U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM ________ TO _________
Commission file number 0-24273
VOXCOM HOLDINGS, INC.
d/b/a MAX INTERNET COMMUNICATIONS, INC.
(Exact name of registrant as specified 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)
(214) 691-0055
(Registrant's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 X No
--- ---
Number of shares outstanding of the Registrant's common stock (par value $.0001
per share) as of September 30, 1999: 15,629,861.
Transitional Small Business Disclosure Format
(Check one)
Yes No X
--- ---
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<TABLE>
<CAPTION>
VOXCOM HOLDINGS, INC.
d/b/a MAX INTERNET COMMUNICATIONS, INC.
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
ASSETS 1999 1999
------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,127,692 $ 8,136,585
Accounts receivable 3,204,950 169,217
Inventories 2,624,000 1,286,539
Prepaid expenses 235,348 44,475
------------- -------------
Total current assets 10,191,990 9,636,816
PROPERTY AND EQUIPMENT, AT COST
Machinery and equipment 162,370 87,830
Furnishings 75,401 67,634
------------- -------------
237,771 155,464
Less accumulated depreciation 41,230 27,969
------------- -------------
196,541 127,495
OTHER ASSETS 852,863 901,336
------------- -------------
$ 11,241,394 $ 10,665,647
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 888,603 $ 113,356
Accrued expenses 610,737 788,797
------------- -------------
Total current liabilities 1,499,040 902,153
STOCKHOLDERS' EQUITY
Preferred stock, $.0001 par value; Series A, authorized, 100,000
shares; issued and outstanding, 80,000 shares 8,000,000 8,000,000
Preferred stock, $.0001 par value; Series B convertible, authorized,
350,000 shares; none issued and outstanding - -
Common stock, $.0001 par value; authorized, 25,000,000 shares;
issued, 15,829,861 shares at September 30, 1999 and
15,772,823 shares at June 30, 1999 1,583 1,577
Additional paid-in capital 18,029,952 17,693,743
Accumulated deficit (16,076,681) (15,719,326)
------------- -------------
9,954,854 9,975,994
Less 200,000 shares of common stock in treasury - at cost (212,500) (212,500)
------------- -------------
9,742,354 9,763,494
------------- -------------
$ 11,241,394 $ 10,665,647
============= =============
</TABLE>
See notes to financial statements.
-1-
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<TABLE>
<CAPTION>
VOXCOM HOLDINGS, INC.
d/b/a MAX INTERNET COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Three Months
Ended Ended
September 30, September 30,
1999 1998
------------- -------------
<S> <C> <C>
Net sales $ 2,637,154 $ 188,432
Cost of sales 1,262,818 66,720
------------- -------------
Gross profit 1,374,336 121,712
Selling, general and administrative expenses 1,640,100 632,591
------------- -------------
Operating loss (265,764) (510,879)
Interest income 76,432 --
Interest expense (23) (46,171)
------------- -------------
Loss from continuing operations before income taxes (189,355) (557,050)
Income taxes 168,000 --
------------- -------------
Loss from continuing operations (357,355) (557,050)
Loss from discontinued operations -- (1,140,606)
Gain on disposal of discontinued operations -- 1,905,494
------------- -------------
-- 764,888
------------- -------------
Net earnings (loss) $ (357,355) $ 207,838
============= =============
Earnings (loss) per share - basic and diluted:
Continuing operations $ (.02) $ (.09)
============= =============
Discontinued operations $ -- $ .12
============= =============
Net earnings (loss) $ (.02) $ .03
============= =============
Weighted average shares outstanding 15,807,944 6,194,462
============= =============
</TABLE>
See notes to financial statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
VOXCOM HOLDINGS, INC.
d/b/a MAX INTERNET COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 1999
Series A Series B
Common stock Preferred stock Preferred stock
------------------------- ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1999 15,772,823 $ 1,577 80,000 $8,000,000 - -
Sales of common stock 32,038 3 - - - -
Stock options issued - - - - - -
Shares issued in payment
of liabilities 25,000 3 - - - -
Net (loss) - - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Balances at September 30, 1999 15,829,861 $ 1,583 80,000 $8,000,000 - $ -
========== ========== ========== ========== ========== ==========
</TABLE>
Additional
paid-in Accumulated Treasury
capital deficit Stock
----------- ------------ ----------
Balances at June 30, 1999 $17,693,743 $(15,719,326) $ (215,500)
Sales of common stock 128,149 - -
Stock options issued 73,688 - -
Shares issued in payment
of liabilities 134,372 - -
Net (loss) - (357,355) -
----------- ------------ ----------
Balances at September 30, 1999 $18,029,952 $(16,076,681) $ 212,500
=========== ============ ==========
See notes to financial statements
-3-
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<TABLE>
<CAPTION>
VOXCOM HOLDINGS, INC.
