U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB/A
Amendment No. Two
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS
ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
VOXCOM HOLDINGS, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 75-2715335
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8115 Preston Road, Eighth Floor-East, Dallas, Texas 75225
(Address of Principal Executive Offices) (Zip Code)
(214) 691-0055
(Issuer's Telephone Number)
Securities to be registered pursuant to 12(b) of the Act: None
Securities to be registered pursuant to 12(g) of the Act:
Common Stock $.0001 Par Value
(Title of Class)
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Explanatory Note:
Unless otherwise indicated or the context otherwise requires, all
references herein to the "Company" are to Voxcom Holdings, Inc., a Nevada
corporation, and its wholly-owned subsidiaries, Voxcom Systems, Inc.,
AmeraPress, Inc, and The Home Business Group, Inc.
The Company is filing the Form 10SB voluntarily. The Company's Common
Stock has traded on the OTC Bulletin Board since November 1997, and the Company
believes the market for its stock will be enhanced by being a reporting company.
In addition, the Company intends to seek listing on either the Nasdaq SmallCap
Market, the National Market System or the American Stock Exchange in the near
future, for which a registration under the 1934 Act will be required.
PART I
Item 1. Description of Business
General
Newcorp One, Inc. ("Newcorp") is a corporation organized under the laws
of the State of Nevada in September 1996 in accordance with the Plan of
Reorganization of Weaver Arms Corporation ("Weaver"), as confirmed by the United
States Bankruptcy Court, Central District of California on January 20, 1994.
Weaver had existed as a publicly held corporation in the business of developing
and manufacturing weapons until its filing for protection under the bankruptcy
laws. Following its reorganization, Weaver changed its name to Madera
International, Inc. and began operating as a timber harvesting and exporting
company. A feature of Weaver's bankruptcy plan of reorganization allowed it to
create Newcorp and distribute its common stock and Class A warrants to the
shareholders and debtors of Weaver. Newcorp would then seek a merger partner
that would contribute an operating business to Newcorp.
The owners of Voxcom Systems, Inc. ("Voxcom Systems") and AmeraPress,
Inc. ("AmeraPress") desired for Voxcom Systems and AmeraPress to consolidate and
become publicly traded; however, they had been unsuccessful in negotiating a
suitable underwriting arrangement to engage in a public offering.
Therefore, in June 1997, the managements of Newcorp and Voxcom Systems
negotiated an Agreement and Plan of Reorganization pursuant to which Newcorp
acquired all of the issued and outstanding shares of common stock of Voxcom
Systems in exchange for an aggregate of 4,000,000 shares of voting common stock
of Newcorp, $.0001 par value per share, and 4,000,000 Class A Warrants,
constituting approximately 80% of the outstanding securities of Newcorp. At the
time of the acquisition of Voxcom Systems, Newcorp had no assets, business or
operations.
Voxcom Systems provides merchant accounts and credit card processing
solutions to small businesses, home based businesses, multi-level marketing
distributors, and independent distributors. In operation since January 1995,
Voxcom Systems is engaged in the transaction processing industry, providing
low-cost credit card processing to diverse merchants, including in-home
businesses, through its patented and proprietary Credit Verification Phone
system.
Concurrent with its acquisition of Voxcom Systems, Newcorp acquired all
of the issued and outstanding common stock of AmeraPress, Inc., a corporation
organized under the laws of the State of Nevada in June 1997 to engage in the
specialty printing and finishing business. AmeraPress succeeded to the business
of Voxcom Sales, L.L.C. ("Voxcom Sales"), a company organized under the laws of
the State of Delaware in November 1995. The common
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stock of AmeraPress was acquired in exchange for a $10,000,000 note, payable in
24 consecutive, equal monthly installments. The Promissory Note was
collateralized by all of the outstanding shares of AmeraPress. In December 1997,
the remaining balance of the Promissory Note was exchanged for 80,000 shares of
Series A Preferred Stock redeemable at the option of the Company at the issue
price of $100 each.
On June 18,1997, Newcorp filed Restated Articles of Incorporation with
the Secretary of State of Nevada, adding provisions regarding corporate
management and control, and changing the name of the Company to "Voxcom
Holdings, Inc." ("Voxcom Holdings").
On July 1, 1997, the Company entered into a Consulting Agreement and
Covenant Not to Compete with Kim Crowther and Brian Jensen to manage a company
(the "Lecture Company") to conduct home business seminars to promote the
Company's goods and services, including the printed products of AmeraPress, and
to compensate them for their exclusive service to the Lecture Company for a
period of 60 months by granting them 200,000 shares of the Company's common
stock, 4% of the gross proceeds of sales by the Lecture Company, and commissions
equal to 25% of the net profit of the Lecture Company on a combined basis. The
Company will also grant them shares of the Company's common stock at June 30,
1998 in an amount equal to the net profit of the Lecture Company on a combined
basis, subject to deductions for federal income tax, debt service obligations of
the Lecture Company, and commissions paid, multiplied by the average price to
earnings ratio of the Company's common stock over the 90 days prior to June 30,
1998, multiplied by 25%, and divided by the average over the 20 trading days
preceding June 30, 1998 of the mean bid and ask price in the over-the-counter
market. In each succeeding year of the Agreement, shares of common stock will be
granted based on the same formula, except that instead of using net profit (as
adjusted) as the starting number, the growth in net profit over the previous
year will be substituted and the same adjustments applied. Home Business Group,
Inc. ("HBG") was incorporated in the State of Delaware and acquired certain
assets and liabilities of and continued the business of the Lecture Company,
commencing during the quarter ended December 31, 1997. The continued operations
of AmeraPress and HBG are referred to together as the "Home Business Segment".
On March 13, 1998 the Company agreed to acquire all of the issued and
outstanding shares of MAXpc Technologies, Inc. in consideration for the issuance
of 210,000 shares of Common Stock. MAXpc has the exclusive manufacturing and
marketing rights to certain multimedia computer hardware and software. Marketing
of the product commenced at the end of April 1998. The contract also provides
that 25% of the net after tax profits of MAXpc will be paid to the Seller.
The Company's activities to date have consisted of the promotion and
marketing through seminars of home- based business opportunities, the production
and sale of customized printing and the sale and distribution of merchant credit
card authorization and payment systems, as well as raising capital, locating and
acquiring equipment, identifying prospective customers, and administrative
activities relating to the foregoing. The Company's future business, including
expansion of its present operations, may require additional equity and/or debt
financing, which may not be available in a timely manner, on commercially
reasonable terms, or at all. See Part 1, Item 2 "Management's Discussion and
Analysis or Plan of Operation."
See Part I, Item 7, "Certain Relationships and Related Transactions"
for information about the interests of certain directors, executive officers and
promoters of the Company in the formation and reorganization transactions
described above involving Voxcom Holdings, Voxcom Systems, AmeraPress, and HBG.
Principal Products, Distribution and Competitive Conditions
The Company's activities are divided into three segments:
(i) Credit card processing and authorization systems;
(ii) Home-based business; and
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(iii) Technology;
Credit Card Processing and Authorization Systems
The Company, through its subsidiary Voxcom Systems, offers merchants of
all sizes a competitive product which can include processing hardware, voice
platform and authorization, and an attractive discount rate on all credit card
transactions. In May, 1992, the credit card industry responded to increasing
levels of credit card fraud by requiring advance authorization of all credit
card transactions or else charging the merchant extra processing fees for
unauthorized charges. It is estimated that 97% of all credit card purchases in
the U.S. are preceded by such authorizations.
