<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
// TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file number _________________________________
SHC CORP.
(Exact name of small business issuer as specified in its charter)
ILLINOIS 36-3971950
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
390 South Eighth Street, Second Floor, West Dundee, Illinois 60118
(Address of principal executive offices)
(847) 836-6685
(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since last
report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT SEPTEMBER 10, 2000
----- ---------------------------------
<S> <C>
Common Stock, Par Value $0.001 86,019.408 Shares
</TABLE>
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ITEM 1. Financial Statements
SHC CORP.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS JUNE 30, DECEMBER 31,
2000 1999
-------------- ---------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 74,469 $ 14,242
Accounts receivable, net of allowance for
doubtful accounts of $1,410,000 and $1,245,238 882,986 912,673
Notes receivable 4,196 4,196
Prepaid expenses 42,658 34,419
-------------- ---------------
TOTAL CURRENT ASSETS 1,004,309 965,530
FIXED ASSETS
Property and equipment 551,500 694,342
Less: accumulated depreciation (243,541) (199,403)
-------------- ---------------
TOTAL FIXED ASSETS, NET 307,959 494,939
OTHER ASSETS
Security Deposits and other assets 99,329 97,769
-------------- ---------------
TOTAL ASSETS $ 1,411,597 $ 1,558,238
============== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 490,191 $ 591,908
Accrued liabilities 1,094,886 690,838
Current portion of notes payable 1,809,858 1,875,394
-------------- ---------------
TOTAL CURRENT LIABILITIES 3,394,935 3,158,140
LONG-TERM PORTION OF NOTES PAYABLE 5,096 61,586
-------------- ---------------
TOTAL LIABILITIES 3,400,031 3,219,726
REDEEMABLE COMMON STOCK
Common Stock - Class A, $.001 par value; 400,000 shares
redeemable at $0.50 per share 200,000 200,000
STOCKHOLDERS' DEFICIT
Preferred stock, par value $.001; 1,000,000 shares
authorized; none issued -- --
Common stock, par value $.001; 100,000,000
shares authorized; 85,519,408 and 75,073,908
shares issued and outstanding, respectively 85,519 75,074
Additional paid-in capital 3,429,774 1,990,969
Less: subscription receivable (40,000) --
Accumulated deficit (5,663,727) (3,927,531)
-------------- ---------------
TOTAL STOCKHOLDERS' DEFICIT (2,188,434) (1,861,488)
-------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,411,597 $ 1,558,238
============== ===============
</TABLE>
See notes to the consolidated financial statements.
2
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SHC CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2000 1999 2000 1999
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET REVENUES $ 738,745 $ 709,329 $ 1,490,346 $ 1,264,259
COST OF STORE OPERATIONS 537,454 523,341 1,155,356 865,884
------------- ------------ ------------ ------------
Gross profit 201,291 185,988 334,990 398,375
OPERATING EXPENSES
Selling, general and administrative 1,049,362 870,799 1,727,782 1,408,230
Reserve for store closings --- --- 250,000 ---
------------- ------------ ------------ ------------
Loss from operations (848,072) (684,811) (1,642,793) (1,009,855)
OTHER EXPENSES
Interest expense 46,744 44,067 93,404 84,385
------------- ------------ ------------ ------------
NET LOSS $ (894,816) $ (728,878) $ 1,736,197 $ 1,094,740
============= ============ ============ ============
LOSS PER SHARE DATA
Basic and diluted $ (0.01) $ (0.01) $ (0.02) $ (0.02)
============= ============ ============ ============
WEIGHTED AVERAGE SHARES
Basic and diluted 83,114,327 71,609,640 81,380,333 67,842,935
============= ============ ============ ============
</TABLE>
See notes to the consolidated financial statements.
3
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SHC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
2000 1999
---------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,736,197) $ (1,094,240)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 69,064 60,995
Provision for store closings 250,000 ---
Shares issued for services and compensation 385,196 117,057
Change in operating assets and liabilities:
Accounts receivable 29,687 (152,177)
Prepaid expenses (8,239) (24,827)
Accounts payable (101,717) 332,588
Accrued liabilities 428,379 241,098
---------------- -----------------
NET CASH FROM OPERATING ACTIVITIES (683,827) (519,506)
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (32,915) (252,033)
Increase in security deposits and other assets (1,560) (62,527)
---------------- -----------------
NET CASH FROM INVESTING ACTIVITIES (34,475) (314,560)
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from equity transactions 676,455 432,946
Proceeds from notes payable 160,000 343,699
Principal payments of notes payable (57,926) (47,291)
---------------- -----------------
NET CASH FROM FINANCING ACTIVITIES 778,529 729,354
---------------- -----------------
NET INCREASE (DECREASE) IN CASH 60,227 (104,712)
CASH, BEGINNING OF PERIOD 14,242 149,321
---------------- -----------------
CASH, END OF PERIOD $ 74,469 $ 44,609
================ =================
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 24,758 $ 44,579
================ =================
NON-CASH TRANSACTIONS
Payments of accrued expenses made by shareholder $ 71,039 $ ---
================ =================
Liabilities exchanged for equity $ 276,560 $ 46,759
================ =================
Write-off of property and equipment of closed stores $ 150,803 $ ---
================ =================
Shares issued under subscription agreement and unpaid $ 40,000 $ ---
================ =================
</TABLE>
See notes to the consolidated financial statements.
