U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-21467
FIRST PRIORITY GROUP, INC
-------------------------
(Exact name of small business issuer as specified in its charter)
New York 11-2750412
- ------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
51 East Bethpage Road
Plainview, New York 11803
(Address of principal executive offices)
(516) 694-1010
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock par value $.015 per share
Preferred Stock Purchase Rights par value $.01 per share
Check whether the issuer (1) has 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
--
As of August 14, 2000, the issuer had outstanding a total of 10,317,869
shares of common stock.
Transitional Small Business Format (check one)
Yes[ ] No[X]
2
Part I Financial Information
Item 1. Financial Statements
THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
3
FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2000
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 1,146,604
Accounts receivable, less allowance for doubtful
accounts of $28,223 1,450,423
Investment securities 759,476
Prepaid expenses and other current assets 37,840
----------
Total current assets 3,394,343
Property and equipment, net of accumulated
depreciation of $706,581 693,776
Security deposits and other assets 32,268
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Total assets $4,120,387
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 759,905
Accrued expenses and other current liabilities 699,694
Current portion of long-term debt 38,557
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Total current liabilities 1,498,156
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Shareholders' equity:
Common stock, $.015 par value, authorized 20,000,000
shares; issued 10,841,655 shares 162,625
Preferred stock, $.01 par value, authorized 1,000,000
shares; none issued or outstanding -
Additional paid-in capital 8,881,203
Accumulated other comprehensive loss, unrealized holding
loss on investment securities ( 4,664)
Deficit (5,330,899)
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3,708,265
Less common stock held in treasury, at cost,
523,786 shares 1,086,034
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Total shareholders' equity 2,622,231
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Total liabilities and shareholders' equity $4,120,387
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See notes to condensed consolidated financial statements.
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FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
June 30, June 30,
2000 1999
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Revenue:
Collision repairs and fleet management services $2,882,976 $3,016,400
Subrogation and salvage service commissions 72,801 146,254
Automobile affinity services 455,257 159,958
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Total revenues 3,411,034 3,322,612
Cost of revenue (principally charges incurred at repair
facilities for services) 2,433,484 2,564,971
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Gross profit 977,550 757,641
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Operating expenses:
Selling 97,523 120,411
General and administrative 893,014 795,609
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Total operating expenses 990,537 916,020
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(12,987) ( 158,379)
Investment and other income 29,690 35,175
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Income (loss) from operations before
income taxes 16,703 ( 123,204)
Income taxes, all current 2,525 -
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Net income (loss) $ 14,178 ($ 123,204)
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Basic and diluted earnings (loss) per share:
Basic $ .00 ($ .01)
Diluted .00 ( .01)
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Weighted average number of common shares outstanding 10,192,434 8,331,800
Effect of dilutive securities, stock options, warrants 1,518,192 -
-------------- -------------
Weighted average diluted common shares outstanding 11,710,626 8,331,800
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See notes to condensed consolidated financial statements.
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FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended
June 30, June 30,
2000 1999
---------------- ---------------
Revenue:
Collision repairs and fleet management services $5,555,731 $5,765,448
Subrogation and salvage service commissions 218,020 260,261
Automobile affinity services 878,327 287,321
---------------- ---------------
Total revenues 6,652,078 6,313,030
Cost of revenue (principally charges incurred at repair
facilities for services) 4,703,513 4,902,269
---------------- ----------------
Gross profit 1,948,565 1,410,761
---------------- ---------------
Operating expenses:
Selling 194,700 210,050
General and administrative 1,715,936 1,610,961
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Total operating expenses 1,910,636 1,821,011
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37,929 ( 410,250)
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Other income (expense):
Realized loss on investment ( 1,518) -
Investment and other income 66,405 79,104
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Total other income 64,887 79,104
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Income (loss) from operations before
income taxes 102,816 ( 331,146)
Income taxes, all current 4,700 -
---------------- ---------------
Net income (loss) $ 98,116 ($ 331,146)
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Basic and diluted earnings (loss) per share:
Basic $ .01 ($ .04)
Diluted .01 ( .04)
---------------- ---------------
Weighted average number of common shares outstanding 9,406,449 8,331,800
Effect of dilutive securities, stock options, warrants 2,560,186 -
---------------- ---------------
Weighted average diluted common shares outstanding 11,966,635 8,331,800
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See notes to condensed consolidated financial statements.