For the small merchant, or direct salesperson, the Company offers its
Credit Verification Phone ("CVP"), which is a host-based system utilizing an
interactive Voice Platform instead of a modem. The device is manufactured by KIA
Intertrade, an unaffiliated company located in Korea. The CVP is compact and
light-weight. It does not require A.C. power, is portable, offers a voice
tutorial to users, and can be used as a standard telephone if desired. Prices
range from $195 to $395 for this product. The Company also provides minor
repairs at its Euless, Texas facility for malfunctioning CVP terminals, and
returns malfunctioning CVP terminals requiring major repair to the manufacturer
for replacement.
In addition to equipment, the Company provides credit card services as
an independent sales organization (ISO) of Heartland Card Services, Inc., a
credit processing company. The Company is charged interchange costs to the
credit card provider (VISA and Master Card) by Heartland and pays to Heartland a
share of the increase over the interchange cost charged to its clients. The
Company also has agency agreements with Delta Card Systems/Woodforest Bank,
Electronic Card Systems, First American Payment Systems/First National Bank in
Brookings and Money Transfer System/NPC whereby the Company purchases credit
card processing at an established rate, and retains the incremental price it
charges its customers above that rate. Because of these relationships, the
Company believes it is competitive in the rates being offered to all types of
businesses ranging from the sole trader to large merchants.
The Company's customers are broadly divided into two sections (i) small
merchant, sole traders or direct sales person, and (ii) larger, often
multi-locational businesses. Approximately 30% of sales were made to the small
merchant category during the twelve months ended June 30, 1998.
For the large merchant the Company is able to offer other
manufacturers' systems such as Verifone and Hypercom purchased to meet the
appropriate need. The larger merchants approached by the Company usually require
more expensive and more sophisticated credit card processing equipment. Most of
this equipment necessitates a dedicated phone line compared to the port ability
of the CVP.
Competition for credit card verification business is intense, and the
market is saturated with systems to meet this need, many of which have greater
experience in the industry and financial resources available to them. Most are
modem based, on-line systems requiring a dedicated phone line, and the cost of
access systems ranges from $195 to $1,700. The Company believes it can compete
for a share of the business because of the affordability, portability and
multiple uses of its CVP and due to its relationships with processing banks and
card providers. In excess of $100 million of annual credit card processing has
been contracted by the Company since October 1997. Competition in this section
is also offered by major banking organizations or their subsidiaries, such as
Bank America, Wells Fargo, Citibank, Chase and First USA. While these
competitors obviously have more financial strength, the Company believes it can
compete effectively because of its flexibility to respond to customer needs and
its orientation to the smaller users in the marketplace.
Business is generated either by incoming responses from national
advertising or from contact by the Company's 75 commissioned sales
representatives.
Home-Based Business Segment
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The Company operates this segment through two wholly owned
subsidiaries, HBG and AmeraPress. HBG conducts seminars in major cities
throughout the United States and offers attendees the opportunity to purchase
introductory kits to approximately three different home-based businesses. One of
these businesses is AmeraPress, and the others include vending machines and an
Internet product, neither of which is affiliated with the Company except that a
director of HBG is a shareholder and officer of the vending machine company,
Vendworx, Inc. The Internet product has been developed by Wealth International,
Inc. The Internet product provides distributors their own web pages so they can
advertise and promote items, such as the AmeraPress trading cards, for profit.
Additionally, they may sell quality items through an Internet mall and may
market the mall site and receive overrides via a multi-level marketing payout
plan. This vending product teaches people how to get involved with the vending
industry and offers small, bulk-candy dispensing machines that they may
purchase. The vending company teaches distributors how to place the machines,
which locations are most profitable, and is a source for candy and supplies.
HBG attracts its attendees by a mailing campaign requesting recipients
to call in and register for attendance at the appropriate seminar. It earns its
income from the sale of the introductory kits provided free or for a small
charge by the offered businesses, and from an additional fee paid by those
businesses for each sale made at a seminar. Such vendors may thereafter approach
such attendees for the sale of additional materials. There are no written
agreements between HBG and any of the vendors. The introductory kits are sold
from prices ranging from $195 to $295 each or combined for prices ranging from
$495 to $695. The purchase of these kits entitles the purchaser to become a
distributor without any further charge. There is sufficient salable material in
the kit to enable the distributor to recover the initial outlay.
AmeraPress conducts business with the distributors enrolled at the HBG
seminars by the purchase of the introductory kit. This kit includes video and
audio tapes, distribution manual and sufficient salable materials to make 100%
return on their cost. The distributors are advised by AmeraPress how to make
their home business operate. Such business is to introduce consumers to the
opportunity of having a photograph of their choice, and the appropriate words or
sketches of their choice printed on high quality, fully-laminated trading,
business, or greeting card, or post card or calendar. Sales are made by way of
pre-paid voucher which the distributor buys from AmeraPress and resells to the
consumer at a profit. Thereafter the distributor's job for that sale is
finished, and the consumer returns the voucher with all appropriate information
to AmeraPress for fulfillment. Distributors are not authorized to sell
distributorships, and for that reason neither HBG nor AmeraPress are multi-level
marketing organizations.
AmeraPress conducts is printing operations in its 20,000 square foot
facility in Euless, Texas. See Item 3 - Description of Property.
The home-based business industry is extremely large and very
competitive. Distributors are sought for many multi-level and direct sales
organizations by means of phone and mail solicitation and via the Internet. Many
companies operating as multi-level marketers are large and well- capitalized,
including companies such as Amway, Mary Kay, Home Interiors & Gifts and Avon.
Home-based business opportunities marketed via seminars are typically smaller
firms without extensive operating histories, and many such companies are created
and cease to exist each year. These companies rely on the responses to the mail
campaigns for attendance at seminars. Other seminar companies use Infomercials
on local and cable television. HBG's principal competitors include Financial
Fortune System, HOME and the vast array of small operators. While, there is no
certainty that the businesses being offered by HBG will be attractive to the
attendees of the seminars, the Company believes it has been able to compete
effectively due to the sheer size of the market for these goods and services and
to the profit potential of the materials offered by the Company compared to
those of many of its competitors.
Technology Division
Through March 31, 1998, all of the Company's business and revenues were
produced from the Home-Based Business Segment and the Credit Card Processing and
Authorization Segment. However, the Company continually seeks opportunities to
diversify its operations and exploit products and markets with the potential for
rapid growth. The
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Company believes that the technology offered by the multi-media add-in card of
MAXpc Technologies, Inc. ("MAX") produced such an opportunity.
