Edgar Filing: HOMECOM COMMUNICATIONS INC

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

-------------

FORM 10-Q

-------------
(Mark One)

/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001.

/ / TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the transition period from ___________ to ___________

Commission File Number 0-29204

HOMECOM COMMUNICATIONS, INC
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)

DELAWARE 58-2153309
------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

3495 Piedmont Road
Building 12, Suite 110
Atlanta, Georgia 30305
--------------------------------------
(Address of principal executive offices)

(404) 237-4646
-------------------------
(Issuer's Telephone Number)

Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 of 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. Yes No X
----- -----

The Company did not timely file a Current Report 8-K to report the sale of
certain assets on January 31, 2001.

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of October 31, 2001, there
were 9,359,156 outstanding shares of the registrant's Common Stock, par value
$0.0001 per share.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

HOMECOM COMMUNICATIONS, INC.

Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000

September 30, December 31,
2001 2000
(unaudited)
------------ ------------
ASSETS
CURRENT ASSETS:

Cash and cash equivalents $ 394,051 $ 520,716
Accounts receivable, net 202,731 443,352
------------ ------------
Total current assets 596,782 964,068
Furniture, fixtures and equipment held for sale 81,755 476,088
Deposits 37,739
Intangible assets, net 557,173
Investment 493,905
------------ ------------
Total assets $ 678,537 $ 2,528,973
============ ============

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,288,933 $ 1,264,416
Accrued payroll liabilities 20,038 375,535
Current portion of obligations under capital leases 14,511 147,523
------------ ------------
Total current liabilities 1,323,482 1,787,474
Other liabilities 5,385 152,782
Obligations Under capital Leases 6,347 357,757
------------ ------------
Total liabilities 1,335,214 2,298,013
------------ ------------
Redeemable Preferred stock, Series B, $.01 par value, 125 shares authorized,
125 shares issued at September 30, 2001 and December 31, 2000 and
17.8 shares outstanding at September 30, 2001 and December 31, 2000,
convertible, participating; $401,147 liquidation value as of September 30,
2001 251,750 251,750
------------ ------------
STOCKHOLDERS' DEFICIT:
Common stock, $.0001 par value, 15,000,000 shares authorized, 9,359,156
shares issued and outstanding at September 30, 2001 and December 31,
2000 936 936
Preferred stock, Series C, $.01 par value, 175 shares issued and authorized,
92.1 shares outstanding at September 30, 2001 and December 31, 2000,
convertible, participating; $2,082,880 liquidation value at September 30,
2001 1 1
Preferred stock, Series D, $.01 par value, 75 shares issued and authorized,
1.3 shares outstanding at September 30, 2001 and December 31, 2000,
convertible, participating; $28,931 liquidation value at September 30,
2001 1 1
Preferred stock, Series E, $.01 par value, 106.4 shares issued and authorized,
106.4 shares outstanding at September 30, 2001 and December 31, 2000,
convertible, participating; $2,375,946 liquidation value at September 30,
2001 1 1
Additional paid-in capital 24,724,570 25,226,101
Accumulated deficit (25,633,936) (25,247,830)
------------ ------------
Total stockholder's deficit (908,427) (20,790)
------------ ------------
Total liabilities and stockholder's deficit $ 678,537 $ 2,528,973
============ ============

The accompanying notes are an integral part of these financial statements

HOMECOM COMMUNICATIONS, INC.

Consolidated Statements of Operations for the nine months ended September, 2001 and 2000

Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------

Revenues $ 308,212 1,001,876 $ 929,010 3,656,833
Cost of Revenues 209,675 775,732 763,322 1,994,038
----------- ----------- ----------- -----------
GROSS PROFIT 98,537 226,144 165,688 1,662,795
----------- ----------- ----------- -----------

OPERATING EXPENSES:
Sales and marketing 614 502,213 704 1,544,885
Product development 52,449 104,699
General and administrative 142,059 295,654 596,494 1,951,744
Depreciation and amortization 225,974 1,902,203
Asset Impairment Charge 493,905
----------- ----------- ----------- -----------
Total operating expenses 142,673 1,076,290 1,091,103 5,503,531
----------- ----------- ----------- -----------
OPERATING LOSS (44,136) (850,146) (925,415) (3,840,736)
OTHER EXPENSES (INCOME)
Interest expense (96) (30,560)
Other income, net (4,152) (19,628) (144,766) (65,587)
----------- ----------- ----------- -----------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (39,984) (830,422) (780,649) (3,744,589)