4
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NOTE 1 - INTERIM FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by SHC Corp., or the
Company, and are unaudited. In the opinion of management, the accompanying
unaudited financial statements contain all necessary adjustments for fair
presentation, consisting of normal recurring adjustments except as disclosed
herein.
The accompanying unaudited financial statements have been condensed pursuant to
the rules and regulations of the Securities and Exchange Commission; therefore,
certain information and disclosures generally included in financial statements
have been condensed or omitted. These financial statements should be read in
connection with the Company's annual financial statements included in the
Company's annual report on Form 10-KSB as of December 31, 1999. The financial
position and results of operations of the interim periods presented are not
necessarily indicative of the results to be expected for the year ended December
31, 2000.
GOING CONCERN - The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. The Company has
incurred $5.6 million of losses from operations since inception and is highly
reliant on obtaining continued financing to satisfy its liquidity requirements.
These factors raise substantial doubt about the ability of the Company to
continue as a going concern. Management has undertaken measures to reduce its
operating costs and has closed several unprofitable stores. Concurrently,
management is negotiating with third party lenders and equity investors in an
effort to obtain sufficient financing to meet its operating needs.
There can be no assurances that these cost reduction measures will be adequate
or that the additional financing, if any, will be sufficient to enable the
Company to continue as a going concern.
STORE CLOSINGS - As described in its annual Form 10-KSB report, the Company has
decided to suspend its expansion program due to a shortage of capital and has
elected to close certain store locations instead. Management has identified as
many as 30 stores for shutdown or divestiture, of which 24 have been closed as
of September 10, 2000. The Company has established a reserve of approximately
$250,000 to provide for closing costs and the write-off of fixed assets,
primarily leasehold improvements. This reserve has been recorded in the first
quarter of fiscal 2000. During the first two quarters, the Company wrote-off
approximately $150,000 of property and equipment against this reserve. The
Company will continue to monitor its store program as it seeks to raise more
capital.
EQUITY TRANSACTIONS - During the first six months ended June 30, 2000, the
Company issued approximately 11.4 million shares of common stock. The following
unaudited amounts indicate the purpose of the issuance, the approximate number
of shares issued, and the approximate amount of consideration received: sale of
common stock, 4.25 million shares for $305,000, conversion of debt, 2.81 million
shares for $228,000; and, compensation for services and other expenses, 4.39
million shares for $433,000.
During the first quarter, Midwest Investors Group of Illinois LLC (MIG), a
company formed by the current Chairman of the Board and the current President,
purchased approximately 18.6 million shares from a group headed by the previous
Chairman of the Board. MIG, in turn, sold those shares to existing and new
shareholders and the excess funds received have been contributed to the Company
or used to pay expenses of the Company and its subsidiaries. As of June 30,
2000, the total of these funds has been approximately $443,000, of which,
$371,455 was contributed as capital.
During the first quarter, the Company issued 500,000 shares of common stock, for
which, it will receive $40,000. As of June 30, 2000, these funds have not been
received.
5
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EARNINGS PER SHARE - The Company has a complex capital structure as defined
under SFAS No. 128. Consequently, the generation of earnings results in a dual
presentation of basic and diluted EPS. The Company had a loss for the first six
months of 2000 and 1999 and, accordingly, potential common stock equivalents
have been excluded from the weighted average share computations because their
inclusion would have been anti-dilutive.
NOTE 2 - LEGAL PROCEEDINGS
NOTE 3 - SUBSEQUENT EVENTS
Since April 1, 2000, the Company has issued approximately 2.54 million shares of
common stock. The following unaudited amounts indicate the purpose of the
issuances, approximate number of shares, and approximate amount of
consideration: conversion of debt, 1.4 million shares for $140,000; sale of
common stock, 530,000 shares for $26,000; and, compensation for services,
610,000 shares for $30,000. In addition, MIG contributed capital of $108,500.
In April 2000, the Company entered into a settlement agreement with its prior
counsel, pursuant to which the Company paid $20,000 and such prior counsel
returned 1,000,000 shares previously issued to him by the Company. The agreement
also provides for a mutual release of all claims between the parties.
6
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ITEM 2. Management Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and the notes thereto contained
elsewhere in this report. The discussion of these results should not be
construed to imply any conclusion that any condition or circumstance discussed
herein will necessarily continue in the future. When used in this report, the
words "believes," "anticipates," "expects," and similar expressions are intended
to identify forward-looking statements. Those statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those that are modified by such statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof. The Company undertakes no obligation to publicly release the
results of any revisions to these forward-looking statements that may be made to
reflect events or circumstances after the date of this report, or to reflect the
occurrence of unanticipated events.
