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, 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 No X
----- -----
Number of shares outstanding of the Registrant's common stock (par value $.0001
per share) as of September 30, 1998: 6,328,679.
Transitional Small Business Disclosure Format
(Check one)
Yes No X
----- -----
VOXCOM HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
ASSETS 1998 1998
------ ------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 412,011 $ 1,753,396
Accounts receivable 570,530 277,856
Inventories 798,270 752,467
Prepaid expenses 270,551 112,039
------------ ------------
Total current assets 2,051,362 2,895,758
PROPERTY AND EQUIPMENT, AT COST
Machinery and equipment 700,353 699,937
Furnishings 265,238 212,384
------------ ------------
965,591 912,321
Less accumulated depreciation 336,755 284,190
------------ ------------
628,836 628,131
OTHER ASSETS 1,389,423 1,720,731
------------ ------------
$ 4,069,621 $ 5,244,620
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 43,184 $ 37,076
Accounts payable 460,117 488,353
Accrued expenses 407,388 441,991
Net liabilities of discontinued operations -- 1,103,442
------------ ------------
Total current liabilities 910,689 2,070,862
LONG-TERM DEBT 100,000 418,469
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,
issued and outstanding, 350,000 shares 3,500,000 3,500,000
Common stock, $.0001 par value; authorized, 25,000,000 shares;
issued and outstanding, 6,328,679 at September 30, 1998 and
6,085,772 shares at June 30, 1998 633 609
Additional paid-in capital 1,835,917 1,479,691
Accumulated deficit (10,065,118) (10,225,011)
------------ ------------
3,271,432 2,755,289
Less 200,000 shares of common stock in treasury - at cost (212,500) --
------------ ------------
3,058,932 2,755,289
------------ ------------
$ 4,069,621 $ 5,244,620
============ ============
See notes to financial statements.
-1-
VOXCOM HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended
September 30,
1998 1997
---- ----
Net sales $ 1,938,035 $ 5,210,209
Cost of sales 917,765 763,594
----------- -----------
Gross profit 1,020,270 4,446,615
Selling, general and administrative expenses 1,930,302 2,898,050
----------- -----------
Operating profit (loss) (910,032) 1,548,565
Interest expense 47,972 139,702
----------- -----------
Earnings (loss) from continuing operations before income taxes (958,004) 1,408,863
Income tax expense -- 536,701
----------- -----------
Earnings (loss) from continuing operations (958,004) 872,162
Loss from discontinued operations (739,652) --
Gain on disposal of discontinued business 1,905,494 --
----------- -----------
Net earnings $ 207,838 $ 872,162
=========== ===========
Earnings (loss) per share - basic and diluted - from
continuing operations $ (.15) $ .17
Earnings from discontinued operations $ .18 $ --
------ -----
Earnings per share - basic and diluted $ .03 $ .17
====== =====
Weighted average shares outstanding 6,194,462 4,999,937
=========== ===========
See notes to financial statements.
-2-
VOXCOM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 1998
Series A Series B
Common stock Preferred stock Preferred stock
----------------------- ------------------------ -----------------------
Shares Amount Shares Amount Shares Amount
-------- ------ -------- ------ -------- --------
Balances at June 30, 1998 6,085,772 $ 609 80,000 $8,000,000 350,000 $3,500,000
Issuance of common stock 50,000 5 - - - -
Conversion of debentures 192,907 19 - - - -
Dividends accrued on Series B
preferred stock - - - - - -
Acquisition of 200,000 shares of
common stock for the treasury - - - - - -
Net earnings - - - - - -
--------- ---- ------ --------- ------- ---------
Balances at September 30, 1998 6,328,679 $ 633 80,000 $8,000,000 350,000 $3,500,000
========= ==== ====== ========= ======= =========
Additional
paid-in Accumulated Treasury
capital deficit Stock
---------- ----------- --------
Balances at June 30, 1998 $ 1,479,691 $(10,225,011) $ -
Issuance of common stock 56,245 - -
Conversion of debentures 299,981 - -
Dividends accrued on Series B
preferred stock - (47,945) -
Acquisition of 200,000 shares of
common stock for the treasury - - 212,500
Net earnings - 207,838 -
---------- ----------- --------
Balances at September 30, 1998 $ 1,835,917 $(10,065,118) $ 212,500
========== =========== ========
See notes to financial statements.
-3-
VOXCOM HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended
September 30,
1998 1997
------ ------
Cash flows from operating activities
Net earnings $ 207,838 $ 872,162
Gain from discontinued operations (1,165,842) --
Adjustments to reconcile net earnings to net cash
provided by (used in) by
operating activities:
Depreciation and amortization 267,179 50,557
Stock issued for services -- 25,000
Change in operating assets and liabilities:
Prepaid expenses (135,568) (744)
Accounts receivable (292,674) (195,133)
Inventories (45,803) 67,051
Other assets -- (226,805)
Accounts payable and accrued expenses (110,884) 582,458
----------- -----------
Net cash provided by (used in) continuing operating (1,275,754) 1,174,546
Cash flows from investing activities
Purchase of property and equipment (53,270) (121,353)
Cash flows from financing activities
Payments on notes payable to stockholders -- (1,260,298)
Payments on long-term debt (12,361) --
----------- -----------
Net cash (used in) financing activities (12,361) (1,260,298)
----------- -----------
Net (decrease) in cash (1,341,385) (207,105)
Cash and cash equivalents at beginning of period 1,753,396 375,687
----------- -----------
Cash and cash equivalents at end of period $ 412,011 $ 168,582
=========== ===========
Noncash financing activities:
Issuance of common stock for services and noncompetition agreements $ 56,250 $ 575,000
=========== ===========
Conversion of convertible debentures $ 300,000 $ --
=========== ===========
See notes to financial statements.
