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 March 31, 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.
(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 March 31, 1999: 14,805,386.
Transitional Small Business Disclosure Format
(Check one)
Yes No X
VOXCOM HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
March 31, June 30,
ASSETS 1999 1998
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 7,769,818 $ 4,091
Accounts receivable 64,651 3,066
Receivables from affiliates 100,000 1,902,805
Inventories 586,670 423,250
Prepaid expenses 39,126 103,125
------------ ------------
Total current assets 8,560,265 2,436,337
PROPERTY AND EQUIPMENT, AT COST
Machinery and equipment 32,589 16,669
Furnishings 60,858 18,848
------------ ------------
93,447 35,517
Less accumulated depreciation 23,325 3,100
------------ ------------
70,122 32,417
OTHER ASSETS 1,027,621 1,247,053
------------ ------------
$ 9,658,008 $ 3,715,807
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 319,033 $ 250,173
Accrued expenses 182,815 123,949
Notes payable to officers 210,579 --
Net liabilities of discontinued operations 16,025 186,396
------------ ------------
Total current liabilities 728,452 560,518
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, -0- shares at March
31, 1999 and 350,000 shares at June 30, 1998 -- 3,500,000
Common stock, $.0001 par value; authorized, 25,000,000 shares;
issued and outstanding, 14,805,386 shares at March 31, 1999 and
6,085,772 shares at June 30, 1998 1,481 609
Additional paid-in capital 14,539,607 1,479,691
Accumulated deficit (13,399,032) (10,225,011)
------------ ------------
9,142,056 2,755,289
Less 200,000 shares of common stock in treasury - at cost (212,500) --
------------ ------------
8,929,556 2,755,289
------------ ------------
$ 9,658,008 $ 3,715,807
============ ============
See notes to financial statements.
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VOXCOM HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
Net sales (returns) $ (114,036) $ -- $ 134,523 $ --
Cost of sales (41,221) -- 52,845 --
----------- ----------- ----------- -----------
Gross profit (loss) (72,815) -- 81,678 --
Selling, general and administrative expenses 1,035,144 904,741 2,615,480 1,400,169
----------- ----------- ----------- -----------
Operating (loss) (1,107,959) (904,741) (2,533,802) (1,400,169)
Interest expense 592 -- 73,350 139,702
----------- ----------- ----------- -----------
(Loss) from continuing operations (1,108,551) (904,741) (2,607,152) (1,539,871)
Earnings (loss) from discontinued operations (558,383) 567,823 (2,338,703) 2,457,601
Gain on disposal of discontinued operations -- -- 1,905,494 --
----------- ----------- ----------- -----------
Net earnings (loss) $(1,666,934) $ (336,918) $(3,040,361) $ 917,730
=========== =========== =========== ===========
Earnings (loss) per share - basic and diluted:
Continuing operations $ (.14) $ (.17) $ (.38) $ (.29)
=========== =========== =========== ===========
Discontinued operations $ (.07) $ .11 $ (.06) $ .46
=========== =========== =========== ===========
Net earnings (loss) $ (.21) $ (.06) $ (.44) $ .17
=========== =========== =========== ===========
Weighted average shares outstanding 7,758,247 5,359,370 6,912,105 5,359,370
=========== =========== =========== ===========
See notes to financial statements.
