not have the right to
assign or transfer any of her rights, benefits, or obligations
hereunder.
12. Specific Performance
--------------------
President of Engineering Services Company's obligations under this
Agreement are unique. If President of Engineering Services Company
should default in or threaten a breach of her obligations under this
Agreement, in addition to any other available rights or remedies, the
Company may sue for specific performance hereof and enjoin President
of Engineering Services Company from committing such default or
threatened breach of, in which event, President of Engineering
Services Company expressly waives any defense concerning the adequacy
of the Company's legal remedies and the absence of immediate or
irreparable harm.
4
<PAGE>
EXHIBIT 10.4
13. Recovery of Litigation Costs
----------------------------
If any legal action or any arbitration or other proceeding is brought
for the enforcement of this Agreement or because of an alleged breach
of default of the provisions of this Agreement, the successful or
prevailing party shall be entitled to recover from the other party
reasonable attorney fees and other costs incurred in such action or
proceeding, in addition to any other relief to which such party may be
entitled.
14. Continuing Liability After Termination
--------------------------------------
The obligations of the parties under this Agreement which by their
nature would continue beyond the termination of this Agreement,
including, by way of illustration only and not limitation, obligations
to make any payment of compensation earned hereunder prior to the date
of termination, or obligations pursuant to paragraphs 1 (c), 8, 9, 13,
or 14, all shall survive termination of this Agreement.
15. Governing Law
-------------
This Agreement shall be governed by and interpreted pursuant to the
internal laws of the State of Colorado, without reference to
principles of conflict laws.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Internet Communications Corporation
By: /s/ Thomas C. Galley
----------------------------------
President/CEO
/s/ Mary Beth Loesch
-------------------------------------
Mary Beth Loesch
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 6,657,000
<ALLOWANCES> 337,000
<INVENTORY> 3,301,000
<CURRENT-ASSETS> 11,337,000
<PP&E> 5,646,000
<DEPRECIATION> 3,841,000
<TOTAL-ASSETS> 18,078,000
<CURRENT-LIABILITIES> 15,034,000
<BONDS> 0
0
0
<COMMON> 13,965,000
<OTHER-SE> (11,534,000)
<TOTAL-LIABILITY-AND-EQUITY> 18,078,000
<SALES> 8,234,000
<TOTAL-REVENUES> 8,234,000
<CGS> (5,993,000)
<TOTAL-COSTS> (11,222,000)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 122,000
<INCOME-PRETAX> (3,110,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,110,000)
<DISCONTINUED> (443,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,553,000)
<EPS-PRIMARY> (.66)
<EPS-DILUTED> (.66)
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