In April 1998, the Company acquired all of the common stock of MAX,
which has the exclusive right to manufacture and market a high performance,
multi-media add-in card providing both hardware and software for personal
computers. MAX has begun marketing its card under the trade name OOMPH! This
card offers 22 different media functions consisting of the following:
- H324 Video Phone over standard phone line with superior audio & video
quality
- PCI Video Capture (full motion 30fps with Realtime MPEG-1
compression) & stereo audio capture
- Video Editing with 3-D Titling, wipe effects & fully syncronized
audio soundtrack editing
- Output captured video to VGA screen, VCR Tape, NTSC Television,
Disk, or CD-Recordable
- PCI DVD Video playback, smooth full-screen DVD-video on a Pentium 133
or faster
- MPEG-1 Video playback, full motion 30fps; full screen or windowed
- Output PC- VGA desktop screen to NTSC Television, 640x480 or
hi-res virtual
- Output DVD or MPEG videos to NTSC Television for PC Home Theater
- Display Live-Video (from Camera, VCR, or int. TV-tuner) full motion;
full screen or windowed
- PCI 2D accelerated Graphics VGA, up to 1280x1024 non-interlaced in
high color
- PCI 3D accelerated Graphics Rendering with Z-buffering, Gourad
Shading, and more
- PCI DSVD Modem v.34bis (230k data/33.6k band) with full TAPI support
- Hands-free Speakerphone, full-Duplex with acoustic echo cancellation
- Voicemail Answermachine with Caller ID and Forwarding function
- Fax V.17 (14.4k) Class 1, 2, and 2.0 with send and receive
capability
- Distinctive Ring call routing for all telephony functions
- PCI Sound Card, compatible with industry standards
- Full Wave Table synthesis with 32 simultaneous voices (4meg)
- Multiple *WAV channel playback/record capability(*multi-Duplex)
- Dolby Digital AC-3 Audio Output (5+1 channels) for DVD Playback
- SRS 3D Audio enhancement for surround sound from just 2 speakers
- Industry Standard Joystick with MIDI port
Such card enhances the performance of computers, either as an add-in at
time of manufacture or installed into existing units. The card, with its own
inbuilt processor, has the ability to perform multi-media software functions,
simultaneously if need be, without detracting from the central processor of the
computer. Additional software can be added to the card as developed.
The card was developed by Chromatic Research of California, and,
subsequent to its acquisition by the Company, MAX purchased the exclusive right
to manufacture and market the card by the acquisition of Chromatic's inventory
of partially completed units and components for a cost of approximately
$550,000.
Since April 1998, the staff of MAX have applied themselves to the
development of a marketing campaign, including the purchase and registration of
trade marks, trade names, and the development of packaging materials. Target
markets are original equipment manufacturers, dealers and sellers in the
industry. Evaluation cards have begun to be offered to industry groups, and a
national marketing campaign is anticipated to commence in August 1998.
No revenues or expenses of MAX were incurred prior to March 31, 1998,
and none are included in the financial statements attached hereto or in any pro
forma data.
The Company continues to look for additional software applications
which may be integrated into the card, and it is believed some of these will
give rise to the availability of patent protection. The Company will continue
limited research and development in this regard.
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Competition in the industry is extremely high, and new developments and
products are offered regularly. Many of Max' competitors have greater experience
in the industry and more financial resources available to them. Competition in
multi-media products comes from companies such as ATI Technologies, Inc.,
Creative Technology, Ltd. and Sigma Designs, Inc. While these competitors
obviously have more financial strength, the Company believes it can successfully
compete because it believes the MAX board fulfills functions that no other
single board can achieve. Marketing is being targeted to original equipment
manufacturers, dealers and resellers in the industry. There is no assurance the
marketing efforts for this computer card will be successful.
Environmental Impact
None of the Company's activities utilize any hazardous materials or
results in any discharge of pollutants into the environment. The Company
believes it complies fully with all environmental laws and regulations.
Year 2000
The Company does not expect any adverse consequences from the problems
arising in the computer industry upon the advent of the year 2000.
Employees
The Company employs a total of 132 full-time persons, including 44 in
its HBG facility in St. George, Utah, 61 at its AmeraPress facility in Euless,
Texas, 4 in its technology division, 17 in its credit card verification
business, and six in its corporate headquarters, including three executive
personnel. The credit card verification business also relies on the sales
efforts of approximately 75 commission-only personnel. None of such persons is
represented by a union, and the Company believes its relations with its
employees is very good.
Regulation
The Company's only regulatory issues not common to all businesses is
the oversight of its home-based business services and sales programs by the U.S.
Federal Trade Commission. The laws and regulations of the FTC provide for
consumer protection against false and misleading sales promotions, but do not
include any advance filing or approval requirements. The Company is required to
exercise supervision over the methods and content utilized in the marketing of
business opportunities, and it believes it is in compliance with these laws;
however, see Part II, Item 2, "Legal Proceedings".
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Item 2. Management's Discussion and Analysis or Plan of Operation
General
The Company through its wholly-owned subsidiaries:
(i) sells and distributes merchant credit card authorization and
payment systems to direct marketing merchants throughout the
United States (commenced November 1994);
(ii) markets home-based business through seminars (acquired in
1997) and produces customized printing for distribution by
home-based businesses (commenced January 1996); and
(iii) manufacturers and markets computer hardware and software
(commenced April 1998).
Revenues and expenses for the fiscal year ended June 30, 1996 applied
only to the credit card authorization systems and to six months of the
customized printing business. Revenues and expenses for the fiscal year ended
June 30, 1997 applied to a full year for each of these businesses. No results
from the computer hardware and software are included in the revenues and
expenses for any period.
For the nine months ended March 31, 1998, the Company's revenues and
expenses apply to the operations of these two businesses for the whole period,
and to the seminar business for only the six months since acquisition.
<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION
Nine Months Nine Months
Year Ended Ended Ended
6/30/96 6/30/97 3/31/97 3/31/98
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
Net sales $ 2,005,486 $13,420,766 $9,596,882 $17,002,945
Gross profit 1,581,288 11,537,659 8,265,746 14,926,871
Operating income (loss) (709,833) 3,162,307 2,219,844 1,592,787
Net earnings (loss) after tax (709,833) 2,923,519 2,113,259 917,730
Net earnings (loss) per share (.14) N/A N/A .17
Pro forma net earnings (1) -- 1,964,378 1,398,502 --
Pro forma earnings per share -- .39 .28 --
(1) Pro forma net earnings give effect to income taxes that would have been
provided if the Company had been subject to federal and state income
taxes for all periods. See Note L to Financial Statements.
June 30, 1997 March 31, 1998
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Balance Sheet Data
Total assets $ 1,312,441 $ 3,885,183
Working capital deficit (5,017,331) (1,591,605)
Total liabilities 10,438,045 3,518,057
Stockholders' equity (deficit) (9,125,604) 367,126
</TABLE>
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Results of Operations
Nine months ended March 31, 1998 compared to nine months ended March 31, 1997.
Revenues
Revenues increased by approximately 77% from $9,596,882 in the nine
months ended March 1997 to $17,002,945 in the nine months ended March 1998. This
increase was primarily from sales by the Home Based Business Segment through
expansion of the printing business and to the inclusion of the revenues of Home
Business Group Inc. Revenues of this segment were the largest component of sales
and increased by approximately 99% from $8,586,852 in the nine months ended
March 1997 to $17,047,755 in the nine months ended March 1998.
Revenues during the nine months ended March 31, 1998 were adversely
affected by the FTC action (See "Recent Events"). This effect has not been
quantified.
Cost of Sales
Cost of sales increased by approximately 56% from $1,331,136 in the
nine months ended March 1997 to $2,076,074 in the nine months ended March 1998.