-2-
VOXCOM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
NINE MONTHS ENDED MARCH 31, 1999
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
Sales of common stock 7,694,000 769 -- -- -- --
Conversion of debentures 364,716 37 -- -- -- --
Conversion of preferred stock 547,201 55 -- -- (34,000) (340,000)
Redemption of preferred stock -- -- -- -- (316,000) (3,160,000)
Dividends on Series B
preferred stock
Paid in common stock 113,697 11 -- -- -- --
Paid in cash -- -- -- -- -- --
Acquisition of 200,000 shares of
common stock for the treasury -- -- -- -- -- --
Net (loss) -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Balances at March 31, 1999 14,805,386 $ 1,481 80,000 $ 8,000,000 -- $ --
============ ============ ============ ============ ============ ============
Additional
paid-in Accumulated Treasury
capital deficit Stock
------------ ------------ ------------
Balances at June 30, 1998 $ 1,479,691 $(10,225,011) $ --
Sales of common stock 12,857,181 -- --
Conversion of debentures 403,095 -- --
Conversion of preferred stock 339,945 -- --
Redemption of preferred stock (632,000) -- --
Dividends on Series B
preferred stock
Paid in common stock 91,695 (91,706) --
Paid in cash -- (41,954) --
Acquisition of 200,000 shares of
common stock for the treasury -- -- 212,500
Net (loss) -- (3,040,361) --
------------ ------------ ------------
Balances at March 31, 1999 $ 14,539,607 $(13,399,032) $ 212,500
============ ============ ============
See notes to financial statements.
-3-
VOXCOM HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended
March 31,
1999 1998
------------ ------------
Cash flows from operating activities
Net earnings (loss) $ (3,040,361) $ 917,730
Loss (gain) from discontinued operations 433,209 (2,457,601)
Adjustments to reconcile net earnings (loss) to net cash
provided (used) by operating activities
Depreciation and amortization 486,907 115,320
Stock issued for services -- 25,000
Change in operating assets and liabilities
Prepaid expenses (11,001) (45,264)
Accounts receivable (61,585) --
Inventories (163,420) --
Other assets (266,000) --
Accounts payable and accrued expenses 130,858 427,871
------------ ------------
Net cash used by continuing operations (2,491,393) (1,016,944)
Net cash provided (used) by discontinued operations (666,080) 2,602,367
------------ ------------
Net cash provided (used) by operating activities (3,157,473) 1,585,423
Cash flows from investing activities
Purchase of property and equipment (57,930) (25,125)
Cash flows from financing activities
Sales of common stock 12,801,700 --
Redemption of preferred stock (3,792,000) --
Dividends paid (41,954) --
Payments on notes payable to stockholders -- (1,560,298)
Increase in notes payable to officers 210,579 --
Decrease in receivables from affiliates 1,802,805 --
------------ ------------
Net cash provided (used) by financing activities 10,981,130 (1,560,298)
------------ ------------
Net increase in cash 7,765,727 --
Cash and cash equivalents at beginning of period 4,091 --
------------ ------------
Cash and cash equivalents at end of period $ 7,769,818 $ --
============ ============
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 $ 340,000 $ --
============ ============
Conversion of stockholder notes to Series A Preferred Stock $ -- $ 8,000,000
============ ============
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 nine-month and three-month
periods ended March 31, 1999 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 subsidiary, 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
Voxcom Systems, Inc. (Systems), which is now a discontinued operation.
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). AmeraPress is now a
discontinued operation.
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 Holdings for all periods
presented, and MAXpc for the nine months and three months ended March 31,
1999. Systems, AmeraPress and HBG are reflected as discontinued operations.
NOTE B - BUSINESS
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.
-5-
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 March 31, 1999
were: Receivables $84,000; Other Assets $66,000; Accounts Payable and
Accrued Expenses $1,219,000, including debt to Holdings of $799,000.
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. Management intends to liquidate the assets of Systems 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 Systems at March 31, 1999 were:
Receivables $24,000; Other Assets $139,000; Accounts Payable and Accrued
Expenses $615,000, including debt to Holdings of $441,000.
Net sales from discontinued operations for the nine and three months ended
March 31, 1999 were approximately $4,456,000 and $73,000, respectively.
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 include the operations MAXpc since
the date of acquisition.
MAXpc had no operations, assets, or liabilities prior to its acquisition by
the Company.
