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, 2000
[ ] 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 0-21467
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DRIVERSSHIELD.COM CORP.
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(Exact name of small business issuer as specified in its charter)
(F/K/A FIRST PRIORITY GROUP, INC.)
New York 11-2750412
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
51 East Bethpage Road
Plainview, New York 11803 (516) 694-1010
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(Address of principal executive offices) (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
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As of November 10, 2000, the issuer had outstanding a total of
10,521,988 shares of common stock.
Transitional Small Business Format (check one) Yes[ ] No[ X ]
DRIVERSSHIELD.COM CORP.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2000
CONTENTS
PAGE
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Part 1. FINANCIAL INFORMATION 3
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
As of September 30, 2000 (Unaudited) 3
Condensed Consolidated Statements of Operations
(Unaudited) for the Three Months ended
September 30, 2000 and 1999 4
Condensed Consolidated Statements of Operations
(Unaudited) for the Nine Months ended
September 30, 2000 and 1999 5
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Nine months ended
September 30, 2000 and 1999 6
Notes to Condensed Consolidated Financial 7
Statements
Item 2. Management's Discussion and Analysis 9
Part 2. OTHER INFORMATION 12
Item 6. Exhibits and Reports on Form 8-K 12
Item 1. Financial Statements
DRIVERSSHIELD.COM CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2000
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 508,769
Accounts receivable, less allowance for doubtful
accounts of $28,223 2,305,644
Investment securities 776,630
Prepaid expenses and other current assets 29,563
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Total current assets 3,620,606
Property and equipment, net of accumulated
depreciation of $782,231 903,636
Security deposits and other assets 30,003
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Total assets $4,554,245
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,051,897
Accrued expenses and other current liabilities 748,660
Current portion of long-term debt 14,644
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Total current liabilities 1,815,201
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Shareholders' equity:
Common stock, $.015 par value, authorized 20,000,000
shares; issued 11,241,655 shares 168,625
Preferred stock, $.01 par value, authorized 1,000,000
shares; none issued or outstanding --
Additional paid-in capital 9,281,657
Accumulated other comprehensive income, unrealized holding
gain on investment securities 1,854
Deficit (5,230,058)
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4,222,078
Less common stock held in treasury, at cost,
719,667 shares 1,483,034
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Total shareholders' equity 2,739,044
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Total liabilities and shareholders' equity $4,554,245
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See notes to condensed consolidated financial statements.
3
DRIVERSSHIELD.COM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30, September 30,
2000 1999
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Revenue:
Collision repairs and fleet management services $ 3,304,304 $ 2,346,454
Subrogation and salvage service commissions 87,650 128,373
Automobile affinity services 480,293 193,783
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Total revenues 3,872,247 2,668,610
Cost of revenue (principally charges incurred at repair
facilities for services) 2,794,754 1,999,990
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Gross profit 1,077,493 668,620
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Operating expenses:
Selling 112,034 92,917
General and administrative 887,915 821,954
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Total operating expenses 999,949 914,871
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77,544 (246,251)
Investment and other income 25,822 31,053
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Income (loss) from operations before
income taxes 103,366 (215,198)
Income taxes, all current 2,525 --
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Net income (loss) $ 100,841 $ (215,198)
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Earnings (loss) per share:
Basic $ .01 $ (.03)
Diluted .01 (.03)
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Weighted average number of common shares outstanding 10,465,757 8,331,800
Effect of dilutive securities, stock options and warrants 948,466 --
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Weighted average diluted common shares outstanding 11,414,223 8,331,800
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See notes to condensed consolidated financial statements.
4
DRIVERSSHIELD.COM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended
September 30, September 30,
2000 1999
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Revenue:
Collision repairs and fleet management services $ 8,860,033 $ 8,111,903
Subrogation and salvage service commissions 305,675 388,634
Automobile affinity services 1,358,620 481,103
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Total revenues 10,524,328 8,981,640
Cost of revenue (principally charges incurred at repair
facilities for services) 7,498,267 6,902,258
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Gross profit 3,026,061 2,079,382
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Operating expenses:
Selling 306,734 302,968
General and administrative 2,603,855 2,432,915
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Total operating expenses 2,910,589 2,735,883
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115,472 (656,501)
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Other income (expense):
Realized loss on investment (1,518) --
Investment and other income 92,227 110,157
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Total other income 90,709 110,157
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Income (loss) from operations before
income taxes 206,181 (546,344)
Income taxes, all current 7,225 --
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Net income (loss) $ 198,956 $ (546,344)
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Earnings (loss) per share:
Basic $ .02 $ (.07)
Diluted .02 (.07)
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Weighted average number of common shares outstanding 9,767,145 8,331,800
Effect of dilutive securities, stock options and warrants 1,990,619 --
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Weighted average diluted common shares outstanding 11,757,764 8,331,800
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See notes to condensed consolidated financial statements.
