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, 1999
[ ] 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
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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)
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
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State the number of shares outstanding of each of the issuer's classes
of common equity, as of May 14, 1999: 8,331,800 shares of common stock
--------------------------------
Transitional Small Business Format (check one)
Yes[ ] No[ X ]
Part I Financial Information
Item 1. Financial Statements
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FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1999
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $2,681,327
Accounts receivable, less allowance for
doubtful accounts of $28,223 1,967,813
Prepaid expenses and other current assets 94,084
----------
Total current assets 4,743,224
Property and equipment, net of accumulated
depreciation of $443,658 559,984
Security deposits and other non-current assets 108,728
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Total assets $5,411,936
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,003,611
Accrued expenses and other current liabilities 1,193,545
Current portion of long-term debt 46,684
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Total current liabilities 2,243,840
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38,093
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Long-term debt
Shareholders' equity:
Common stock, $.015 par value, authorized
20,000,000 shares; issued 8,598,467 shares 128,977
Preferred stock, $.01 par value, authorized 1,000,000
shares; none issued or outstanding -
Additional paid-in capital 7,762,360
Deficit (4,671,324)
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3,220,003
Less common stock held in treasury, at
cost, 266,667 shares 90,000
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Total shareholders' equity 3,130,003
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Total liabilities and shareholders' equity $5,411,936
==========
The accompanying notes are an integral part of these financial statements.
3
FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
March 30, March 30,
1999 1998
----------------------- -----------------------
Revenue $ 3,578,606 $ 4,017,501
Costs of revenue (principally charges incurred
at repair facilities for services) 2,925,486 3,358,992
----------------------- -----------------------
Gross profit 653,120 658,509
Operating expenses 904,991 978,284
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Loss from operations (251,871) (319,775)
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Other income (expense):
Interest and other income 43,929 51,350
Other expenses -- (6,771)
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Total other income 43,929 44,579
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Net loss $ (207,942) $ (275,196)
======================= =======================
Basic and diluted loss per share $ (0.02) $ (0.03)
======================= =======================
Weighted average number of common shares outstanding 8,331,800 8,092,911
======================= =======================
The accompanying notes are an integral part of these financial statements.
4
FIRST PRIORITY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
THREE MONTHS ENDED
March 30, March 30,
1999 1998
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Cash flows from operating activities:
Net loss ($207,942) ($275,196)
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Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 42,461 32,661
Changes in assets and liabilities
Accounts receivable (256,169) (90,515)
Inventories -- (9,246)
Prepaid expenses and other current assets (27,877) 48,500
Security deposit and other assets (756) 13,590
Accounts payable (234,478) (264,690)
Accrued expenses and other liabilities 596,760 379,526
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Total adjustments 119,931 109,826
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Net cash used in operating activities (88,011) (165,370)
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Cash flows used in investing activities,
additions to property and equipment (1,021) (98,653)
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Cash flows from financing activities:
Repayment of long-term debt (11,821) --
Collection of shareholder note -- 100,000
Proceeds from issuance of common stock -- 1,000,000
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Net cash provided by (used in) financing
activities (11,821) 1,100,000
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Net increase (decrease) in cash and cash
equivalents (89,032) 835,971
Cash and cash equivalents at beginning of
period 2,782,180 3,453,864
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Cash and cash equivalents at end of period $2,681,327 $4,289,845
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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, 1999 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
-----------------------
The Company, a New York corporation formed on June 28, 1985, is engaged
in automotive fleet management and administration of automotive repairs for
businesses, insurance companies and members of affinity groups.
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 three months ended March
31, 1999 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 month periods ended March 31, 1999 and 1998, there was no dilutive
effect from stock options and warrants.
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5. SUBSEQUENT EVENTS
-----------------
On April 13, 1999, the Company formed a new wholly owned subsidiary,
Collision Depot.com, Inc. to provide collision repair claims management services
for the insurance industry nationwide through the Internet.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
Automotive Management
Revenues from services of the automotive management operations were
$3,578,606, for the three months ended March 31, 1999, as compared to $4,017,501
for the three months ended March 31, 1998, representing a decrease of $438,895,
or 10.9%. We attribute the reduction in Revenue for the quarter to a lower
national vehicle accident rate. The reduced vehicle accident rate, recognized by
various insurance industry sources, is due to: (i) increased safety conditions
on both roads and in vehicles, (ii) drivers' safety awareness and defensive
driving and (iii) moderate weather conditions. The direct cost of services
related to such revenue (principally charges from automotive repair facilities)
was $2,925,486 and $3,358,992 for the three month periods ended March 31, 1999
and 1998, respectively, resulting in a decrease of $433,506 or 12.9%. The gross
profit percentage for the three months ended March 31, 1999 and March 31, 1998
increased 1.9% to 18.3% from 16.4%. This increase represents better pricing
structures and an increase in the Affinity program sales which yields a higher
gross profit than the traditional repair services.