INCOME TAX PROVISION (BENEFIT) 0 0 0 0
----------- ----------- ----------- -----------
LOSS FROM CONTINUING OPERATIONS (39,984) (830,422) (780,649) (3,744,589)
LOSS FROM DISCONTINUED OPERATIONS (644,000) (1,525,000)
GAIN ON DISPOSAL OF DISCONTINUED BUSINESS SEGMENT 394,543
----------- ----------- ----------- -----------
NET LOSS (39,984) (1,474,42) (386,106) (5,269,589)

DEEMED PREFERRED STOCK DIVIDEND (36,603) (213,222) (109,809) (1,395,962)
----------- ----------- ----------- -----------
LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (76,587) $(1,687,644) $ (495,915) $(6,665,551)
=========== =========== =========== ===========
EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED
CONTINUING OPERATIONS $ (0.01) $ (0.12) $ (0.09) $ (0.62)
DISCONTINUED OPERATIONS (0.07) 0.04 (0.18)
----------- ----------- ----------- -----------
LOSS PER SHARE - BASIC AND DILUTED $ (0.01) $ (0.19) $ (0.05) $ (0.80)
=========== =========== =========== ===========

WEIGHTED NUMBER OF SHARES OUTSTANDING 9,359,156 9,036,095 9,359,156 8,283,302
=========== =========== =========== ===========

The accompanying notes are an integral part of these financial statements.

HOMECOM COMMUNICATIONS, INC.

Consolidated Statements of Cash Flows for the nine months ended September 30, 2001 and 2000

Nine Months Ended
September 30,
(unaudited)
----------- -----------
2001 2000
----------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ (386,106) $(5,269,589)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 2,155,102
Write down of investment 493,905
Provision for bad debts 40,654 (190,320)
Deferred rent expense 3,565 173,252
Forgiveness of subscription receivable 64,687
Change in operating assets and liabilities:
Accounts receivable (27,336) 142,394
Prepaid expenses
Accounts payable and accrued expenses (715,049) 365,852
Accrued payroll liabilities (341,354) 218,334
Unearned revenue (296,319)
Other 37,245
----------- -----------
Net cash used in operating activities (931,721) (2,599,362)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of furniture, fixtures, and equipment (15,679) (307,940)
Proceeds from sale of divisions 864,603
----------- -----------
Net cash provided by (used in) investing activities 848,924 (307,940)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations (43,868) (98,309)
Proceeds from issuance of common shares and exercise of warrants 14,731
Proceeds from issuance of preferred shares and exercise of warrants 1,898,750
Proceeds from a receivable of a related party 200,000
----------- -----------
Net cash provided (used in) financing activities (43,868) 2,015,172
=========== ===========

NET DECREASE IN CASH AND CASH EQUIVALENTS (126,665) (892,130)
CASH AND CASH EQUIVALENTS at beginning of period 520,716 1,497,678
----------- -----------
CASH AND CASH EQUIVALENTS at end of period $ 394,051 $ 605,548
=========== ===========

The accompanying notes are an integral part of these financial statements.

HOMECOM COMMUNICATIONS, INC.

Notes to Consolidated Financial Statements

1. BASIS OF PRESENTATION

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to Article 10 of Regulation S-X of the
Securities and Exchange Commission. The accompanying unaudited financial
statements reflect, in the opinion of management, all adjustments necessary to
achieve a fair statement of the financial position and results of operations of
HomeCom Communications, Inc. (the "Company") for the interim periods presented.
All such adjustments are of a normal and recurring nature. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on form 10-K.

2. GOING CONCERN MATTERS

The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidations of liabilities in the normal course of
business. The Company has incurred significant losses since its incorporation
resulting in an accumulated deficit as of September 30, 2001 of approximately
$25.6 million. The Company continues to experience negative cash flows from
operations and has been dependent on continued financing from investors to
sustain its activities. There is no assurance that such financing will be
available in the future. These factors raise doubt about the Company's ability
to continue as a going concern.

