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 September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 33-00412-NY
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.)
270 Duffy Avenue
Hicksville, New York 11801
(Address of principal executive offices)
(516) 938-1010
(Issuer's telephone number)
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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of November 13, 1995: 4,883,883 shares of common stock
Transitional Small Business Format (check one)
Yes No X
Page 1 of 29 pages.
Exhibit Index starts on page 12
Index to Condensed Consolidated Financial Statements
PART I - FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements.
Condensed Consolidated Balance Sheet as at September 30, 1995 3
Condensed Consolidated Statements of Operations for the three months
ended September 30, 1995 and 1994 4
Condensed Consolidated Statements of Operations for the nine months
ended September 30, 1995 and 1994 5
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 1995 and 1994 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation. 8
PART II - OTHER INFORMATION
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 9
(b) Reports on Form 8-K. 27
2
FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30,
1995
-------------
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents............. $ 410,133
Account receivable, less allowance for
doubtful accounts of $11,500....... 857,135
Other current assets.................. 20,968
-------------
Total current assets............... 1,288,236
Property and equipment, net............. 115,902
Other assets............................ 10,575
-------------
Total assets....................... $ 1,414,713
-------------
-------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses........................... 986,847
Note payable, current................. 10,410
-------------
Total current liabilities.......... 997,257
Note payable, long term............... 29,455
-------------
Total liabilities.................. 1,026,712
Shareholder's equity:
Common stock, $.015 par value,
authorized 8,000,000 shares; issued
5,150,550 shares................... 77,258
Additional paid-in capital............ 1,509,310
Deficit............................... (1,108,567)
-------------
478,001
Less common stock held in treasury, at
cost, 266,667 shares............... (90,000)
-------------
Total shareholders' equity......... 388,001
-------------
Total.............................. $ 1,414,713
-------------
-------------
The accompanying notes are an integral part of these financial statements.
3
FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
------------- -------------
(UNAUDITED) (UNAUDITED)
Revenue from operations................. $ 2,423,933 $ 1,844,479
Costs of revenue (principally charges by
repair facilities for services)....... 2,027,974 1,508,583
------------- -------------
Gross profit............................ 395,959 335,896
Operating expenses:
Selling, general and administration... 393,284 326,293
------------- -------------
Income from operations.................. 2,675 9,603
Interest and other income............... 1,699 38
------------- -------------
Net Income.............................. $ 4,374 $ 9,641
------------- -------------
------------- -------------
Income per share........................ NIL NIL
------------- -------------
------------- -------------
Weighted average shares outstanding
during the period..................... 4,883,883 4,883,883
------------- -------------
------------- -------------
The accompanying notes are an integral part of these financial statements.
4
FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
------------- -------------
(UNAUDITED) (UNAUDITED)
Revenue from operations................. $ 7,346,860 $ 5,800,284
Costs of revenue (principally charges by
repair facilities for services)....... 6,031,671 4,738,662
------------- -------------
Gross profit............................ 1,315,189 1,061,622
Operating expenses:
Selling, general and administration... 1,154,595 961,573
------------- -------------
Income from operations.................. 160,594 100,049
Interest and other income............... 3,879 1,269
------------- -------------
Income before income taxes.............. 164,473 101,318
Provision for income taxes.............. 1,000 0
------------- -------------
Net income.............................. $ 163,473 $ 101,318
------------- -------------
------------- -------------
Income per share........................ $ 0.03 $ 0.02
------------- -------------
------------- -------------
Weighted average shares outstanding
during the period..................... 4,883,883 4,883,883
------------- -------------
------------- -------------
The accompanying notes are an integral part of these financial statements.
5
FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
------------- -------------
Cash flows from operating activities:
Net income............................ $ 163,473 $ 101,318
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization......... 21,434 25,369
Changes in assets and liabilities:
Increase in accounts receivable.... (112,427) (46,623)
Increase in other current assets... (6,813) (10,099)
Increase in accounts payable and
accrued expenses.................. 251,169 96,576
------------- -------------
Net cash provided by operating
activities......................... 316,836 166,541
------------- -------------
Cash flows from investing activities:
Additions to property and equipment... (73,486) (21,340)
------------- -------------
Cash flows from financing activities:
Net cash provided by financing
activities......................... 39,865 0
------------- -------------
Net increase in cash.................... 283,215 145,201
Cash at beginning of period............. 126,918 44,161
------------- -------------
$ 410,133 $ 189,362
------------- -------------
------------- -------------
The accompanying notes are an integral part of these financial statements.