The increase resulted from the increased operating activity of the Home Based
Business Segment, but reflects the higher margins obtainable as such sales
increase.
Gross Profit
Group gross profit increased approximately 81% from $8,265,746 in the
nine months ended March 1997 to $14,926,871 in the nine months ended March 1998.
The increase is almost entirely due to, and reflects the expansion of, the
printing business and the inclusion of gross profit from the seminar business,
both forming the Home Based Business Segment. This 88% gross margin demonstrates
the attractiveness of this business to the Company.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased approximately
121% from $6,045,902 in the nine months ended March 1997 to $13,334,084 in the
nine months ended March 1998. The increase was due almost entirely to the Home
Based Business Segment and reflects the increases of labor, commissions,
delivering expenses, and overheads necessary to achieve the increased revenues
achieved by the division. In addition, attorney fees increased by $405,226 to
$463,272, for the nine months ended March 1998, due primarily to the defense
against the FTC action. (See "-Recent Events").
Interest Expense
Interest expense of $141,734 incurred during the nine months ended
March 1998 was paid primarily on the promissory note to the Company's
Shareholders who sold AmeraPress to the Company. On December 15, 1997 the note
was converted to Series A Preferred Stock, and no further interest is payable.
No interest expense was incurred for the nine months ended March 1997.
Income Taxes
Income taxes of $533,323 were accrued based on income earned for the
nine months ended March 1998. Only state income tax was accrued for the nine
months ended March 1997, because for that period the income was earned in a
limited liability company for which the members of the LLC were personally
responsible for federal taxes on the Company's income.
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Net Earnings
Net earnings decreased by approximately 57% from $2,113,259 in the nine
months ended March 1997 to $917,730 in the nine months ended March 1998. This
decrease was due to the increased profitability of the Home Based Business
Segment and reflected both the business expansion and the inclusion of the
seminar business, offset by significantly higher selling, general and
administrative expenses and legal fees related to the defense against the FTC
action. (See "-Recent Events"). In addition, income tax expense of $533,323 was
recorded for the nine months ended March 1998, while $106,585 was recorded for
the nine months ended March 1997.
Fiscal year ended June 30, 1997 compared to year ended June 30, 1996
Revenues
Revenues increased by approximately 569% from $2,005,486 in the year
ended June 30, 1996 to $13,420,766 in the year ended June 30, 1997. The increase
is due almost entirely to the Home Based Business Segment which booked its first
full year of operation.
Cost of Sales
Cost of sales increased by approximately 344% from $424,198 in the year
ended June 30, 1996 to $1,883,107 in the year ended June 30, 1997. The increase
was almost entirely due to the Home Based Business Segment and represents the
increased costs needed to achieve the increased revenues.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased approximately
266% from $2,291,121 in the year ended June 30, 1996 to $8,375,352 in the year
ended June 30, 1997. The increase represents the costs of labor, commissions,
delivery expenses, and overheads required by the Home Based Business Segment to
achieve the increased revenues.
Interest Expense
Interest expense of $44,247 incurred in the year ended June 30, 1997
was paid on the promissory note to the Sellers of AmeraPress. No interest
expense was incurred in the year ended June 30, 1996.
Income Tax
The income tax expense in the year ended June 30, 1997 of $194,541 was
accrued on the net profit of the divisions earned from the date of acquisition
by the Company to June 30, 1997. No income tax was accrued in the year ended
June 30, 1996. The effective rate of tax for the year ended June 30, 1997 was
less than the full statutory rate due to the availability of net operating
losses from prior years.
Net Earnings
Net earnings increased from a loss of $709,833 in the year ended June
30, 1996 to a profit of $2,923,519 in the year ended June 30, 1997. The increase
of profitability was almost entirely due to the Home Based Business Segment
which operated for the full year to June 30, 1997 compared to only six months in
the year to June 30, 1996.
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Liquidity
The Company had working capital deficits of ($1,591,605) at March 31,
1998 and ($5,017,331) at June 30, 1997. The Company's cash flow and working
capital requirements are primarily affected by the receipt of payments from
customers, which generally are due at the time of sale, and payment of operating
expenses. The reduction in the working capital deficit from June 30, 1997 to
March 31, 1998, of $3,425,726, included (a) additional investment in receivables
and other assets as a result of increased sales and related activities; (b)
$5,000,000 of current maturities of notes payable to stockholders were converted
to preferred stock; (c) accounts payable increased by $1,748,757, from $536,953
at June 30, 1997 to $2,285,710 at March 31, 1998 and accrued expenses increased
by $552,772 from $66,551 at June 30, 1997 to $619,323 at March 31, 1998. The
increases are due to additional payables related to the increased level of sales
and related costs, $400,000 accrued for estimated refunds to be given to
customers as a result of the FTC action and accrual of $326,817 of legal fees
incurred as a result of the FTC action; (d) income taxes payable increased by
$338,782, from $194,541 at June 30, 1997 to $533,323 at March 31, 1998. Income
taxes were accrued based on income earned for the nine months ended March 31,
1998, while federal income taxes were accrued only on earnings from the date of
acquisition of AmeraPress during the year ended June 30, 1997 due to the
availability of net operating losses from prior years, and the company operated
as a limited liability company prior to the AmeraPress acquisition, and the
members of the LLC were personally liable for federal taxes on the Company's
income. Therefore, the Company's operating activities provided net cash of
$2,616,865 for the nine months ended March 31, 1998 and $3,290,810 for the year
ended June 30, 1997.
Investing activities of the Company consisted of the acquisition of
property and equipment in the amounts of $263,978 and $703,949 for the year
ended June 30, 1997 and the nine months ended March 31, 1998, respectively.
Financing activities of the Company consisted of note repayments and
distributions to stockholders in the total amounts of $2,680,000 and $1,560,299
for the year ended June 30, 1997 and the nine months ended March 31, 1998,
respectively.
Notes payable to stockholders in the total amount of $8,000,000 were
converted to preferred stock in the nine months ended March 31, 1998.
Future cash resources available to the Company are expected to come
from profitable operations and the additional issue of shares as a result of
anticipated exercises of warrants at $4 each. Should the need arise for further
funding for increases in inventories or for capital equipment, the Company would
address the possibility of lines of credit from lending authorities and new
issues of capital stock. There is no assurance that these resources will be
available to the Company.
Recent Events
Federal Trade Commission
On February 17, 1998, the Federal Trade Commission (FTC) obtained from
the United States District Court an ex parte Temporary Restraining Order and
Asset Freeze on AmeraPress, Inc., and Home Business Group, Inc., two of the
subsidiary companies of the Company. A Temporary Receiver was also appointed by
the Court. The FTC alleged that the Company was offering prepaid business
ventures in which the purchaser could expect to receive a specific level of
earnings and that such representations were false and misleading and constituted
deceptive acts or practices in violation of Section 5(c) of the FTC Act (15
U.S.C Sec 45(a)).
On February 27, 1998, the Federal District Court removed the Temporary
Restraining Order and replaced it with a new order which substantially eased the
restrictions placed on the Company. Under the new order, the Company resumed
operations under limited oversight by a court appointed monitor to review
expenditures of the Company within specified limits and monitor sales
information.