5
DRIVERSSHIELD.COM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30, September 30,
2000 1999
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Cash flows provided by (used in) operating activities:
Net income (loss) $ 198,956 $ (546,344)
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Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 184,746 132,985
Realized loss on investment 1,518 --
Options granted for services 49,421 --
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Changes in assets and liabilities:
Accounts receivable (510,904) 17,177
Prepaid expenses and other current assets 9,813 44,580
Security deposit and other assets 5,285 73,734
Accounts payable 113,479 (562,764)
Accrued expenses and other current liabilities 1,093 667,606
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Total adjustments (145,549) 373,318
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Net cash provided by (used in) operating activities 53,407 (173,026)
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Cash flows used in investing activities:
Purchase of property and equipment (399,288) (161,506)
Purchase of investments (35,937)
Proceeds from sale of investments 300,000 --
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Net cash used in investing activities (135,225) (161,506)
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Cash flows provided by (used in) financing activities:
Repayment of long-term debt (35,869) (31,252)
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 48,228 (31,252)
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Net decrease in cash and cash equivalents (33,590) (365,784)
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 $ 508,769 $ 2,416,396
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Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 7,225 $ --
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See notes to condensed consolidated financial statements.
6
DRIVERSSHIELD.COM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
1. BASIS OF PRESENTATION
The information contained in the condensed consolidated financial
statements for the three and nine month periods ended September 30, 2000 and
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 in accordance with the
requirements of 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 statements as reported
in its most recent annual report on Form 10-KSB.
Certain prior period balances have been reclassified to conform to the
current period classification.
For the nine month period ending September 30, 2000, 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 AND NAME CHANGE
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 announced
that, effective November 2, 2000, it had changed its name to driversshield.com
Corp., and that its stock trading symbol on the Nasdaq Small-Cap Market would
become DRVR.
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 and nine months ended
September 30, 2000 are not necessarily indicative of the results to be expected
for the full year.
7
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 nine month periods ended September 30, 1999 there was no dilutive
effect from stock options and warrants.
5. OUTSTANDING DISPUTES
The Company has advised a third-party provider, which it had engaged for
specified tasks associated with the development and enhancement of its software,
that it was disputing selected charges totaling $228,000. Of such amounts,
$156,000 had previously been paid, and capitalized, and is currently included in
the accompanying financial information. The remaining $72,000 payment has been
withheld, and has not been recorded in the accompanying financial statements.
In an unrelated matter, the Company has not recorded the value of certain
warrants provided to an investment relations firm because it is seeking to
nullify that contract for lack of performance. The Company is seeking to recoup
$45,000, which it has already paid and expensed in its financial records, and to
void warrants, including those vested, which had been granted to acquire shares
of its common stock.
8
Item 2. Management's Discussion and Analysis or Plan of Operation
Forward Looking Statements - Cautionary Factors
The following discussion and analysis should be read in conjunction
with the Company's Financial Statements and the notes hereto appearing elsewhere
in this report. This report contains forward-looking statements within the
meaning of the Private Securities Litigation Act of 1995. The company cautions
that forward-looking statements are not guarantees of future performance and
involve certain risks and uncertainties (including those identified in "Risk
Factors" in the company's Form 10-KSB for the year ended December 31,1999) and
that actual results may differ materially from those in the forward-looking
statements as a result of various 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.
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 presented 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 nine months ended September 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 nine months ended
September 30,1999 were reduced by $715,000 and $2,063,000, respectively.
Three Months ended September 30,2000 (the "2000 Quarter") Compared to Three
Months ended September 30, 1999 (the "1999 Quarter").
The 2000 Quarter reflected net income of $101,000 compared to a net loss of
($215,000) in the 1999 Quarter, an increase of $316,000. Basic and fully diluted
earnings per share was $.01 per share in the 2000 Quarter, versus a loss of
($.03) in the 1999 Quarter.
Revenues
Revenues were $3,872,000 in the 2000 Quarter, versus $2,669,000 in the 1999
Quarter, representing an increase of $1,203,000 or 45%. The Company's revenues
increased $917,000 from its collision repair and fleet management services,
including subrogation and salvage commissions. This represented an increase of
37% for the 2000 Quarter, as compared to the 1999 Quarter. The increase in
revenues for collision repair and fleet management services reflects expansion
of the client base which was added to the fleet program during the second
quarter of 2000 and reached its full effect during the third quarter. In the
2000 Quarter Affinity Services sales increased $287,000 or 148% to $480,000 as
compared to $194,000 for the same period in 1999 reflecting marketing efforts
that resulted in greater participation in the Company's membership services
programs.