On March 23, 2001 the Company announced that it is seeking to wind down its
operations. Our business is dependent on continued financing from investors to
sustain our activities, and we have been unable to obtain the additional
financing that we need to remain in operation. We currently have insufficient
assets to satisfy completely our obligations to our creditors and the
liquidation preferences of our preferred stock. We continue to evaluate our
alternatives, including the possible sale of other assets, but we cannot offer
any assurances that we will be able to identify or complete any transactions
that will enable us to remain in operation.

3. SEGMENT INFORMATION

Historically, the Company was organized into five separate business units.
The Company has determined that its reportable segments were those that were
based on the Company's method of internal reporting, which disaggregated its
business by product and service category into business units. The Company's
reportable segments were custom Web development (FAST), Internet outsourcing
services (HostAmerica), Internet security services (HISS), software products,
and InsureRate/FIMI. On June 9, 1998, the Company sold substantially all of the
assets of its HostAmerica Internet outsourcing services business unit to Sage
Acquisition Corp. On October 1, 1999 the company sold all of the assets of its
HISS unit to Infrastructure Defense, Inc. On January 31, 2001 the Company sold
all of the assets of its InsureRate/FIMI unit to Digital Insurance, Inc. and on
March 15, 2001 the Company sold the remaining assets of its Software Products
group to Netzee, Inc. The Company currently operates in a single business
segment, hosting and web site maintenance services. Historical segment
information is not provided since each of the former business segments is
presented as discontinued operations.

4. BASIC AND DILUTED LOSS PER SHARE

Loss per common share is computed by dividing net loss available to common
shareholders by the weighted average number of shares of common stock
outstanding for the period of time then ended. The effect of the Company's stock
options and convertible securities is excluded from the computations for the
nine months ended September 30, 2001 and 2000, as it is antidilutive.

5. TAXES

There was no provision for cash payment of income taxes for the nine months
ended September 30, 2001 and 2000, respectively, as the Company anticipates a
net taxable loss for the year ended December 31, 2001.

6. STOCKHOLDERS' DEFECIT

As a requirement of the April 2000 private placement of $2,127,000
principal amount of the Company's Series E Convertible Preferred Stock, the
Company was obligated to file and have declared effective, within a specified
time period, a registration statement with respect to a minimum of 1,808,293
shares of common stock issuable upon conversion of the Series E Preferred Stock.
As of September 30, 2001, such registration statement has not been declared
effective and penalties are owed to the Series E Preferred Stock holders. In
addition, given the Company's financial condition as discussed in footnote 2,
the Company has no current plans to ensure that such registration statement is
declared effective. In accordance with the terms of the agreement between the
parties, penalties accrue at the rate of 2% per 30 day period of the outstanding
purchase price of the unregistered securities. As of September 30, 2001,
$731,467 has been accrued into accounts payable and accrued expenses for such
penalties.

7. OTHER MATTERS

Certain prior period amounts have been reclassified to conform to current
period presentation.

In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 eliminates
the pooling-of-interests method of accounting for business combinations except
for qualifying business combinations that were initiated prior to July 1, 2001.
Under SFAS No. 142, goodwill and indefinite lived intangible assets are no
longer amortized but are reviewed annually for impairment. Separable intangible
assets that are not deemed to have an indefinite life will continue to be
amortized over their useful lives. The Company believes that neither SFAS No.
141 nor SFAS No. 142 will have any impact on its financial position or results
of operations.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

GENERAL

Except for historical information contained herein, some matters discussed
in this report constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward looking statements include,
but may not be limited to, those statements regarding the Company's
expectations, beliefs, intentions, or strategies regarding the future. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. Specifically, the
Company's statements with respect to, among other things, the potential
disposition of the Company's remaining assets and business and its ability or
inability to continue as a going concern, are forward looking statements. The
Company notes that a variety of risk factors could cause the Company's actual
results and experience to differ materially from the anticipated results or
other expectations expressed in the Company's forward-looking statements
including, among other things, our ability or inability to dispose of our
remaining assets and business, our ability to obtain additional financing, and
other factors discussed in this report and set forth in our Annual Report on
Form 10-K and our Registration Statements on Forms S-1 and S-3.