d/b/a MAX INTERNET COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended
September 30,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ (357,355) $ 207,838
Gain from discontinued operations -- (764,888)
Adjustments to reconcile net earnings (loss) to net cash
used by operating activities
Depreciation and amortization 86,008 172,771
Stock options issued 73,688 --
Change in operating assets and liabilities
Prepaid expenses (193,998) (124,575)
Accounts receivable (3,035,733) (442,799)
Inventories (1,337,461) (121,210)
Other assets (21,149) 24,503
Accounts payable and accrued expenses 731,262 (107,597)
----------- -----------
Net cash used by continuing operations (4,054,738) (1,155,957)
Net cash used by discontinued operations -- (393,434)
----------- -----------
Net cash used by operating activities (4,054,738) (1,549,391)
Cash flows from investing activities
Purchase of property and equipment (82,307) (49,411)
Cash flows from financing activities
Sales of common stock 128,152 --
----------- -----------
Net decrease in cash (4,008,893) (1,598,802)
Cash and cash equivalents at beginning of period 8,136,585 1,774,091
----------- -----------
Cash and cash equivalents at end of period $ 4,127,692 $ 175,289
=========== ===========
Noncash financing activities:
Issuance of common stock in payment of liabilities $ 134,375 $ 56,250
=========== ===========
Conversion of convertible debentures $ -- $ 300,000
=========== ===========
</TABLE>
See notes to financial statements
-4-
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VOXCOM HOLDINGS, INC.
d/b/a MAX INTERNET COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
These financial statements have not been examined by independent certified
public accountants, but in the opinion of management, all adjustments
(consisting of normal recurring accruals and adjustments) necessary for a
fair presentation of consolidated results of operations, financial position
and cash flows at the dates and for the periods indicated, have been
included.
These financial statements do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Operating results for the three-month period ended
September 30, 1999 are not necessarily indicative of the results that may
be expected for the year ending June 30, 2000. For further information,
refer to the consolidated financial statements and notes thereto for the
fiscal year ended June 30, 1999 included in the Company's Form 10-KSB, as
filed with the Securities and Exchange Commission on September 28, 1999.
These financial statements include the accounts of Voxcom Holdings, Inc.,
d/b/a MAX Internet Communications, Inc. (MAX) and its subsidiaries, MAXpc
Technologies, Inc. (MAXpc), MAX Internet Communications do Brasil LTDA
(Brasil) and MAX Internet Communications Deutschland GmbH (GmbH),
collectively, "the company."
During the quarter ended September 30, 1999, the company formed two new
subsidiaries, both of which are 100% owned. MAX Internet Communications
Deutschland GmbH was incorporated in Frankfurt, Germany on August 4, 1999,
and MAX Internet Communications do Brasil Ltda was formed in Rio de
Janeiro, Brazil on September 14, 1999. Both of these companies will sell
and service the MAX i.c. Live card in their respective regions, as well as
other products the company may develop.
The financial statements include the operations of Brasil and GmbH from the
dates of formation
NOTE B - BUSINESS
MAX assembles, through contractors, and markets a high-performance,
multi-media add-in card providing both hardware and software for inclusion
in either new or existing personal computers. MAX markets its card under
the trade name "MAX i.c. Live".
The MAX i.c. Live 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 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.
-5-
<PAGE>
VOXCOM HOLDINGS, INC.
d/b/a MAX INTERNET COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE C - ACQUISITION AND DISPOSITION OF BUSINESSES
Effective October 1, 1997, the company formed Home Business Group Inc.
(HBG) to acquire certain assets and assume the liabilities of a company
engaged in the business of home-based business seminars for no
consideration. A major stockholder and officer of the acquired business is
a stockholder and officer of the company. The acquisition was accounted for
as a purchase.
On September 30, 1998, the company sold the stock of HBG to HBG's
management in exchange for the redemption of 200,000 shares of the
company's common stock previously owned by such management.
Effective January 15, 1999, the company closed AmeraPress, as it had been
unable to generate sufficient business activity to justify its ongoing
overhead following the sale of HBG described above. The company sold
AmeraPress in June 1999.