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FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30, June 30,
2000 1999
--------------- --------------
Cash flows provided by (used in) operating activities:
Net income (loss) $ 98,116 ($331,146)
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Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 115,173 82,502
Realized loss on investment 1,518 -
Provision for bad debts - -
Options granted for services 39,967 -
Changes in assets and liabilities:
Accounts receivable 344,317 ( 442,891)
Prepaid expenses and other current assets 1,536 24,709
Security deposit and other assets 3,020 ( 29,248)
Accounts payable ( 178,513) ( 231,400)
Accrued expenses and other current liabilities ( 47,873) 666,152
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Total adjustments 279,145 69,824
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Net cash provided by (used in) operating activities 377,261 ( 261,322)
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Cash flows provided by (used in) investing activities:
Purchase of property and equipment ( 119,855) ( 15,117)
Purchase of investments ( 25,302)
Proceeds from sale of investments 300,000 -
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Net cash provided by (used in) investing activities 154,843 ( 15,117)
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Cash flows provided by (used in) financing activities:
Repayment of long-term debt ( 11,956) ( 15,859)
Proceeds from disgorgement of short-swing profits 75,097 -
Proceeds from issuance of common stock 9,000 -
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Net cash provided by (used in) financing activities 72,141 ( 15,859)
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Net increase (decrease) in cash and cash equivalents 604,245 ( 292,298)
Cash and cash equivalents at beginning of period 542,359 2,782,180
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Cash and cash equivalents at end of period $ 1,146,604 $2,489,882
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Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 4,700 $ -
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See notes to condensed consolidated financial statements.
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FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. UNAUDITED FINANCIAL STATEMENTS
------------------------------
The information contained in the condensed consolidated financial
statements for the period ended June 30, 2000 is unaudited, but includes all
adjustments, consisting of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the financial position and the
results of operations for these periods.
The financial statements and notes are presented as permitted by Form
10-QSB, and do not contain certain information included in the Company's annual
statements and notes. These financial statements should be read in conjunction
with the Company's annual financial statement as reported in its most recent
annual report on Form 10-KSB.
For the six month period ending June 30, 20000, there were no
significant non-owner sources of income or expense. Accordingly, a separate
statement of comprehensive income has not been presented herein.
2. BUSINESS OF THE COMPANY
-----------------------
The Company, a New York corporation formed on June 28, 1985, is engaged
in the administration and provision of vehicle maintenance and repair
management, including collision and general repair programs, appraisal services,
subrogation services, vehicle salvage and vehicle rentals; and the
administration of automotive collision repair referral services for self insured
fleets, insurance companies and affinity group members.
The Company's office is located at 51 East Bethpage Road, Plainview, New
York 11803 and its telephone number is (516) 694-1010.
3. RESULTS OF OPERATIONS
---------------------
The unaudited results of operations for the six months ended June 30, 2000
are not necessarily indicative of the results to be expected for the full year.
4. EARNINGS PER SHARE
------------------
Basic earnings (loss) per share is computed by dividing earnings by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share reflects the potential dilution that could occur if common
stock equivalents, such as stock options and warrants, were exercised. During
the three and six month periods ended June 30, 1999 there was no dilutive effect
from stock options and warrants.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
In accordance with Securities and Exchange Commission Staff Accounting
Bulletin No. 101 (SAB 101), the Company has determined that the portion of its
business representing commission revenues from its subrogation and salvage
services should be displayed in the financial statements on a net basis. It had
been the Company's prior policy to report such revenues and related costs on a
gross basis. Accordingly, the three and six months ended June 30, 1999 have been
reclassified to reflect the net presentation. There was no effect on net loss or
net cash flows used in operating activities from the reclassification. Revenues
and direct costs for the three and six months ended June 30,1999 were reduced by
$759,636 and $1,347,824, respectively.
Revenues were $3,411,034 for the three months ended June 30, 2000, as
compared to $3,322,612 for the same period in 1999, representing an increase of
$88,422 or 2.7%. The direct costs of services related to such revenue
(principally charges from automotive repair facilities) were $2,433,484 for the
three months ended June 30, 2000, as compared to $2,564,971 for the same period
in 1999, representing a decrease of $131,487 or 5.1%. For the six months ended
June 30, 2000 revenues from services were $6,652,078 as compared to $6,313,030
for the same period in 1999, representing an increase of $339,048 or 5.4%. The
direct cost of services related to such revenue was $4,703,513 and $4,902,269
for the six months ended June 30, 2000 and 1998, respectively, resulting in a
decrease of $198,756 or 4.1%.