-4-
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 three-month period ended
September 30, 1998 are not necessarily indicative of the results that may
be expected for the year ended 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),
AmeraPress, Inc. (AmeraPress), 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, AmeraPress and
Holdings for all periods presented, and MAXpc for the quarter ended
September 30, 1998.
-5-
VOXCOM HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE B - BUSINESS
AmeraPress sells printing services to home-based business seminar sponsors
and multi-level marketing companies and produces laminated, customized
sports, trading, and greeting cards sold by those businesses. 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.
NOTE C - ACQUISITION 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.
The accompanying financial statements reflect the results of operations and
net liabilities of HBG as a discontinued operation.
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 the quarter ended September 30,
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:
Sept 30, June 30,
1998 1998
--------- ---------
Deposits $ 478,389 $ 495,073
Noncompetition agreements 174,055 362,180
Purchased technology 498,952 517,702
Consulting agreements 217,715 252,083
Other 20,312 93,693
--------- --------
$1,389,423 $1,720,731
========= =========
Purchased technology arose out of the acquisition of MAXpc on April 13, 1998.
-6-
VOXCOM HOLDINGS, INC.
ITEM 2. Management's discussion and analysis.
Results of Operations
Net Sales
Net sales decreased to $1,938,035 for the three months ended September 30, 1998
from $5,210,209 for the three months ended September 30, 1997, a decrease of
63%. This decrease is primarily attributable to a slow-down in sales and an
increase in refunds granted 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 businesses. 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.
Net sales for the Company's second quarter are anticipated to be significantly
lower due to a.) the disposal of Home Business Group, Inc., b.) the transition
of AmeraPress from a retail sales organization to a wholesaler and c.) the
marketing of the MAXpc product being in its development stage. It is expected
that a net loss will be reported for the second quarter. However, contract
negotiations for both AmeraPress and MAXpc are in advanced stages, and are
expected to generate net sales and net earnings thereafter.
Cost of Sales
Cost of sales increased to $917,765 for the three months ended September 30,
1998 from $763,594 for the three months ended September 30, 1997, an increase of
20%. This increase is primarily due to a.) higher printing and paper costs, b.)
a shift in sales mix to a higher percentage of sales with lower gross margins
and c.) the write-off of certain inventory which became obsolete with the
expiration of a contract to print brand-name trading cards.
Gross Profit
Gross profit decreased to $1,020,270 for the three months ended September 30,
1998 from $4,446,615 for the three months ended September 30, 1997, a decrease
of 77%. This decrease is primarily attributable to the lower sales described
above.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased to $1,930,302 for the
three months ended September 30, 1998 from $2,898,050 for the three months ended
September 30, 1997, a decrease of 33%. This decrease is due to the reduced
labor, commissions and overhead necessary for the reduced level of sales.
Interest Expense
Interest expense of $47,972 for the three months ended September 30, 1998 was
incurred primarily on the convertible debentures. The interest expense of
$139,702 for the three months ended September 30, 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
Income taxes of $536,701 was accrued at September 30, 1997 based on the
Company's income. For the quarter ended September 30, 1998, no income tax
benefit has been accrued, as all deferred tax assets arising from the Company's
previous operating losses have been fully reserved.
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. The accompanying
financial statements reflect the results of operations and net liabilities of
HBG as a discontinued operation.
-7-
VOXCOM HOLDINGS, INC.
Management's discussion and analysis - continued
Liquidity and Capital Resources
The Company had a net decrease in cash and cash equivalents for the three months
ended September 30, 1998 of approximately $1,341,000. Net cash used in operating
activities for the period was approximately $1,276,000, primarily consisting of
the cash operating loss for the period of approximately $691,000 plus increases
in prepaid expenses, receivables and inventories and a decrease in accounts
payable and accrued expenses. Cash used in investing activities consisted of
approximately $53,000 in purchases of property and equipment. Financing
activities used approximately $12,000 for payments on debt.
The Company believes that funds generated from sales, the collection of
receivables and financing of receivables and inventories, to the extent
available, plus current amounts of cash and cash equivalents will be sufficient
to meet its presently anticipated needs for working capital.
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-
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 October 20, 1998 concerning the sale of The
Home Business Group, Inc. to members of its management.
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: November 16, 1998
/s/ Donald G. McLellan
----------------------------------------
Donald G. McLellan, President
/s/ Leslie D. Crone
----------------------------------------
Leslie D. Crone, Chief Financial Officer