11
<PAGE>
On April 6, 1998, the defendants filed a counterclaim against the FTC
alleging that the FTC acted unlawfully in obtaining an exparte restraining order
that was overbroad, harassing and inappropriate to the Company's situation, and
that the FTC had acted in a pattern of deceit, coercion and harassment to obtain
information from and about the defendants.
On April 13, 1998 the FTC and the Company agreed to a compromise and
settlement of the case. The Company did not admit to any violation of any law,
statute, rule, or regulation or to the commission of any wrongful act; however,
it believed that it reached a settlement that would end the litigation and
permit the Company to operate under reasonable restrictions. Such agreed order
of settlement included a permanent injunction against making any false or
misleading statement or misrepresentation about any business venture, product or
service offered by it and the potential income that might be derived therefrom.
The agreement with FTC included the payment to the FTC of refunds to
distributors which would be reimbursed to those distributors by FTC. Refunds due
prior to the FTC action were approximately $145,000 and increased to more than
$465,000 during the time of the FTC investigation. The Company believes that
many of the distributors were led to believe that the Company was being closed.
In addition, the Company paid an administrative fee of $35,000. The Company has
a policy of offering refunds to distributors for a period of ten days, and the
average rate of refunds experienced before the FTC action was approximately 10%
of sales.
Legal fees approximating $500,000 have been incurred and paid fighting
this action. These requests for refunds and legal fees have adversely affected
the Company's profitability and cash resources during the fourth quarter of
fiscal 1998. To meet these extraordinary expenses the Company encouraged warrant
holders to exercise, by reducing the exercise price of its Class A Warrants from
$6.00 to $4.00 per warrant as permitted by the instrument creating the warrant.
As of June 30, 1998, a total of 160,835 shares had been issued upon exercise of
warrants, generating $643,340 in additional equity. In addition, in June 1998
the Company issued Convertible Debentures for $400,000 and 350,000 shares of
Series B Preferred Stock for a purchase price of $3,500,000. The Company has
therefore obtained adequate cash to enable it to return to a full operating
level and meet its obligations for the foreseeable future.
MAXpc Technologies, Inc.
On March 13, 1998, the Company agreed to purchase all of the issued and
outstanding stock of MAXpc Technologies, Inc., subject to a 30 day due diligence
period. The Company believed that MAX provided an opportunistic source of
revenues that could be acquired for common stock and future development costs
and that could provide an entry into the rapidly expanding market for computer
equipment.
On April 13, 1998, the agreement became effective, and 200,000 shares
of common stock were issued to the Seller. At the same time, finders fees of
10,000 shares of common stock were issued. MAX's assets consisted only of its
contract rights to acquire and develop its products and associated know-how and
good will. Since the acquisition, the activities of MAX have consisted of the
development of a marketing program, purchase and registration of trade marks and
trade names and development of packaging materials.
MAXpc Technologies, Inc. has the exclusive rights to manufacture and
market a high performance, multi- media add-in card providing both hardware and
software for inclusion in either new or existing computers.
12
<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of June 30, 1998 with
respect to persons known to the Company to be the beneficial owners of more than
5% of its voting securities and with respect to the beneficial ownership of such
securities by each director of the Company and by all directors and executive
officers of the Company as a group.
<TABLE>
Number of Shares Number of Shares
(Assuming No Exercise (Assuming Exercise
Name and Address of of Class A Warrants of Class A Warrants
Beneficial Owner by Holder) (1) Percent by Holder)(1) Percent
- ----------------------- ---------------------- ------- ---------------------- -------
<S> <C> <C>
Common Stock
Lawrence R. Biggs, Jr. 1,070,000 17.2 2,158,000 29.5
8115 Preston Road
Eighth Floor-East
Dallas, Texas 75225
Lawrence A. Cahill 2,049,800 32.9 3,949,800 48.6
3330 Southgate, S.W.
Cedar Rapids, Iowa 52404
Donald G. McLellan(2) 800,000 12.9 1,460,000 21.2
8115 Preston Road
Eighth Floor-East
Dallas, Texas 75225
Ronald L. Brown 50,000 0.8 50,000 0.8
Suite 2200
One Galleria Tower
Dallas, Texas 75240
Directors and executive 4,382,300 70.4 8,030,300 81.3
officers as a group
(9 persons)
</TABLE>
<TABLE>
Series B Preferred Stock
Name and Address of Number of Percentage of Number of
Beneficial Owner Series B Shares Series B Shares Common Shares (3)
- ---------------- --------------- --------------- -----------------
<S> <C>
Dominion Capital Fund, Ltd. 200,000 57.1 2,000,000
c/o Thomson Kernaghan & Co.
365 Bay Street
Toronto, Ontario M54-2V2
Sovereign Partners, Limited 110,000 31.5 1,100,000
Partnership
c/o Thomson Kernaghan & Co.
365 Bay Street
Toronto, Ontario M54-2V2
Canadian Advantage Ltd. 40,000 11.4 400,000
</TABLE>
13
<PAGE>
Partnership
c/o Thomson Kernaghan & Co.
365 Bay Street
Toronto, Ontario M54-2V2
- ---------------
(1) Messrs. Biggs, Cahill, McLellan and all executive officers and
directors as a group beneficially own Class A Warrants exercisable
until June 1999 at a price of $4.00 per share for 1,088,000, 1,900,000,
660,000 and 3,648,000 shares of Common Stock, respectively.
(2) Mr. McLellan has 50% voting and investment power in Vision Finance and
Management, a family company which owns of record 400,000 shares of
Common Stock and 400,000 Class A Warrants included in the table as
being beneficially owned by Mr. McLellan. His spouse owns the other 50%
of Vision Finance and Management.
(3) See Item 8 - "Description of Securities - Series B Preferred Stock."
Shares of common stock issued upon conversion is based upon recent
conversion price of $1.00 per share. Such conversion price varies with
the market price of the Common Stock. Shares of Common Stock issuable
upon conversion are being registered by the Company for resale on the
Company's trading market.
The Company is not aware of any arrangement which might result in a
change in control in the future.
14
<PAGE>
PART F/S
The following financial statements are filed as part of this
registration statement on Form 10-SB. Financial Statements as of June 30, 1997
and for the year then ended have been audited by Grant Thornton LLP, as stated
in their report. Audited Financial Statements for the year ended June 30, 1996
are not available, and unaudited financial statements are included pursuant to
the Form 10-SB, Part F/S. Financial Statements for the nine month periods ended
March 31, 1997 and 1998 have not been audited, but are believed by management to
contain all accruals and adjustments required for a fair presentation of the
financial condition and results of operations of the Company in accordance with
generally accepted accounting principles.
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of June 30, 1997 and March 31, 1998 (unaudited)
Consolidated Statements of Earnings for the years ended June 30, 1996
(unaudited) and 1997 and the nine months ended March 31, 1997 (unaudited) and
1998 (unaudited)
Consolidated Statement of Stockholders' Equity (Deficit) for the years ended
June 30, 1996 (unaudited) and 1997 and the nine months ended March 31, 1998
(unaudited)
Consolidated Statements of Cash Flows for the years ended June 30, 1996
(unaudited) and 1997 and the nine months ended March 31, 1997 (unaudited) and
1998 (unaudited)
Notes to Consolidated Financial Statements
F - 1
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Voxcom Holdings, Inc.
