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 December 31, 1998
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.
(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 December 31, 1998: 7,242,398.
Transitional Small Business Disclosure Format
(Check one)
Yes No X
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<CAPTION>
VOXCOM HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
ASSETS 1998 1998
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 8,951 $ --
Accounts receivable 330,501 29,176
Receivable from affiliate 499,992 1,803,536
Inventories 564,218 480,850
Prepaid expenses 391,237 108,979
------------ ------------
Total current assets 1,794,899 2,422,541
PROPERTY AND EQUIPMENT, AT COST
Machinery and equipment 78,016 60,270
Furnishings 79,038 36,766
------------ ------------
157,054 97,036
Less accumulated depreciation 61,369 42,238
------------ ------------
95,685 54,798
OTHER ASSETS 988,146 1,386,447
------------ ------------
$ 2,878,730 $ 3,863,786
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 416,110 $ 404,704
Accrued expenses 180,132 146,309
Net liabilities of discontinued operations 141,028 157,484
------------ ------------
Total current liabilities 737,270 708,497
LONG-TERM DEBT -- 400,000
COMMITMENTS AND CONTINGENCIES -- --
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; issued and outstanding, 335,500 shares at December
31, 1998 and 350,000 shares at June 30, 1998 3,355,000 3,500,000
Common stock, $.0001 par value; authorized, 25,000,000 shares;
issued and outstanding, 7,242,398 shares at December 31, 1998 and
6,085,772 shares at June 30, 1998 724 609
Additional paid-in capital 2,687,636 1,479,691
Accumulated deficit (11,689,400) (10,225,011)
------------ ------------
2,353,960 2,755,289
Less 200,000 shares of common stock in treasury - at cost (212,500) --
------------ ------------
2,141,460 2,755,289
------------ ------------
$ 2,878,730 $ 3,863,786
============ ============
</TABLE>
See notes to financial statements.
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<TABLE>
<CAPTION>
VOXCOM HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 392,158 $ 474,169 $ 967,849 $ 913,540
Cost of sales 139,170 102,102 379,610 186,497
----------- ----------- ----------- -----------
Gross profit 252,988 372,067 588,239 727,043
Selling, general and administrative expenses 1,248,874 405,495 2,219,999 1,060,151
----------- ----------- ----------- -----------
Operating (loss) (995,886) (33,428) (1,631,760) (333,108)
Interest expense 26,585 118 72,523 137,517
----------- ----------- ----------- -----------
(Loss) from continuing operations (1,022,471) (33,546) (1,704,283) (470,625)
Earnings (loss) from discontinued operations (558,793) 416,032 (1,574,638) 1,725,273
Gain on disposal of discontinued operations -- -- 1,905,494 --
----------- ----------- ----------- -----------
Net earnings (loss) $(1,581,264) $ 382,486 $(1,373,427) $ 1,254,648
=========== =========== =========== ===========
Earnings (loss) per share - basic and diluted - from
continuing operations $ (.15) $ (.01) $ (.26) $ (.09)
=========== =========== =========== ===========
Earnings (loss) from discontinued operations $ (.08) $ .09 $ .05 $ .34
=========== =========== =========== ===========
Earnings (loss) per share - basic and diluted $ (.23) $ .08 $ (.21) $ .25
=========== =========== =========== ===========
Weighted average shares outstanding 6,802,000 4,999,937 6,498,231 4,999,937
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
-2-
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<CAPTION>
VOXCOM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 1998
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, 1998 6,085,772 $ 609 80,000 $ 8,000,000 350,000 $ 3,500,000
Sales of common stock 494,000 49 -- -- -- --
Conversion of debentures 364,716 37 -- -- -- --
Conversion of preferred stock 243,697 24 -- -- (14,500) (145,000)
Dividends paid and accrued on
Series B preferred stock 54,213 5 -- -- -- --
Acquisition of 200,000 shares of
common stock for the treasury -- -- -- -- -- --
Net (loss) -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Balances at September 30, 1998 7,242,398 $ 724 80,000 $ 8,000,000 335,500 $ 3,355,000
============ ============ ============ ============ ============ ============
Additional
paid-in Accumulated Treasury
capital deficit Stock
----------- ------------ ----------
Balances at June 30, 1998 $ 1,479,691 $(10,225,011) $ --
Sales of common stock 611,201 -- --
Conversion of debentures 403,095 -- --
Conversion of preferred stock 144,976 -- --
Dividends paid and accrued on
Series B preferred stock 48,673 (90,962) --
Acquisition of 200,000 shares of
common stock for the treasury -- -- 212,500
Net (loss) -- (1,373,427) --
------------ ------------ ------------
Balances at September 30, 1998 $ 2,687,636 $(11,689,400) $ 212,500
============ ============ ============
</TABLE>
See notes to financial statements.