Effective February 19, 1999, the company closed Systems, as it had been
unable to generate sufficient business activity to justify its ongoing
overhead following the sale of HBG and the closure of AmeraPress described
above. The company sold Systems in June 1999.
During the quarter ended September 30, 1999, MAX formed two new
subsidiaries, both of which are 100% owned. MAX Internet Communications
Deutschland GmbH was incorporated in Frankfurt, Germany on August 4, 1999,
and MAX Internet Communications do Brasil Ltda was formed in Rio de
Janeiro, Brazil on September 14, 1999. Both of these companies will sell
and service the MAX i.c. Live card in their respective regions, as well as
other products the company may develop.
-6-
<PAGE>
VOXCOM HOLDINGS, INC.
d/b/a MAX INTERNET COMMUNICATIONS, INC.
ITEM 2. Management's discussion and analysis.
Results of Operations
Three months ended September 30, 1999 compared to three months ended September
30, 1998.
Net Sales
Net sales from continuing operations were $2,637,154 for the three months ended
September 30, 1999, an increase of $2,448,722 over the $188,432 for the three
months ended September 30, 1998. Sales for the three months ended September 30,
1999 include a sale in Brazil in the amount of $1,500,000.
The company has discontinued the businesses that were the primary operations in
the prior year and restructured its business plan to direct all resources to its
MAX i.c. Live product. The marketing of the MAX i.c. Live product was in its
very early stages during the quarter ended September 30, 1998. As of September
30, 1999 the marketing plan and materials are nearly complete, and the first
print ads appeared after the end of the quarter. Contract negotiations for sales
of the MAX i.c. Live product are ongoing, and are expected to generate
increasing net sales and net earnings in future quarters.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 159% to $1,640,100 for
the three months ended September 30, 1999 from $632,591 for the three months
ended September 30, 1998. This increase is due to significant increases in
advertising, marketing and selling expenses related to the MAX i.c. Live
product, as well as the overhead structure which has been put into place in
order to generate and service expected future increases in net sales.
Interest Income and Expense
The interest income of $76,432 for the three months ended September 30, 1999 was
earned on the available cash balances the Company has invested in money market
funds. There was virtually no interest expense during this period. Interest
expense for the three months ended September 30, 1998 of $46,171 was incurred
primarily on the convertible debentures. This debt has been fully converted to
common stock as of November 1998, and no further interest is payable.
Income Taxes
The income tax expense of $168,000 for the three months ended September 30, 1999
is computed on the net income in Brazil. This tax will be available to offset
against income taxes in the United States once the company becomes profitable.
However, there are currently no US taxes available for offset.
Discontinued Operations
On September 30, 1998, the company sold the stock of a wholly owned subsidiary,
HBG, to HBG's management in exchange for the redemption of 200,000 shares of the
Company's common stock previously owned by such management.
Effective January 15, 1999, the company closed AmeraPress, as it had been unable
to generate sufficient business activity to justify its ongoing overhead
following the sale of HBG described above. AmeraPress was sold on June 30, 1999.
Effective February 19, 1999, the company closed Systems, as it had been unable
to generate sufficient business activity to justify its ongoing overhead
following the sale of HBG and the closure of AmeraPress described above. Systems
was sold on June 30, 1999.
-7-
<PAGE>
VOXCOM HOLDINGS, INC.
d/b/a MAX INTERNET COMMUNICATIONS, INC.
Management's discussion and analysis - continued
The financial statements for the three months ended September 30, 1998 reflect
the results of operations of Systems, AmeraPress and HBG as discontinued
operations.
Liquidity and Capital Resources
Cash and cash equivalents decreased $4,008,893 in the three months ended
September 30, 1999. Net cash used in operating activities for the period was
$4,054,738. This cash used in operating activities primarily consisted of the
cash operating loss for the period, plus increases in accounts receivable of
$3,035,733, inventories of $1,337,461 and prepaid expenses of $193,998; offset
by an increase in accounts payable and accrued expenses of $731,262. Inventories
continue to increase in part because of the need to purchase certain components
well in advance of the scheduled production date, due to competition for these
parts. Cash used in investing activities consisted of approximately $82,000 in
purchases of property and equipment. Financing activities generated
approximately $128,000, consisting of sales of common stock.
Working capital at September 30, 1999 decreased less than 1 %, to $8,692,950,
from $8,734,663 at June 30, 1999. Management believes this working capital will
be sufficient to meet ongoing overhead expenses, plus pursue an aggressive
advertising and marketing campaign for the MAXpc product. Future cash resources
available to the company are expected to come from profitable operations.