On March 23, 2001, we announced our intentions to wind down our operations.
Our business is dependent on continued financing from investors to sustain our
activities, and we have been unable to obtain the additional financing that we
need to remain in operation. We currently have insufficient assets to satisfy
completely our obligations to our creditors and the liquidation preferences of
our preferred stock. We continue to evaluate our alternatives, including the
possible sale of other assets, but we cannot offer any assurances that we will
be able to identify or complete any transactions that will enable us to remain
in operation.

Historically, we developed and marketed specialized software applications,
products and services that enabled financial institutions and their customers to
use the Internet and intranets/extranets to obtain and communicate important
business information, conduct commercial transactions and improve business
productivity. We provided Internet/intranet solutions in three areas: (i) the
design, development and integration of customized software applications,
including World Wide Web site development and related network outsourcing; (ii)
the development, sale and integration of our existing software applications into
the client's operations; and, (iii) security consulting and integration
services. In October, 1999, we sold our security consulting and integration
services operations and entered into a joint marketing program with the
acquirer. During the first quarter of 2001, we sold our remaining software
applications businesses, although the proceeds from these transactions did not
represent significant operating capital for us. Currently, we only derive
revenue from our hosting and web development services.

Our revenues and operating results have varied substantially from period to
period, and should not be relied upon as an indication of future results.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2000

NET SALES. Net sales decreased 69.2% from $1,001,876 in the third quarter
of 2000 to $308,212 in the third quarter of 2001. This decrease of $693,664 is
primarily attributable to the absence of any web development work and the
absence of any maintenance contracts. Revenues now consist exclusively of
hosting and hourly billing site maintenance work.

COST OF SALES. Cost of sales includes salaries for programmers, technical
staff and customer support, as well as a pro-rata allocation of
telecommunications, facilities and data center costs. Cost of sales decreased
from $775,732, or 77.4% of revenues in the third quarter of 2000, to $209,675,
or 68.0% of revenues in the third quarter of 2001. This decrease in the cost of
sales is attributable to reductions in production personnel and to the reduction
of internet connection and local loop costs.

GROSS PROFIT. Gross profit decreased by $127,607 from $226,144 in the third
quarter of 2000 to $98,537 in the third quarter of 2001. Gross profit margins
increased from 22.6% during the third quarter of 2000 to 32.0% during the third
quarter of 2001. This erosion in gross profit is primarily related to the
decline in revenue. Reductions in production costs have however outpaced
declines in revenue leading to an improved percentage profit margin.

SALES AND MARKETING. Sales and marketing expenses include salaries,
variable commissions and bonuses for the sales force, advertising and
promotional marketing materials, and a pro-rata allocation of
telecommunications, facilities and data center costs. The cost of sales
decreased from $502,213, or 50.1% of revenues, in the third quarter of 2000 to
$614 in the third quarter of 2001. The Company has discontinued all significant
sales and marketing efforts at this time.

PRODUCT DEVELOPMENT. Product development costs consist of personnel costs
required to conduct the Company's product development efforts, and a pro-rata
allocation of telecommunications, facilities and data center costs. Total
expenditures for product development decreased from $52,449 in the third quarter
of 2000 to $0 in the third quarter of 2001. The Company has discontinued all
product development efforts at this time.

GENERAL AND ADMINISTRATIVE. General and administrative expenses include
salaries for administrative personnel, insurance and other administrative
expenses, as well as a pro-rata allocation of telecommunications, and facilities
and data center costs. General and administrative expenses decreased from
$295,654 in the third quarter of 2000 to $142,059 in the third quarter of 2001
due to the reductions in overhead. As a percentage of net sales, these expenses
increased from 29.5% in the third quarter of 2000 to 46.1% in the third quarter
of 2001, due to continued reductions in revenue.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization includes
depreciation and amortization of computers, network equipment, office equipment,
equipment under capital leases and intangible assets. Depreciation and
amortization was $225,974, or 22.6% of revenues in the third quarter of 2000.
With the write down of the carrying value of all fixed assets in the fourth
quarter of 2000 and the Company's announcement that it intends to wind-down its
operations, the company has suspended depreciation of its remaining assets.

OTHER INCOME. Other income consists of miscellaneous amounts received which
are outside the normal course of operations. Other income decreased $15,476,
from $19,628 for the third quarter of 2000 to $4,152 for the third quarter of
2001.