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<CAPTION>
VOXCOM HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended
December 31,
1998 1997
------ ------
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $(1,373,427) $ 1,254,648
Gain from discontinued operations (330,856) (1,725,273)
Adjustments to reconcile net earnings to net cash
used in operating
activities:
Depreciation and amortization 380,276 76,712
Stock issued for services -- 25,000
Change in operating assets and liabilities:
Prepaid expenses (408,403) (122,955)
Accounts receivable (301,325) (608)
Inventories (83,368) (8,434)
Other assets 69,551 76,724
Accounts payable and accrued expenses 6,077 147,490
----------- -----------
Net cash used in continuing operations (2,041,475) (276,696)
Cash flows from investing activities
Purchase of property and equipment (60,018) (10,534)
Cash flows from financing activities
Sales of common stock 555,000 --
Payments on notes payable to stockholders -- (1,560,298)
Increase in notes payable to affiliate -- 1,847,528
Decrease in receivable from affiliate 1,555,444 --
----------- -----------
Net cash provided by financing activities 2,110,444 287,230
----------- -----------
Net increase in cash 8,951 --
Cash and cash equivalents at beginning of period -- --
----------- -----------
Cash and cash equivalents at end of period $ 8,951 $ --
=========== ===========
Noncash financing activities:
Issuance of common stock for services and noncompetition agreements $ 56,250 $ 575,000
=========== ===========
Conversion of convertible debentures $ 400,000 $ --
=========== ===========
Conversion of Series B preferred stock $ 145,000 $ --
=========== ===========
Conversion of stockholder notes to Series A Preferred Stock $ -- $ 8,000,000
=========== ===========
</TABLE>
See notes to financial statements.
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<PAGE>
VOXCOM HOLDINGS, 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 six-month and three-month
periods ended December 31 and September 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending June 30,
1999. For further information, refer to the consolidated financial
statements and notes thereto for the fiscal year ended June 30, 1998
included in the Company's Amendment No. One to Form SB-2, as filed with the
Securities and Exchange Commission on October 8, 1998.
These financial statements include the accounts of Voxcom Holdings, Inc.
(Holdings) and its subsidiaries, Voxcom Systems, Inc. (Systems) and MAXpc
Technologies, Inc. (MAXpc), 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 on 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.
MAXpc, a wholly-owned subsidiary, was acquired on April 13, 1998.
The financial statements include the operations of Systems and Holdings for
all periods presented, and MAXpc for the six months and three months ended
December 31,1998. AmeraPress and HBG are reflected as discontinued
operations.
NOTE B - BUSINESS
Systems sells and provides services related to credit card processing and
authorization systems for merchants. MAXpc 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 computers.
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VOXCOM HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE C - ACQUISITION AND DISPOSITION OF BUSINESSES
Effective October 1, 1997, the Company formed Home Business Group Inc. 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 cancellation 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. Management intends to
liquidate the assets of AmeraPress and use the proceeds to make payments to
creditors. The Company does not expect losses, if any, on liquidation to be
material.
The significant assets and liabilities of AmeraPress at December 31, 1998
were: Receivables $252,000; Inventories $170,000; Property and Equipment
$488,000; Other Assets $258,000; Accounts Payable and Accrued Expenses
$1,257,000.
The accompanying financial statements reflect the results of operations and
net liabilities of AmeraPress and HBG as discontinued operations.
On April 13, 1998, the Company acquired all of the issued and outstanding
shares of MAXpc Technologies, Inc. The acquisition was accounted for as a
purchase and the financial statements for 1998 include the operations
MAXpc.
MAXpc had no operations, assets, or liabilities prior to its acquisition by
the Company.
NOTE D - OTHER ASSETS
Other assets consist of the following:
December 31, June 30,
1998 1998
------------ ----------
Deposits $ 161,592 $ 160,789
Noncompetition agreements 145,930 362,180
Purchased technology 480,208 517,702
Consulting agreements 183,333 252,083
Other 17,083 93,693
------- -------
$ 988,146 $ 1,386,447
======== ===========
Purchased technology arose out of the acquisition of MAXpc on April 13, 1998.
-6-
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VOXCOM HOLDINGS, INC.
ITEM 2. Management's discussion and analysis.