6
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 September 30, 1995 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.
2. BUSINESS OF THE COMPANY
First Priority Group, Inc. (the "Company"), a New York corporation formed in
October 1983, is engaged directly and through its wholly-owned subsidiaries in
automotive fleet management and administration of automotive repairs for
businesses, insurance companies and members of affinity groups. The services
provided by the Company include the computerized compilation and analysis of
vehicle usage and maintenance data and the repair and maintenance of vehicles
through approximately 3,000 independently contracted and over 5,000 nationally
recognized repair facilities nationwide. The Company's office is located at 270
Duffy Avenue, Hicksville, New York 11801 and its telephone number is (516)
938-1010.
3. RESULTS OF OPERATIONS
The unaudited results of operations for the three and nine months ended
September 30, 1995 and 1994 are not necessarily indicative of the results to be
expected for the full year.
7
Item 2. Management's Discussion and Analysis or Plan of Operation.
For the three months ended September 30, 1995 the Company's revenues from
operations increased by $579,454 (31.4%) to $2,423,933 from $1,844,479 for the
three months ended September 30, 1994. The gross profit as a percentage
decreased 1.9% for the three months ended September 30, 1995 to 16.3% from 18.2%
for the same period of 1994. The decreased gross profit percentage is mainly
due to fee based programs offered to large companies at a reduced rate as an
incentive to sign on long term contracts. This business practice has
dramatically reduced the Company's attrition rate.
For the nine months ended September 30, 1995 the Company's revenues from
operations increased by $1,546,576 (26.7%) to $7,346,860 from $5,800,284 for the
nine months ended September 30, 1994. The gross profit as a percentage
decreased .4% for the nine months ended September 30, 1995 to 17.9% from 18.3%
for the same period of 1994.
Selling, general and administrative expenses increased $66,991 (20.5%) to
$393,284 for the third quarter of 1995 from $326,293 during the same period of
1994. Selling, general and administrative expenses increased 193,022 (20.1%) to
$1,154,595 for the first nine months of 1995 from $961,573 during the same
period of 1994. The increased selling, general, and administrative costs is due
to increased advertising, personnel, and benefit costs.
The Company has recently expanded its program of providing automobile collision
repair services to the insurance industry. Under its Direct Repair and
Appraisal Program, the Company provides appraisal services on a per accident fee
basis to insurance companies. Additionally, the Company offers, to the insured,
to repair the damaged vehicle through the Company's extensive shop repair
network. The Company believes that the provision of such services to insurance
companies may become an important source of revenues for the Company because of
the high volume of collision appraisal and repair referrals that insurance
companies provide as compared with the Company's corporate fleet management
clients. The Company has taken steps to obtain several insurance companies as
clients.
The Company believes that it has adequate liquidity to support its cost of
operations for the foreseeable future.
8
Part II OTHER INFORMATION
Item 5. Other Information
The Company entered into an Investment Banking Agreement with Kirlin
Securities, Inc. ("Kirlin") on August 1, 1995. For a term of eighteen months,
Kirlin will provide financial consulting and investment banking services to the
Company. It is anticipated that Kirlin will assist the Company in exploring the
possibility of raising additional capital through the issuance of additional
shares of its Common Stock. In consideration for these services, Kirlin has
been granted a Warrant to purchase 750,000 shares of the Company's Common Stock
which becomes exercisable in increments on various dates and at various prices.
Item 6. Exhibits and Reports on Form 8-K.
(a) List of Exhibits
9
Item 6. Exhibits and Reports on Form 8-K.
(b) Reports on Form 8-K
None
THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
10
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: November 14, 1995 By: /s/ Michael Karpoff
-------------------
Michael Karpoff
Co-Chairman of the Board
of Directors, President and
Director (Principal Executive
Officer)
Date: November 13, 1995 By: /s/ Barry Siegel
----------------
Barry Siegel
Co-Chairman of the Board
of Directors, Treasurer,
Secretary and Director
(Principal Financial
and Accounting Officer)
11
Index of Exhibits
Exhibit No. Description Page
- ----------- ----------- ----
10.1 Investment Banking Agreement dated August 1, 10
1995 between the Company and Kirlin Securities, Inc.
10.2 Warrant dated August 1, 1995 issued to Kirlin 15
Securities, Inc.
12