We have audited the accompanying consolidated balance sheet of Voxcom Holdings,
Inc. and Subsidiaries as of June 30, 1997, and the related consolidated
statements of earnings, stockholders' equity (deficit), and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the consolidated financial position of Voxcom Holdings,
Inc., and Subsidiaries as of June 30, 1997, and the consolidated results of
their operations and their consolidated cash flows for the year then ended, in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Dallas, Texas
October 28, 1997
F - 2
<PAGE>
<TABLE>
<CAPTION>
Voxcom Holdings, Inc.
CONSOLIDATED BALANCE SHEETS
March 31,
ASSETS June 30, 1997 1998
------------- ----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 375,687 $ 728,304
Inventories 363,409 378,312
Receivables -- 411,465
Other current assets 41,618 408,371
----------- -----------
Total current assets 780,714 1,926,452
PROPERTY AND EQUIPMENT, AT COST
Machinery and equipment 323,606 679,227
Furnishings 103,281 451,609
----------- -----------
426,887 1,130,836
Less accumulated depreciation 117,895 188,306
----------- -----------
308,992 942,530
OTHER ASSETS 222,735 1,016,201
----------- -----------
$ 1,312,441 $ 3,885,183
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of notes payable to stockholders $ 5,000,000 $ 79,701
Accounts payable 536,953 2,285,710
Accrued expenses 66,551 619,323
Income taxes payable 194,541 533,323
----------- -----------
Total current liabilities 5,798,045 3,518,057
NOTES PAYABLE TO STOCKHOLDERS, less current maturities 4,640,000 --
COMMITMENTS -- --
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $100 par value; authorized, 50,000,000 shares;
issued and outstanding, 80,000 shares at March 31 (unaudited) -- 8,000,000
Common stock, $.0001 par value; authorized, 25,000,000 shares;
issued and outstanding, 4,999,937 shares at June 30 and 5,574,937
shares at March 31 (unaudited) 500 557
Additional paid-in capital -- 574,943
Accumulated deficit (9,126,104) (8,208,374)
----------- -----------
(9,125,604) 367,126
----------- -----------
$ 1,312,44 $ 3,885,183
=========== ===========
</TABLE>
F - 3
<PAGE>
<TABLE>
<CAPTION>
Voxcom Holdings, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
Nine months ended
Year ended June 30, March 31,
----------------------------- ----------------------------------
1996 1997 1997 1998
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C>
Net sales $2,005,486 $13,420,766 $9,596,882 $17,002,945
Cost of sales 424,198 1,883,107 1,331,136 2,076,074
---------- ----------- ---------- ----------
Gross profit 1,581,288 11,537,659 8,265,746 14,926,871
Selling, general and
administrative expenses 2,291,121 8,375,352 6,045,902 13,334,084
---------- ----------- --------- -----------
Operating income (loss) (709,833) 3,162,307 2,219,844 1,592,787
Interest expense - 44,247 - 141,734
---------- ----------- ----------- ----------
Earnings (loss) before
income taxes (709,833) 3,118,060 2,219,844 1,451,053
Income taxes - 194,541 106,585 533,323
---------- ----------- ---------- --------
Net earnings (loss) $ (709,833) $ 2,923,519 $2,113,259 $ 917,730
========== =========== ========== ===========
Earnings (loss) per share - basic ($.14) $.17
==== ===
Weighted average shares outstanding 4,999,937 5,507,938
========= =========
Unaudited pro forma information (Note L):
Earnings before income taxes $3,118,060 $2,219,844
Pro forma income tax expense 1,153,682 821,342
--------- --------
Pro forma net earnings $1,964,378 $1,398,502
========= =========
Pro forma earnings per share - basic $.39 $.28
=== ====
Weighted average shares outstanding 4,999,937 4,999,937
========= =========
</TABLE>
F - 4
<PAGE>
<TABLE>
<CAPTION>
Voxcom Holdings, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Additional
Common stock Preferred stock paid-in
-------------------------- --------------------------
Shares Amount Shares Amount capital
------ ------ ------ ------ -----------
<S> <C> <C> <C>
Balances at July 1, 1995 100,000 $ 1,000 -- $ -- $ 444,000
Net loss for the year -- -- -- -- --
Capital contributions -- -- -- -- 850,000
------------ ------------ ------------ ------------ ------------
Balances at June 30, 1996 (unaudited) 100,000 1,000 -- -- 1,294,000
Reorganization (Note A) Merger of
Voxcom Holdings, Inc.
And Voxcom Systems, Inc. 4,899,937 (500) -- -- (1,294,000)
Notes issued for acquisition
of AmeraPress, Inc. -- -- -- -- --
Distributions to stockholders -- -- -- -- --
Net earnings for the year -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balances at June 30, 1997 4,999,937 500 -- -- --
Issuance of stock 575,000 57 -- -- 574,943
Conversion of debt -- -- 80,000 8,000,000 --
Net earnings for the period -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balances at March 31, 1998 (unaudited) 5,574,937 $ 557 80,000 $ 8,000,000 $ 574,943
============ ============ ============ ============ ============
</TABLE>
Accumulated
deficit Total
------------ ------------
Balances at July 1, 1995 $ (714,290) $ (269,290)
Net loss for the year (709,833) (709,833)
Capital contributions -- 850,000
------------ ------------
Balances at June 30, 1996 (unaudited) (1,424,123) (129,123)
Reorganization (Note A) Merger of
Voxcom Holdings, Inc.
And Voxcom Systems, Inc. 1,294,500 --
Notes issued for acquisition
of AmeraPress, Inc. (10,000,000) (10,000,000)
Distributions to stockholders (1,920,000) (1,920,000)
Net earnings for the year 2,923,519 2,923,519
------------ ------------
Balances at June 30, 1997 (9,126,104) (9,125,604)
Issuance of stock -- 575,000
Conversion of debt -- 8,000,000
Net earnings for the period 917,730 917,730
------------ ------------
Balances at March 31, 1998 (unaudited) $ (8,208,374) $ 367,126
============ ============
The accompanying notes are an integral part of this statement.
F - 5
<PAGE>
<TABLE>
<CAPTION>
Voxcom Holdings, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
Year ended June 30, March 31,
-------------------------- -------------------------
1996 1997 1997 1998
------ ------ ------ ------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ (709,833) $ 2,923,519 $ 2,113,259 $ 917,730
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Write-off of receivables -- 258,085 -- 10,657
Depreciation and amortization 5,320 71,489 48,019 185,731
Stock issued for services -- -- -- 25,000
Change in operating assets and liabilities
Receivables -- -- -- (422,122)
Other current assets (354,940) 65,288 178,580 (366,753)
Inventories (60,354) (303,459) (356,855) (14,903)
Other assets (54,830) (67,898) (7,592) (358,786)
Accounts payable and accrued
expenses 466,759 149,245 36,574 2,301,529
Income taxes payable -- 194,541 106,585 338,782
----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities (707,878) 3,290,810 2,118,570 2,616,865
Cash flows from investing activities
Acquisition of property and equipment (120,687) (263,978) (227,918) (703,949)
Cash flows from financing activities
Capital contributions 850,000 -- -- --
Payments on notes payable to stockholders -- (760,000) (400,000) (1,560,299)
Distributions paid to stockholders -- (1,920,000) (1,225,000) --
----------- ----------- ----------- -----------
Net cash used in financing activities 850,000 (2,680,000) (1,625,000) (1,560,299)
Net increase in cash 21,435 346,832 265,652 352,617
Cash at beginning of period 7,420 28,855 28,855 375,687
----------- ----------- ----------- -----------
Cash at end of period $ 28,855 $ 375,687 $ 294,507 $ 728,304
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ -- $ -- $ -- $ 185,981
Income taxes $ -- $ -- $ -- $ --
Noncash investing and financing activities
Common stock issued for services and
noncompetition agreements $ -- $ -- $ -- $ 575,000
</TABLE>
The accompanying notes are an integral part of these statements.