Total operating expenses were $904,991 for the three months ended March
31, 1999, as compared to $978,284 for the three months ended March 31, 1998,
representing a decrease of $73,293 or 7.5%. The decrease in operating expenses
is mainly attributable to pay cuts taken by upper management and a reduction in
work force.
Interest and other income was $43,929 for the three months ended March
31, 1999, as compared to $51,350 for the same period in 1998, representing a
decrease of $7,421. The decrease is primarily attributable to lower average cash
balances available during the quarter ended March 31, 1999.
As a result of the foregoing, the net loss from continuing operations
for the three months ended March 31, 1999 was $207,942 ($.02 per share) as
compared to a net loss of $275,196 ($.03 per share) for the comparable three
months in 1998.
Liquidity and Capital Resources
As of March 31, 1999, the Company had cash and cash equivalents of
$2,681,327 and working capital was $2,499,384. The Company's operating
activities used $88,011 of cash in the first quarter of 1999, an improvement of
$77,359, as compared to the first quarter of 1998 where operating activities
used $165,370 of cash.
The Company believes that its present cash position will enable the
Company to continue to support its operations for the short and longer term.
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New Business Developments
On April 19, 1999, the Company announced the formation of a new wholly
owned subsidiary, Collision Depot.com, Inc. ("Collision Depot") to provide
collision repair claims and management services for the insurance industry
nationwide through the Internet. Additionally, the Company announced that
Collision Depot retained Fahnestock & Co., Inc. to act as its exclusive
placement agent in a private offering of equity securities.
Collision Depot has since changed its name to driversshield.com Corp.
The Company holds the registered trademark of Driver's Shield(Registered) and
is in the process of assigning this trademark to its subsidiary,
driversshield.com Corp. The subsidiary will offer, in addition to the collision
repair claims and management services for the insurance industry nationwide
through the Internet, a wide array of automotive services and discounts on a
nationwide basis, some of which are already being sold wholesale through
affinity groups and financial institutions under the Company's existing Driver's
Shield(Registered) label.
Year 2000 Compliance
The Company has two computer systems and software products coded to
accept only two digit entries to represent years. For example, the year "1998"
would be represented by "98." These systems and products will need to be able to
accept four digit entries to distinguish years beginning with 2000 from prior
years. As a result, systems and products that do not accept four digit year
entries will be replaced to comply with such "Year 2000" requirements. The
Company believes that its internal systems are Year 2000 compliant or will be
replaced in connection with previously planned changes to information systems
prior to the need to comply with Year 2000 requirements. Expenses related to
Year 2000 compliance amounted to approximately $100,000 in 1998 and are expected
to amount to approximately $100,000 in 1999. The anticipated costs of any Year
2000 modifications are based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to the availability or cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes and similar uncertainties. In addition, there can be no assurance
that Year 2000 compliance problems will not be revealed in the future which
could have a material adverse affect on the Company's business, financial
condition and results of operations. Many of the Company's customers and
suppliers may be affected by Year 2000 issues that may require them to expend
significant resources to modify or replace their existing systems. This may
result in those customers having reduced funds to purchase the Company's
products or in those suppliers experiencing difficulties in producing or
shipping key components to the Company on a timely basis or at all.
Forward Looking Statements - Cautionary Factors
Certain information contained herein includes information that is
forward looking. The matters referred to in forward-looking statements may be
affected by the risks and uncertainties involved in the Company's business.
These forward-looking statements are qualified in their entirety by the
cautionary statements contained in the Company's Form 10-KSB for the year ended
December 31, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Placement Agent Agreement between Fahnstock & Co., Inc. and
Collision Depot.com, Inc. dated April 14, 1999.
27 Financial Data Schedules
9
(b) Reports on Form 8-K
None
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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 17, 1999 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
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10.1 Placement Agent Agreement between Fahnstock & Co., Inc. and
Collision Depot.com, Inc. dated April 14, 1999.
27 Financial Data Schedules
12