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2000

NET SALES. Net sales decreased 74.6% from $3,656,833 in the first nine
months of 2000 to $929,010 in the first nine months of 2001. This decrease of
$2,727,823 is primarily attributable to the absence of any web development work
and the absence of any maintenance contracts. Revenues now consist exclusively
of hosting and hourly billing site maintenance work.

COST OF SALES. Cost of sales includes salaries for programmers, technical
staff and customer support, as well as a pro-rata allocation of
telecommunications, facilities and data center costs. Cost of sales decreased
from $1,994,038, or 54.5% of revenues in the first nine months of 2000, to
$763,322, or 82.2% of revenues in the first nine months of 2001. The increase in
the percentage of the cost of selling, general and administrative expense is due
to the lack of web development work and the fact that, at the new reduced
manpower levels, production now accounts for a much higher portion of the cost
ratios used to calculate pro-rata allocations.

GROSS PROFIT. Gross profit decreased by $1,497,107 from $1,662,795 in the
first nine months of 2000 to $165,688 in the first nine months of 2001. Gross
profit margins declined from 45.5% at the end of the third quarter of 2000 to
17.8% during the first nine months of 2001. This erosion in gross profit is
primarily related to a less profitable product mix and the dramatic decline in
revenue.

SALES AND MARKETING. Sales and marketing expenses include salaries,
variable commissions and bonuses for the sales force, advertising and
promotional marketing materials, and a pro-rata allocation of
telecommunications, facilities and data center costs. The cost of sales
decreased from $1,544,885, or 42.2% of revenues in the first nine months of 2000
to $704 in the first nine months of 2001. The Company has discontinued all
significant sales and marketing efforts at this time.

PRODUCT DEVELOPMENT. Product development costs consist of personnel costs
required to conduct the Company's product development efforts, and a pro-rata
allocation of telecommunications, facilities and data center costs. Total
expenditures for product development decreased from $104,699 in the first nine
months of 2000 to $0 in the first nine months of 2001. The Company has
discontinued all product development efforts at this time.

and data center costs. General and administrative expenses decreased from
$1,951,744 in the first nine months of 2000 to $596,494 in the first nine months
of 2001 due to the reductions in overhead begun in the fourth quarter of 2000
and continued in the first nine months of 2001. As a percentage of net sales,
these expenses increased from 53.4% in the first nine months of 2000 to 64.2% in
the first nine months of 2001, due to continued reductions in revenue.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization includes
depreciation and amortization of computers, network equipment, office equipment,
equipment under capital leases and intangible assets. Depreciation and
amortization was $1,902,203, or 52.0% of revenues in the first nine months of
2000. With the write down of the carrying value of all fixed assets in the
fourth quarter of 2000 and the Company's announcement that it intends to
wind-down its operations, the company has suspended depreciation of its
remaining assets.

OTHER INCOME. Other income consists of miscellaneous amounts received which
are outside the normal course of operations. Other income increased $79,179,
from $65,587 at the end of the third quarter of 2000 to $144,766 at the end of
the third quarter of 2001. The increase is primarily due to the favorable
settlement of a $130,000 liability related to the prior sale of certain assets.
Without this settlement other income would have declined.

LIQUIDITY AND CAPITAL RESOURCES

Our sources of capital are extremely limited. We have incurred operating
losses since inception and as of September 30, 2001, we had an accumulated
deficit of $25,633,936 and a working capital deficit of $726,700. On March 23,
2001, we announced our intentions to wind down operations. While we continue to
evaluate our alternatives, we have been unable to obtain additional financing
and do not have sufficient assets to completely satisfy our obligations to our
creditors and the liquidation preferences of our preferred shareholders.

We believe that we have exhausted our current sources of capital and also
believe that it is highly unlikely that we will be able to secure additional
capital that would be required to undertake additional steps to continue our
operations. We may elect to implement other cost reduction actions as we may
determine are necessary and in our best interests, including the possible
additional sale of assets. Also, we believe that there may be value in remaining
current in our reporting obligations under the Securities Exchange Act of 1934,
although we can give no assurance that we will ever be able to realize any value
from our situation. If we cannot resolve our liabilities, and no other
alternatives are available, we may be forced to seek protection from our
creditors. The aforementioned factors raise substantial doubt about our ability
to continue as a going concern. The financial statements included herein have
been prepared assuming the Company is a going concern and do not include any
adjustments that might result should the Company be unable to continue as a
going concern.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Not Applicable