F - 6
<PAGE>
Voxcom Holdings, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to March 31, 1998, the year ended June 30, 1996
and the nine month periods ended March 31, 1997 and 1998 is unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Voxcom
Holdings, Inc. (Holdings) and its subsidiaries, Voxcom Systems, Inc.
(Systems), AmeraPress, Inc. (AmeraPress) and Home Business Group, Inc.
(HBG), collectively, "the Company."
Holdings, formerly Newcorp One, Inc., was incorporated in 1996. On June 17,
1997, Holdings, which had no operations and no significant assets or
liabilities, issued 4,000,000 shares of its common stock (equal to 80% of
its then outstanding shares) for all of the outstanding capital stock of
Systems.
Since the stockholders of Systems owned 80% of the common stock of Holdings
after the sale of Systems, Systems is deemed to be the acquiring
corporation for accounting purposes. Concurrent with the above
transactions, Holdings acquired all of the outstanding common stock of
AmeraPress in exchange for a $10,000,000 note, payable in 24 equal monthly
installments. AmeraPress was incorporated on June 19, 1997 and succeeded to
the business of Voxcom Sales, L.L.C. (Voxcom Sales).
Voxcom Sales and Systems were under common control. Accordingly, the
financial statements include the accounts or a historical cost basis of
Systems and Voxcom Sales/AmeraPress for all periods presented. The
$10,000,000 note given in the acquisition of AmeraPress has been deemed a
distribution to the shareholders of AmeraPress for accounting purposes and
resulted in a charge to stockholders' equity of a like amount.
Home Business Group, Inc. (HBG), a wholly-owned subsidiary, commenced
operations on October 1, 1997.
The financial statements include the operations of Systems and Voxcom Sales
from July 1, 1996 and AmeraPress and Holdings from June 17, 1997, and HBG
from October 1, 1997.
NOTE B - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Business
--------
AmeraPress sells materials to home-based businesses and produces laminated,
customized sports, trading, and greeting cards sold by those businesses. HBG
conducts seminars and sells introductory kits to home-based businesses.
AmeraPress and its predecessor, Voxcom Sales, L.L.C., accounted for
approximately 89% of total revenues for the year ended June 30, 1997.
Systems sells and provides services related to credit card verification
units for merchants.
Advertising Costs
-----------------
The Company charges advertising costs to expense when incurred. Advertising
costs for the year ended June 30, 1997 were approximately $213,000.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash in banks and all highly liquid
investments with maturities of three months or less when purchased.
Inventories
F-7
<PAGE>
Voxcom Holdings, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to March 31, 1998, the year ended June 30, 1996
and the nine month periods ended March 31, 1997 and 1998 is unaudited)
NOTE B-BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES-Continued
Inventories
-----------
Inventories consist principally of finished goods and are stated at the
lower of cost or market; cost is determined using the first-in, first-out
method.
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is computed on a
straight-line basis over the estimated lives of the individual assets,
ranging from five to seven years.
Revenue Recognition
-------------------
Sales of products and services are recorded as products are shipped or
services are rendered.
Earnings (Loss) Per Share
-------------------------
The Company adopted Statement of Financial Accounting Standards No. 128
(SFAS No. 128) effective December 31, 1997. In accordance with SFAS No.
128, the Company computes basic earnings or loss per share based on the
weighted average number of common shares outstanding. Diluted earnings per
share is computed based on the weighted average number of common shares
outstanding plus the number of additional common shares that would have
been outstanding if dilutive potential common shares, consisting of stock
purchase warrants, had been issued. For all periods presented, there was no
dilutive effect from outstanding stock purchase warrants.
The computation of weighted average shares outstanding gives retroactive
effect to the shares issued by Holdings in the acquisition of Systems (Note
A).
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F - 8
<PAGE>
Voxcom Holdings, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to March 31, 1998, the year ended June 30, 1996
and the nine month periods ended March 31, 1997 and 1998 is unaudited)
NOTE B - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - Continued
Interim Financial Statements
The accompanying interim financial statements are unaudited. They have been
prepared in accordance with generally accepted accounting principles for
interim financial information and Item 310(b) of Regulation S-B.
Accordingly, they do not include all the information and footnotes required
by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the interim periods are not
necessarily indicative of the results that may be expected for the full
year.
NOTE C - ACQUISITION OF BUSINESS
Effective October 1, 1997, the Company acquired certain assets and
liabilities of a company engaged in the business of home-based business
seminars for no consideration. The acquisition was accounted for as a
purchase, and the financial statements include the operations of the
acquired business since October 1, 1997.
The following unaudited pro forma data presents combined net sales and net
earnings assuming the acquisition had taken place at the beginning of
fiscal 1997. Pro forma net earnings reflect both the pro forma effect of
income taxes (see Note L) and the pro forma effect of the acquisition:
Nine months ended
Year ended March 31
June 30, 1997 1997 1998
------------- ---- ----
Net sales $21,968,000 $16,261,000 $19,449,000
Net earnings 1,936,000 1,185,000 1,406,000
Earnings per share .39 .24 .26
NOTE D - OTHER ASSETS
Other assets consist of the following:
June 30, 1997 March 31, 1998
(unaudited)
------------- --------------
Deposits $221,689 $ 596,576
Noncompetition agreements - 400,305
Other 1,046 19,320
-------- ----------
$222,735 $1,016,201
======== ==========
During 1997, the Company issued 500,000 shares in exchange for
non-compete agreements with various individuals. The agreements are being
amortized over their respective lives, ranging from 32 to 60 months.
F-9
<PAGE>
Voxcom Holdings, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to March 31, 1998, the year ended June 30, 1996
and the nine month periods ended March 31, 1997 and 1998 is unaudited)
NOTE E - NOTES PAYABLE
Notes payable to stockholders are due in 24 equal monthly installments of
principal plus interest. The Company has the right to defer all or any part
of any 12 installments by paying all accrued interest required on the date
of payment, provided that all principal and interest shall be paid by June
11, 2001. The notes bear interest at prime, adjusted each December 31. The
interest rate at June 30, 1997 was 8.5%. The notes are collateralized by all
of the outstanding shares of AmeraPress.
In December 1997, $8,000,000 principal amount of notes were exchanged for
80,000 shares of preferred stock. The preferred stock pays no dividends and
is redeemable at the option of the Company.
NOTE F - FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of notes payable approximates carrying value because the
notes have variable interest rates. Due to their short-term nature, the fair
value of cash, cash equivalents and accounts payable approximates their
carrying value.