9
Operating Income and Expenses
Consolidated net income increased by $316,000 to $101,000 in the 2000
Quarter from a loss of $215,000 in the 1999 Quarter. The increase in revenues of
$1,203,000, described above, resulted in an increase in gross profit of
$408,000. In addition to revenue growth, the gross profit percentage also
increased from 25% in the 1999 Quarter to 28% in the 2000 Quarter. This was due
to a greater proportion of revenues from Affinity services. The direct costs of
services related to such revenue (principally charges from automotive repair
facilities) were $2,795,000 in the 2000 Quarter, as compared to $2,000,000 for
the same period in 1999, representing an increase of $795,000 or 40%, while the
increase in revenues was 45% in the aggregate.
Selling, general and administrative expenses increased by $85,000
(9%), to $1,000,000 in the 2000 Quarter, from $915,000 in the 1999 Quarter. The
increase in operating expenses is mainly attributable to the additional
personnel necessary for the start-up of operations of driversshield.com CRM and
increase in Affinity Services.
Nine Months ended September 30,2000 (the "2000 Period") Compared to Nine Months
ended September 30, 1999 (the "1999 Period").
The 2000 Period reflected net income of $199,000 compared to a net loss of
($546,000) in the 1999 Period, an increase of $745,000. Basic and fully diluted
earnings per share increased to $.02 per share in the 2000 Period, versus a loss
of ($.07) in the 1999 Period.
Revenues
Revenues increased 17%, or $1,542,000, to $10,524,000 in the 2000 Period versus
$8,982,000 in the 1999 Period. Collision repair and fleet management services,
including subrogation and salvage commissions, increased $665,000 or 8% to
$9,166,000 in the 2000 Period versus $8,501,000 for the same period in 1999. The
increase in revenues for collision repair and fleet management services reflects
expansion of the client base which was added to the fleet program during the
2000 quarter and reached its full effect during the third quarter. Affinity
Services sales increased $878,000, or 182%, in the 2000 Period, to $1,359,000
versus $481,000 in the 1999 Period, reflecting marketing efforts that increased
enrollment in the Company's membership services program.
Operating Income and Expenses
Consolidated net income increased by $745,000 to $199,000 in the 2000 Period
from a loss of $(546,000) in the 1999 Period. The increase in revenues of
$1,542,000, described above, resulted in an increase in gross profit of
$947,000. In addition to revenue growth, the gross profit percentage also
increased from 23% in the 1999 Period to 29% in the 2000 Period. This was due to
a greater proportion of revenues from Affinity Services. The direct costs of
services related to such revenue (principally charges from automotive repair
facilities) were $7,498,000 in the 2000 Period, as compared to $6,902,000 for
the same period in 1999, representing an increase of $596,000 or 9%, while the
increase in revenues was 17%, in the aggregate.
In the 2000 Period, selling, general and administrative expenses increased
$175,000,
10
or 6%, to $2,911,000 as compared to $2,736,000 for the same period of 1999.
Investment and other income was $91,000 for the 2000 Period, as
compared to $110,000 for the 1999 Period, representing a decrease of $19,000.
The decrease is primarily attributable to lower average investment balances
available.
Liquidity and Capital Resources
As of September 30, 2000, the Company had cash and cash
equivalents of $509,000. The Company also holds 79,450 shares of Salomon Smith
Barney Adjustable Rate Government Income Fund securities valued at $777,000 at
September 30, 2000. Working capital of the Company as of September 30, 2000, was
$1,805,000. The Company's operating activities generated $53,000 of cash for the
nine months ended September 30, 2000 as compared to 1999, when the Company's
operating activities used $173,000 of cash. The reduced cash use for operations
is primarily a result of the increase in net income for 2000, as described
above. In the aggregate of all activities, cash decreased $34,000 for the nine
months ended September 30,2000.
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. This equity facility enables
driversshield.com Corp. to draw down funds at its discretion on a monthly basis
for a twelve month period following the effective date of a registration
statement, filed to register the shares issued pursuant to the Securities Act of
1933, in exchange for common stock of 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. A registration statement for the securities
became effective on November 14, 2000. No funding has occurred to date under
this agreement.
Deferred Income Taxes
The Company has an operating loss carryforward of approximately $4.7
million which is available to offset future taxable income. A valuation
allowance has been established for the full amount of the deferred tax benefit
and accordingly no deferred tax asset has been presented in the accompanying
financial statements. To the extent the Company is profitable in future periods,
such carryforwards may be utilized to offset taxable earnings. However, to the
extent the Company is not profitable it would not be able to realize this
benefit.
11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedules
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.
driversshield.com Corp.
Date: November 14, 2000 By: /s/ Barry Siegel
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Barry Siegel
Chairman of the Board
of Directors, Chief Executive Officer
Treasurer, Secretary and Principal
Financial and Accounting Officer
12
Index of Exhibits
Exhibit No. Description
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27 Financial Data Schedules