Comparison of the three months ended June 30, 2000 to the three months ended
June 30, 1999
NET REVENUES. SHC Corp. and its subsidiaries ("Company") generated revenues of
$738,745 for the three months ended June 30, 2000. This represented a 4.2%
increase over $709,329 in revenues generated in the three months ended June 30,
1999. The principal reason for this growth was an increase in loan activity from
year-to-year.
COST OF STORE OPERATIONS. The Company incurred expenses of $537,454 for
operating its stores during the three months ended June 30, 2000, which
represented an increase of 2.7% over the in expenses that were incurred during
the three months ended June 30, 1999. This increase was a result of an increases
in store operating costs.
GROSS PROFIT. For the three months ended June 30, 2000, the Company reported
gross profit of $201,291. This is a increase of 8.2% from the prior year's
amount of $185,988 . This was due to reductions in certain operating expenses as
stores were closed, while Company was able to maintain loan volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Expenses related to these
activities were $1,049,362, which was 21% higher than the first quarter's amount
from the prior year. The increase was due primarily to higher expenses
associated with professional and consulting services incurred.
INTEREST EXPENSE. This expense increased by 6.1% from $44,067 in 1999 to $46,744
in 2000. This was due to increased bank borrowings and other notes payable.
NET LOSS. The Company reported a wider net loss in 2000 from a year earlier for
those reasons cited previously.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 TO THE SIX MONTHS ENDED JUNE
30, 1999
NET REVENUES. The Company had revenues of $1,490,346 for the six months ended
June 30, 2000. This represented a 18% increase over the $1,264,259 in revenues
generated in the six months ended June 30, 1999. The principal reason for this
growth was an increase in the number of stores operating in the first quarter of
2000 over the number in 1999 during the same period.
COST OF STORE OPERATIONS. The Company incurred expenses of $1,155,356 for
operating its stores during the six months ended June 30, 2000, which
represented an increase of 33% over the $865,884 in expenses that were incurred
during the six months ended June 30, 1999. This increase was a result of costs
incurred with the opening of new stores that included staffing, rent, utilities
and other store costs during the first quarter of 2000.
7
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GROSS PROFIT. For the six months ended June 30, 2000, the Company reported gross
profit of $334,990. This is a decrease of 16% from the prior year's amount of
$398,375. This was due to costs associated with store openings and ramping up
store activities which exceeded the gains in revenues, specifically in the first
quarter of 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the first six months of 2000,
these expenses were $1,727,782, which was 23% higher than the amount for the
same period of the prior year. The primary reasons for this increase is an
increase in professional and consulting fees during the period.
RESERVE FOR STORE CLOSINGS. The Company recorded a provision for stores that
were closed in the first quarter or will be closed. This is necessitated by the
Company's accelerated growth, for which, the Company does not have the cash
wherewithal to meet the cash demands.
INTEREST EXPENSE. This expense increased by 11% from $84,385 in 1999 to $93,404
in 2000. This was due to increased bank borrowings and other notes payable.
NET LOSS. The Company reported a wider net loss in 2000 from a year earlier.
This was due to those factors noted above.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 TO THE SIX MONTHS
ENDED JUNE 30, 1999
PART II
ITEM 1 Legal Proceedings
The information required by Part II, Item 1 of Form 10-QSB is hereby
incorporated by reference to Note 2 to SHC Corp.'s Consolidated Balance Sheets
for the three months ended June 30, 2000, included in Item 1 of Part 1 of this
Form 10-QSB.
ITEM 2 Other Information
As of June 30, 2000 and December 31, 1999, the Company had a negative working
capital position of $2,390,626 and $2,192,610. The Company was able to fund its
operations during the first six months through equity transactions, in which, it
received approximately $676,000 in cash and the issuance of $160,000 in notes.
The Company realizes it needs to strengthen its working capital position and
over all financial condition. Through September 2000, it has closed 24 stores to
reduce the losses and improve its cash position. It is in talks with several
groups regarding cash infusions via equity or debt capital. If such talks are
successful, the Company will receive funds for operating capital. If the
discussions are not successful, the Company will need to examine various
options, such as, closing additional stores and/or financial restructuring.
In an effort to reduce debt, the Company has negotiated with three noteholders
to exchange their notes for common stock in fiscal 2000 and any unpaid interest.
The outstanding amount of these notes is approximately $265,000, of which,
$215,000 was converted through June 30, 2000.
8
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It is management's intention to offer a conversion of debt-for-stock to other
noteholders after the Company's common stock is listed again on the OTC Bulletin
Board. Management does not know how many noteholders, if any, will agree to
convert their notes, but believes there will be some conversions.
9
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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SHC CORP. (f/k/a VictorMaxx Technologies, Inc.)
By: /s/ Terrence L. Donati
----------------------------------
Terrence L. Donati, President, Principal
Financial Officer and Principal Accounting Officer
Date: September 15, 2000
------------------
By: /s/ Terrence L. Donati
----------------------------------
Terrence L. Donati, Director
Date: September 15, 2000
------------------
By: /s/ D. Desmond Paden
----------------------------------
D. Desmond Paden, Director
Date: September 15, 2000
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By: /s/ Philip E. Ruben
----------------------------------
Philip E. Ruben, Director
Date: September 15, 2000
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10