The gross profit percentage increased 5.9% to 28.7% from 22.8% for the three
months ended June 30, 2000 and 1999. For the six months ended June 30, 2000,
gross profit increased 7% to 29.3% from 22.3% for the same period in 1999. The
Company had decreased revenues of $206,877 for its collision repair and fleet
management services, including subrogation and salvage commissions representing
a decrease of 6.5% for the three months ended June 30, 2000, as compared to the
same three months of 1999. Collision repair and fleet management services for
the six months ended June 30, 2000 decreased $251,958 or 4.1% to $5,773,751 as
compared to $6,025,709 for the same period in 1999. The decrease in revenues for
collision repair and fleet management services reflect a continuing nationwide
decline in per capita accident rates. For the three months ended June 30, 2000
Affinity Services sales increased $295,299 or 184.6% to $455,257 as compared to
$159,958 for the same period in 1999. Affinity Services sales for the six months
ended June 30, 2000 were $878,327 as compared to $287,321 for the same period in
1999 representing an increase of $591,006 or 205.7% reflecting the increased
membership enrollment. The increased gross profit percentage is a result of the
increased affinity sales, which has a lower cost of revenue than the other
programs.
Total operating expenses were $990,537 for the three months ended June 30,
2000, as compared to $916,020 for the three months ended June 30, 1999,
representing an increase of $74,517 or 8.1%. For the six months ended June 30,
2000, total operating expenses increased $89,625 or 4.9% to $1,910,636 as
compared to $1,821,011 for the same period of 1999. The increase in operating
expenses is mainly attributable to the additional personnel necessary for the
start-up of operations of driversshield.com and
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increase in Affinity Services.
Investment and other income was $29,690 and $64,887 for the three and
six months ended June 30, 2000, as compared to $35,175 and $79,104 for the same
periods in 1999, representing a decrease of $5,485 and $14,217, respectively.
The decrease is primarily attributable to lower average investment balances
available during the periods.
As a result of the foregoing, the net income for the three and six
months ended June 30, 2000 was $14,178 ($.00 per share) and $98,116 (.01 per
share) as compared to a net loss of $123,204 ($.01 per share) and $331,146 ($.04
per share) for the comparable periods in 1999.
Liquidity and Capital Resources
As of June 30, 2000, the Company had cash and cash equivalents
of $1,146,604. The Company also holds 78,377 shares of Salomon Smith Barney
Adjustable Rate Government Income Fund securities valued at $759,476 at June 30,
2000. Working capital of the Company as of June 30, 2000, was $1,896,187. The
Company's operating activities provided $377,261 of cash for the six months
ended June 30, 2000 as compared to 1999, when the Company's operating activities
used $261,322 of cash. This is primarily a result of the increase in net income
for 2000.
The Company believes that its present cash position will enable the
Company to continue to support its operations for the next twelve months.
The Company announced on May 31, 2000 that it has secured up to $10
million in equity based funding commitments for the Company. This equity
facility enables FPG to draw down funds at its discretion on a monthly basis,
over a twelve-month period in exchange for common stock in the Company. Pricing
will be established during the draw down periods according to the
volume-weighted average trading price of the Company's common stock. The
securities to be issued pursuant to this private placement have not been
registered under the Securities Act of 1933 and may not be offered or sold in
the United States absent registration or an applicable exemption from
registration. The Company is prohibited from announcing additional details or
the name of the investor at this time.
Forward Looking Statements - Cautionary Factors
Except for the historical information and statements contained in this
Report, the matters and items set forth in this Report are forward looking
statements that involve uncertainties and risks some of which are discussed at
appropriate points in this Report and stated in other filings with the
Securities and Exchange Commission, which are hereby incorporated by reference.
10
Forward Looking Statements - Cautionary Factors
Except for the historical information and statements contained in this
Report, the matters and items set forth in this Report are forward looking
statements that involve uncertainties and risks some of which are discussed at
appropriate points in this Report and stated in other filings with the
Securities and Exchange Commission, which are hereby incorporated by reference.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedules
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
FIRST PRIORITY GROUP, INC.
Date Filed 8/18/00 By: /s/ Barry Siegel
----------------
Barry Siegel
Chairman of the Board
of Directors, Chief Executive Officer
Treasurer, Secretary and Principal
Financial and Accounting Officer
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Index of Exhibits
Exhibit No. Description
27 Financial Data Schedules
12