Item 2. Changes in Securities and Use of Proceeds

Not Applicable

Item 3. Defaults Upon Senior Securities

As a requirement of the April 2000 private placement of $2,127,000
principal amount of the Company's Series E Convertible Preferred Stock, the
Company was obligated to file and have declared effective, within a specified
time period, a registration statement with respect to a minimum of 1,808,293
shares of common stock issuable upon conversion of the Series E Preferred Stock.
As of September 30, 2001, such registration statement has not been declared
effective and penalties are owed to the Series E Preferred Stock holders. In
addition, given our financial condition, we do not have any plans to ensure that
such registration statement is declared effective. In accordance with the terms
of the agreement between the parties, penalties accrue at the rate of 2% per 30
day period of the outstanding purchase price of the unregistered securities. As
of September 30, 2001, $731,467 has been accrued into accounts payable and
accrued expenses for such penalties.

Item 4. Submission of Matters to a Vote of Security Holders

Not Applicable

Item 5. Other Information

Not Applicable

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

3.1 Restated Certificate of Incorporation of the Registrant. (Incorporated
herein by reference to exhibit of the same number in the Form S-1
Registration Statement of the Registrant (Registration No.
333-12219)).

3.2 Restated Bylaws of the Registrant. (Incorporated herein by reference
to exhibit of the same number in the form S-1 Registration Statement
of the Registrant (Registration No. 333-12219)).

3.3 Certificate of Designation of Series A Convertible Preferred Stock.
(Incorporated herein by reference to exhibit of the same number in the
Form S-1 Registration Statement of the Registrant (Registration No.
333-42599)).

3.4 Certificate of Designation of Series B Convertible Preferred Stock.
(Incorporated herein by reference to exhibit of the same number in the
form 10-K of the Registrant filed with the Commission on March 31,
1998).

3.5 Certificate of Designation of Series C Convertible Preferred Stock.
(Incorporated herein by reference to exhibit of the same number in the
registration statement on Form S-1 of the Registrant filed with the
Commission on October 5, 1999 (Registration No. 333-86837)).

3.6 Certificate of Designation of Series D Convertible Preferred Stock.
(Incorporated herein by reference to exhibit of the same number in the
registration statement on Form S-1 of the Registrant filed with the
Commission on October 5, 1999 (Registration No. 333-86837)).

3.7 Amended Certificate of Designations, Preferences and Rights of Series
E Convertible Preferred Stock. (Incorporated herein by reference to
exhibit of the same number in the registration statement on Form S-3
of the Registrant filed with the Commission on June 1, 2000 (No.
333-38326)).

4.1 See Exhibits 3.1 and 3.2 for provisions of the Restated Certificate of
Incorporation and Bylaws of the Registrant defining rights of the
holders of Common Stock of the Registrant. (Incorporated herein by
reference to exhibit of the same number in the Form S-1 Registration
Statement of the Registrant (Registration No. 333-12219)).

4.2 Specimen Stock Certificate. (Incorporated herein by reference to
exhibit of the same number in the Form S-1 Registration Statement of
the Registrant (Registration No. 333-12219)).

4.3 Form of Warrant. (Incorporated herein by reference to exhibit of the
same number in the Form S-1 Registration Statement of the Registrant
(Registration No. 333-12219)).

(b) Reports on Form 8-K

We did not file any reports on Form 8-K during the three month period
ending on September 30, 2001.

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.

HOMECOM COMMUNICATIONS, INC.

November 9, 2001 BY: /s/ TIMOTHY R. ROBINSON
--------------------------------
Timothy R. Robinson
Executive Vice President
and Chief Financial
Officer (Principal
Accounting Officer)

EXHIBIT INDEX

3.2 Restated Bylaws of the Registrant. (Incorporated herein by reference
to exhibit of the same number in the form S-1 Registration Statement
of the Registrant (Registration No. 333-12219)).

4.2 Specimen Stock Certificate. (Incorporated herein by reference to
exhibit of the same number in the Form S-1 Registration Statement of
the Registrant (Registration No. 333-12219)).

4.3 Form of Warrant. (Incorporated herein by reference to exhibit of the
same number in the Form S-1 Registration Statement of the Registrant
(Registration No. 333-12219)).