Results of Operations
Six months ended December 31, 1998 compared to six months ended December 31,
1997
Net Sales
Net sales from continuing operations increased 6% to $967,849 for the six months
ended December 31, 1998 from $913,540 for the six months ended December 31,
1997, while net sales decreased 17% to $392,158 for the second quarter of 1998
from $474,169 for the second quarter of 1997. These changes are primarily
attributable to the sale of certain residuals in December 1998 for approximately
$120,000, offset by an overall slow-down in sales during the period. This
slow-down resulted after the Federal Trade Commission (FTC) filed a lawsuit in
February 1998, alleging violations of the Federal Trade Commission Act in
connection with the Company's business of marketing sales opportunities for home
based business. In April 1998, the Company and the FTC agreed to a compromise
and settlement of the case in which the Company did not admit to any violation
of any law, statute, rule or regulation or to the commission of any wrongful
act.
In response to this slow-down, the Company has since restructured its business
plan to direct all resources to its MAXpc product. The marketing of the MAXpc
product has been in the development stage, and it is expected that a net loss
will be reported for the third quarter. However, contract negotiations for MAXpc
are continuing, and are expected to generate net sales and net earnings
thereafter.
Cost of Sales
Cost of sales increased 104% to $379,610 for the six months ended December 31,
1998 from $186,497 for the six months ended December 31, 1997. This increase is
primarily due to a shift in sales mix to a higher percentage of sales with lower
gross margins.
Gross Profit
Gross profit decreased 19% to $588,239 for the six months ended December 31,
1998 from $727,043 for the six months ended December 31, 1997. This decrease is
primarily attributable to the higher cost of sales described above.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 109% to $2,219,999 for
the six months ended December 31, 1998 from $1,060,151 for the six months ended
December 31, 1997. This increase is due to advertising, marketing and selling
expenses related to the MAXpc product, the establishment of a $100,000 reserve
for bad debts against the remaining receivable from HBG, amortization of
payments made for noncompetition agreements, purchased technology and consulting
agreements, and a larger corporate overhead structure which was in place prior
to the sale of HBG and the closing of AmeraPress.
Interest Expense
Interest expense of $72,523 for the six months ended December 31, 1998 was
incurred primarily on the convertible debentures. The interest expense of
$137,517 for the six months ended December 31, 1997 was incurred on debt to the
Company's shareholders who sold AmeraPress to the Company. This debt has been
converted to Series A Preferred Stock, and no further interest is payable.
Income Taxes
No income taxes have been accrued due to operating losses of the Company.
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VOXCOM HOLDINGS, INC.
Management's discussion and analysis - continued
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 cancellation 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. Management intends to liquidate the
assets of AmeraPress and use the proceeds to make payments to creditors.
The accompanying financial statements reflect the results of operations and net
liabilities of AmeraPress and HBG as discontinued operations.
Liquidity and Capital Resources
The Company had a net increase in cash and cash equivalents for the six months
ended December 31, 1998 of approximately $9,000. Net cash used in operating
activities for the period was approximately $2,041,000, primarily consisting of
the cash operating loss for the period, plus increases in prepaid expenses and
accounts receivable. Cash used in investing activities consisted of
approximately $60,000 in purchases of property and equipment. Financing
activities generated approximately $555,000 from sales of common stock and
$1,555,000 from collection of amounts previously loaned to an affiliate.
During the six months ended December 31, 1998, sales were not at a level needed
to support the Company's operations. MAXpc has been in the start-up phase, and
losses from operations which have been discontinued were approximately
$1,700,000. In order to continue, the Company must generate additional funds
from one or more of the following sources: sales of the MAXpc product;
additional sales of common stock, which would dilute the ownership of current
stockholders; collections of receivables; and financing of receivables and
inventories, to the extent available. Various contract negotiations are in
progress, and management is extremely optimistic funds will be secured which
will be sufficient to meet anticipated working capital needs.
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.
-8-
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VOXCOM HOLDINGS, INC.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
A report on Form 8-K was filed on January 29, 1999 concerning the closure of
AmeraPress, Inc.
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.
(Registrant)
Date: February 19, 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> 1061554
<NAME> Voxcom Holdings, Inc.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> OCT-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 8,951
<SECURITIES> 0
<RECEIVABLES> 830,493
<ALLOWANCES> 100,000
<INVENTORY> 546,218
<CURRENT-ASSETS> 1,794,899
<PP&E> 154,054
<DEPRECIATION> 61,369
<TOTAL-ASSETS> 2,878,730
<CURRENT-LIABILITIES> 737,270
<BONDS> 0
0
11,355,000
<COMMON> 724
<OTHER-SE> (9,214,264)
<TOTAL-LIABILITY-AND-EQUITY> 2,878,730
<SALES> 392,158
<TOTAL-REVENUES> 392,158
<CGS> 139,170
<TOTAL-COSTS> 1,248,874
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 100,000
<INTEREST-EXPENSE> 26,585
<INCOME-PRETAX> (1,022,471)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,022,471)
<DISCONTINUED> (558,793)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,581,264)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