However, due to the need to purchase inventories in advance, and the selling of
product on terms to customers, it is anticipated the company will need
additional working capital. The company is currently in discussions regarding
the possibility of credit facilities from various lending authorities, as well
as new issues of capital stock.
Year 2000
The company, like most companies, is faced with the Year 2000 ("Y2K") issue,
which is a result of the use of computer systems designed to process two digits
rather than four when designating the year. The company began an internal
assessment of its year 2000 preparedness in the early months of 1998, through a
review of all equipment and software. For purposes of the review, the equipment
and software were divided into critical and non-critical categories. The
critical category included accounting software, customer databases, the actual
computer systems themselves and our vendors' individual preparedness. The
non-critical category included the telephone systems, general administrative
software and network operating systems.
In the critical category, the accounting software, customer databases, and
computer systems issues have been addressed through software and hardware
updates provided to our company by the software and/or hardware vendors. These
updates were provided at minimal cost. It should also be noted that these
applications are relatively simple programs.
The company has contacted its major component suppliers and its contract
manufacturer. To date, none has indicated that it anticipates material internal
risks. The company is continuing this process to determine the readiness of all
significant suppliers and will assess, and where practicable, attempt to
mitigate its risks with respect to any failure of these entities to be Y2K
compliant. The company is in the process of identifying additional contract
manufacturers, and one of the key contract requirements is for the manufacturer
to make their systems Y2K compliant.
These critical areas have been monitored for any unforeseen issues since June
1998, and procedures are in place to ensure that a hard copy of all critical
transactions is maintained.
-8-
<PAGE>
VOXCOM HOLDINGS, INC.
d/b/a MAX INTERNET COMMUNICATIONS, INC.
Management's discussion and analysis - continued
With regard to the company's non-critical category, such as telephone systems,
general administrative software and network operating systems, these areas have
also been addressed. Any minor infractions found were resolved through software
updates and upgrades.
Although the company cannot quantify the potential effect of Y2K issues on its
financial condition, business or results of operations, it is reasonably certain
that any such future costs will not be significant.
Forward Looking Statements
This document includes statements which may constitute "forward-looking"
statements, usually containing the words "believe", "estimate", "project",
"expect" or similar expressions. These statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements inherently involve risks and uncertainties that could
cause actual results to differ materially from the forward-looking statements.
Factors that would cause or contribute to such differences include, but are not
limited to, continued acceptance of the Company's products in the marketplace,
competitive factors, changes in regulatory environments, and other risks
detailed in the Company's periodic report filings with the Securities and
Exchange Commission. By making these forward-looking statements, the Company
undertakes no obligation to update these statements for revisions or changes
after the date of this filing.
-9-
<PAGE>
VOXCOM HOLDINGS, INC.
d/b/a MAX INTERNET COMMUNICATIONS, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The company has filed a lawsuit alleging breach of contract against
Heartland Payment Systems, LLC (Heartland), a credit card processing
company which has performed this function for the company. Heartland
then filed suit against the company alleging breach of contract, and
asking for an unspecified amount. As yet, this case has not yet reached
the discovery stage. Management believes that the ultimate resolution
of this case will not have a material effect on financial position,
results of operations or cash flows.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
None
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.
Voxcom Holdings, Inc.
d/b/a MAX Internet Communications, Inc.
(Registrant)
Date: November 12, 1999
/s/ Donald G. McLellan
----------------------------------------
Donald L. McLellan, President
/s/ Leslie D. Crone
----------------------------------------
Leslie D. Crone, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0001061554
<NAME> VOXCOM HOLDINGS, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 4,127,692
<SECURITIES> 0
<RECEIVABLES> 3,234,950
<ALLOWANCES> 30,000
<INVENTORY> 2,624,000
<CURRENT-ASSETS> 10,191,990
<PP&E> 237,771
<DEPRECIATION> 41,230
<TOTAL-ASSETS> 11,241,394
<CURRENT-LIABILITIES> 1,499,040
<BONDS> 0
0
8,000,000
<COMMON> 1,583
<OTHER-SE> 1,740,771
<TOTAL-LIABILITY-AND-EQUITY> 11,241,394
<SALES> 2,637,154
<TOTAL-REVENUES> 2,637,154
<CGS> 1,262,818
<TOTAL-COSTS> 1,262,818
<OTHER-EXPENSES> 1,640,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> (189,355)
<INCOME-TAX> 168,000
<INCOME-CONTINUING> (357,355)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (357,355)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
