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 March 31, 1996 [ ] 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 May 14, 1996: 5,883,883 shares of common stock Transitional Small Business Format (check one) Yes [ ] No [X] Part I Financial Information Item 1. Financial Statements THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK. 2 FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MARCH 31, 1996 ASSETS Current Assets: Cash and cash equivalents $ 771,767 Accounts receivable, less allowance for doubtful accounts of $11,500 1,152,936 Other current assets 14,462 ----------- Total current assets 1,939,165 Property and equipment, net 128,334 Security deposits 10,575 ----------- $ 2,078,074 =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses 1,075,272 ----------- Total current liabilities 1,075,272 Shareholders' equity: Common stock, $.015 par value, authorized 8,000,000 shares; issued 6,150,550 shares 92,258 Additional paid-in capital 1,929,310 Deficit (928,766) ----------- 1,092,802 Less common stock held in treasury, at cost, 266,667 shares (90,000) ----------- Total shareholders' equity 1,002,802 ----------- $ 2,078,074 =========== 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 March 31, March 31, 1996 1995 ----------- ----------- (Unaudited) (Unaudited) Revenue from operations $3,180,779 $2,663,265 Costs of revenue (principally charges incurred at repair facilities for services) 2,589,172 2,141,484 ---------- ---------- Gross profit 591,607 521,781 Operating expenses: Selling, general and administration 484,205 365,354 ---------- ---------- Income from operations 107,402 156,427 Interest and other income 6,538 785 ---------- ---------- Income before income taxes 113,940 157,212 Provision for income taxes 1,000 1,000 ---------- ---------- Net income $ 112,940 $ 156,212 ========== ========== Income per common share 0.01 0.03 ========== ========== 5,883,883 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 CASH FLOW THREE MONTHS ENDED March 31, March 31, 1996 1995 -------- -------- Cash flows from operating activities: Net income 112,940 156,212 -------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,887 6,146 Changes in assets and liabilites: Accounts receivable (83,150) (168,115) Other current assets (3,522) (14,471) Accounts payable and accrued expenses 15,983 179,327 -------- -------- Total adjustments (61,802) 2,887 -------- -------- Net cash provided by operating activities 51,138 159,099 -------- -------- Cash flows from investing activities, additions to property and equipment (21,181) (3,812) -------- -------- Cash flows used in financing activities, repayment of notes payable (37,264) 0 -------- -------- Net increase (decrease) in cash and cash equivalents (7,307) 155,287 Cash and cash equivalents at beginning of period 779,074 126,918 -------- -------- Cash and cash equivalents at end of period 771,767 282,205 ======== ======== The accompanying notes are an integral part of these financial statements. 5 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 March 31, 1996 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 June 28, 1985, 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 months ended March 31, 1996 are not necessarily indicative of the results to be expected for the full year. 4. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE The computation of earnings per common and common equivalent share is based upon the weighted average number of outstanding common shares during the period plus, when their effect is dilutive, common shares subject to stock options and warrants. The number of common and common equivalent shares utilized in the per share computations were 7,775,377 and 4,883,883 in the three months ended March 31, 1996 and March 31, 1995, respectively. 6 Item 2. Management's Discussion and Analysis or Plan of Operation. For the three months ended March 31, 1996 the Company's revenues from operations increased by $517,514 (19.4%) to $3,180,779 from $2,663,265 for the three months ended March 31, 1995. Gross profit increased $69,826 to $591,607 for the first quarter of 1996 from $521,781 during the same period of 1995. The gross profit percentage was 18.6% for the three months ended March 31, 1996 as compared to 19.6% for the same period of 1995. 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 long term contracts. This business practice has reduced the Company's attrition rate. Selling, general and administrative expenses increased $118,851 (32.5%) to $484,205 for the first quarter of 1996 from $365,354 during the same period of 1995. Of the $118,851 increase in selling, general, and administrative expenses, approximately $88,000 was related to increased salary expense due to contractual agreements, wage increases and an increase in labor force necessary to prepare the Company to manage anticipated increases in its business activities. The remaining increase was directly related to the increase in revenue. The Company believes that it has adequate liquidity to support its cost of operations for the foreseeable future. THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK. 7 Part II Other Information Item 6. Exhibits and Reports on Form 8-K. (b) Reports on Form 8-K None 8 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: May 14, 1996 By: /s/ Michael Karpoff ------------------- Michael Karpoff Co-Chairman of the Board of Directors, President and Co-Chief Executive Officer Date: May 14, 1996 By: /s/ Barry Siegel ---------------- Barry Siegel Co-Chairman of the Board of Directors, Treasurer, Secretary and Principal Financial and Accounting Officer 9 Index of Exhibits Exhibit No. Description Page - ----------- ----------- ---- 10.1 Amendment of Lease dated June, 1995, between 11 the Company, American Auto Trading and LBA Properties, Inc., of original lease dated September 12, 1990 for the Company's headquarters. 10