NOTE G - LEASE COMMITMENTS
The Company leases offices and warehouse space and equipment under various
noncancellable lease agreements. Total rent expense was $180,097 for the
year ended June 30, 1997. As of June 30, 1997, the future minimum rental
payments are as follows:
Year ending
June 30,
-----------
1998 $139,383
1999 111,096
2000 62,168
2001 56,958
2002 15,762
-------
$385,367
========
In February 1998, the Company entered into a new lease agreement for office
space with a five-year term. Monthly rental payments are approximately
$24,000.
NOTE H - INCOME TAXES
The provision for income taxes for the year ended June 30, 1997, consists of
the following:
Federal $ 52,257
State 142,284
--------
$194,541
========
F - 10
<PAGE>
Voxcom Holdings, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to March 31, 1998, the year ended June 30, 1996
and the nine month periods ended March 31, 1997 and 1998 is unaudited)
NOTE H - INCOME TAXES - Continued
Voxcom Sales, the predecessor to AmeraPress, was a limited liability
company. Therefore, federal income taxes on its earnings were the liability
of its stockholders. Following is a reconciliation of income taxes at the
federal statutory rate to income tax expense for the year ended June 30,
1997:
<TABLE>
<S> <C>
Tax at statutory rate $1,060,141
Earnings of Voxcom Sales, not subject to federal tax (838,629)
State income tax, net of federal benefit 131,646
Benefit of utilization of net operating loss carryovers of Systems (157,155)
Other (1,462)
----------
Income tax expense $ 194,541
==========
</TABLE>
At June 30, 1997, the Company had no remaining operating loss carryovers and
no material deferred income tax assets or liabilities.
NOTE I - STOCK PURCHASE WARRANTS
All stockholders of Holdings were given one Class A warrant for each common
share acquired by them. Each warrant entitles the holder to purchase one
share of common stock for $6.00. If not exercised, warrants expire in June
1999. If exercised, the holder will receive one Class B warrant for each
Class A warrant. Each Class B warrant entitles the holder to purchase one
share of common stock for $20.00 and expires in June 1999.
At June 30, 1997, there were 4,999,937 Class A warrants outstanding; none
had been exercised.
In March 1998, the Company reduced the exercise price of the class A
warrants to $4.00.
F - 11
<PAGE>
Voxcom Holdings, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to March 31, 1998, the year ended June 30, 1996
and the nine month periods ended March 31, 1997 and 1998 is unaudited)
NOTE J - INDUSTRY SEGMENTS
The Company operates in two industry segments, as described in Note B.
Financial information by segment as of June 30, 1997 and for the year then
ended is as follows:
<TABLE>
Home-based Credit card
businesses verification Corporate Consolidated
<S> <C> <C>
Sales to unaffiliated customers $12,008,786 $1,411,980 $ - $13,420,766
=========== ========== ========== ===========
Operating income $ 2,700,086 $ 462,221 $ - $ 3,162,307
Corporate expenses - - (44,247) (44,247)
----------- ---------- ---------- -----------
Earnings before income taxes $ 2,700,086 $ 462,221 $ (44,247) $ 3,118,060
=========== ========== ========== ===========
Identifiable assets at June 30, 1997 $ 1,168,394 $ 144,047 $ - $ 1,312,441
=========== ========== ========== ===========
Capital expenditures $ 250,208 $ 13,770 $ - $ 263,978
=========== ========== ========== ===========
</TABLE>
Operating income is revenue less operating expenses, exclusive of corporate
interest expense.
NOTE K - FEDERAL TRADE COMMISSION SETTLEMENT (unaudited)
In April 1998, the Company and the Federal Trade Commission (FTC) agreed to
a compromise and settlement of a lawsuit filed by the FTC in February 1998.
The FTC had alleged violations of the FTC Act in connection with the
Company's business of marketing sales opportunities for home-based
businesses.
The agreement resulted in refunds by the Company to distributors in the
amount of approximately $145,000 which were due at the time the lawsuit was
filed, plus an additional $320,000 which arose during the FTC's
investigation after the lawsuit was filed. The Company believes that many of
the distributors were led to believe during the investigation that the
Company was being closed. The Company has a policy of making refunds to
distributors for a period of ten days after receipt of goods.
Legal fees in connection with this matter were approximately $500,000.
F - 12
<PAGE>
Voxcom Holdings, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to March 31, 1998, the year ended June 30, 1996
and the nine month periods ended March 31, 1997 and 1998 is unaudited)
NOTE L - PRO FORMA DATA
As discussed in Note G, Voxcom Sales was a limited liability company, and
income taxes on its earnings were the liability of its shareholders. The
unaudited pro forma income tax information included in the statements of
earnings presents income tax expense as though the Company had been subject
to federal and state income taxes for all periods presented.
F - 13
<PAGE>
PART III
Item 1. Index to Exhibits
The following list describes the exhibits filed as part of this
registration statement on Form 10-SB:
Exhibit No. Description of Document
- --------------------------------------------------------------------------------
2.01 Agreement and Plan of Reorganization, dated
June 9, 1997, among Newcorp One, Inc. and the
shareholders of Voxcom Systems, Inc.
2.02.1 Stock Purchase Agreement, dated June 30, 1997,
among Voxcom Holdings, Inc. and the
shareholders of AmeraPress, Inc.
2.02.2 Promissory Note, dated June 30, 1997, in
connection with Stock Purchase Agreement
between Voxcom Holdings, Inc. and the
Shareholders of AmeraPress, Inc.
2.02.3 Security Agreement-Pledge, dated June 30, 1997,
in connection with Promissory Note between
Voxcom Holdings, Inc. and the Shareholders of
AmeraPress, Inc.
2.03.1 Stock Purchase Agreement regarding MAXpc
2.03.2 Employment Agreement with Gary Raabe
3.01 Restated Articles of Incorporation of
Newcorp One, Inc., dated June 12, 1997.
3.02 By-laws of Voxcom Holdings, Inc.
3.03 Certificate of Decrease in Authorized and
Issued Shares.
3.04 Certificate of Designation regarding Series A Preferred Stock
3.05 Certificate of Designation regarding Series B Preferred Stock
4.01.1 Securities Purchase Agreement dated June 19, 1998 with
Carmax Investments, Inc.
4.01.2 5% Convertible Debenture due May 31, 2000 dated June 19, 1998
III-1
<PAGE>
4.02. 1 Securities Purchase Agreement dated June 22, 1998 among
the Company and Dominion Capital Fund, Ltd. and
Sovereign Partners, Limited Partnership
4.02.2 Registration Rights Agreement
10.01 Consulting Agreement and Covenant Not to
Compete, dated July 1, 1997, between the Company
and Kim Crowther and Brian Jensen.
10.02 1997 Stock Bonus Plan
10.03 Promissory Note and Purchase Money Security
Agreement between the Company and General
Binding Corporation, dated March 27, 1997.
10.04 Settlement Agreement with FTC
*10.05 Consulting Agreement with Jande International
Holdings, LLC
*10.06 Consulting Agreement with S.G. Financial, Inc.
11.01 Earnings per Share
21.01 Subsidiaries
*27.01 Financial Data Schedule
- --------------------
Item 2 - Description of Exhibits - Not applicable
III - 2
<PAGE>
SIGNATURES
----------
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant has caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
VOXCOM HOLDINGS, INC.
By: /s/ Donald G. McLellan
-----------------------------
Donald G. McLellan, President
September 22, 1998