NOTE D - OTHER ASSETS
Other assets consist of the following:
March 31, June 30,
1999 1998
----------- -----------
Deposits $ 22,341 $ 21,395
Noncompetition agreements 117,805 362,180
Purchased technology 724,976 517,702
Consulting agreements 148,958 252,083
Other 13,541 93,693
----------- -----------
$ 1,027,621 $ 1,247,053
=========== ===========
Purchased technology arose primarily out of the acquisition of MAXpc on
April 13, 1998.
-6-
VOXCOM HOLDINGS, INC.
ITEM 2. Management's discussion and analysis.
Results of Operations
Nine months ended March 31, 1999 compared to nine months ended March 31, 1998
Net Sales
Net sales from continuing operations of $134,523 for the nine months ended March
31, 1999 were generated entirely from MAXpc. The net sales returns for the three
months ended March 31, 1999 of ($114,036) arose from one significant return in
the quarter, offset by other sales. For the nine months and three months ended
March 31, 1998, no sales were generated as there were no operating companies
that have not since been discontinued, and MAXpc had not yet been acquired.
The Company has discontinued the businesses that were part of the ongoing
operations in the prior year and restructured its business plan to direct all
resources to its MAXpc product. The marketing of the MAXpc product has been in
the development stage. However, contract negotiations for MAXpc are ongoing, and
are expected to generate net sales and net earnings in future quarters.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 87% to $2,615,480 for the
nine months ended March 31, 1999 from $1,400,169 for the nine months ended March
31, 1998. This increase is due to advertising, marketing and selling expenses
related to the MAXpc product, amortization of payments made for noncompetition
agreements, purchased technology and consulting agreements, and the overhead
structure which was in place prior to the discontinuing Systems, HBG and
AmeraPress.
Interest Expense
Interest expense of $73,350 for the nine months ended March 31, 1999 was
incurred primarily on the convertible debentures. This debt has been converted
to common stock, and no further interest is payable. The interest expense of
$139,702 for the nine months ended March 31, 1998 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.
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.
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.
Management intends to liquidate the assets of Systems and use the proceeds to
make payments to creditors.
The accompanying financial statements reflect the results of operations and net
liabilities of Systems, AmeraPress and HBG as discontinued operations.
-7-
VOXCOM HOLDINGS, INC.
Management's discussion and analysis - continued
Liquidity and Capital Resources
Cash and cash equivalents increased $7,765,727 in the nine months ended March
31, 1999. Net cash used in operating activities for the period was approximately
$3,157,000, of which $666,000 was used in discontinued operations. Net cash used
in operating activities primarily consisted of the cash operating loss for the
period, plus increases in accounts receivable, inventories and other assets,
offset by an increase in accounts payable and accrued expenses. Cash used in
investing activities consisted of approximately $58,000 in purchases of property
and equipment. Financing activities generated approximately $10,980,000,
consisting primarily of $12,800,000 from sales of common stock and $1,800,000
from collection of amounts previously loaned to an affiliate, offset by the
redemption of the Series B preferred stock in the approximate amount of
3,800,000.
As a result of the above, working capital at March 31, 1999 increased
approximately 317%, to $7,832,000, from $1,876,000 at March 31, 1998. 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.
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
Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K was filed on April 9, 1999 concerning the sale of 7,000,000
shares of common stock, including 3,000,000 shares upon the conversion of the
Series B Preferred Stock and 4,000,000 new shares. The net proceeds to the
Company were $7,796,700. From the net proceeds, the Company paid $200,000 to
acquire the source and object codes to its MAXpc computer board product and will
use the balance to promote the product and provide working capital.
In addition, the investor was granted certain distribution rights in Germany and
Europe, and the Company's board of directors will be expanded to nine members,
including three representatives of the investor and two independent directors.
All material contracts and bylaw amendments in connection with the transaction
were attached as exhibits to the Form 8-K.
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: May 14, 1999
/s/ Donald G. McLellan
--------------------------------------------
Donald L. McLellan, President
/s/ Leslie D. Crone
--------------------------------------------
Leslie D. Crone, Chief Financial Officer