<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10 - QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to _________
COMMISSION FILE NUMBER 0-23705
AUTOMOTIVE PERFORMANCE GROUP, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 86-0938742
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
7341 ANACONDA AVENUE, GARDEN GROVE, CALIFORNIA 92841
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(714) 373-2837
(ISSUER'S TELEPHONE NUMBER)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF
CHANGED SINCE LAST REPORT.)
Check whether the issuer: (1) 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ] (Not Applicable)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: On July 31, 1999 the issuer had
8,449,771 outstanding shares of Common Stock, par value $.0001
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
<PAGE> 2
PART I.
FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
<PAGE> 3
Automotive Performance Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
CURRENT ASSETS
<S> <C> <C>
Cash $ 124 $ 1,829
Restricted cash 3,037 500
Accounts receivable, net of allowance for
doubtful accounts of $0 and $19 respectively -- 327
Inventories -- 907
Prepaid expenses and other 1,482 374
Net assets of discontinued specialty chemical subsidiary 1,009 --
Net assets of discontinued automotive parts and
accessories subsidiaries 2,100 --
Purchase option 1,000 --
Notes receivable -- 600
-------- --------
Total current assets 8,752 4,537
PROPERTY, PLANT and EQUIPMENT, net 91 1,710
OTHER ASSETS
Net assets of discontinued specialty chemical subsidiary 51 --
Net assets of discontinued automotive parts and
accessories subsidiaries 1,506 --
Other assets -- 20
-------- --------
$ 10,400 $ 6,267
======== ========
CURRENT LIABILITIES
Line of credit $ -- $ 876
Current maturities of long-term obligations -- 496
Current maturities of capital lease obligations -- 105
Notes payable 2,023 --
Accounts payable 1,569 1,440
Accrued liabilities 45 240
Net liabilities of discontinued specialty chemical
subsidiary including provision for losses 687 --
Net liabilities of discontinued automotive parts and
accessories subsidiaries including provision for losses 5,772 --
-------- --------
Total current liabilities 10,096 3,157
LONG TERM OBLIGATIONS, less current maturities -- 944
LONG TERM CAPITAL LEASE OBLIGATIONS, less
current maturities -- 179
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock - authorized 13,000,000 shares, $.0001 par
value, 4,799,000 and 2,195,000 shares outstanding, respectively -- --
Common Stock - authorized 130,000,000 shares, $.0001 par
value, 6,455,071 and 6,239,956 shares outstanding, respectively 1 1
Additional contributed capital 45,337 38,418
Accumulated other comprehensive income 28 28
Accumulated deficit (45,062) (36,460)
-------- --------
304 1,987
-------- --------
$ 10,400 $ 6,267
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 4
Automotive Performance Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ --
Expenses
Selling, general and administrative 28 223 226 223
Salaries, payroll taxes and benefits 75 -- 306 --
Professional expenses 372 -- 731 --
Depreciation and amortization 7 -- 9 --
Write-off of goodwill 3,047 -- 3,047 --
----------- ----------- ----------- -----------
3,529 223 4,319 223
----------- ----------- ----------- -----------
Operating loss (3,529) (223) (4,319) (223)
Other income (expense)
Interest expense (94) -- (249) --
Interest income 25 -- 37 --
----------- ----------- ----------- -----------
Loss from continuing operations before discontinued
operations and extraordinary item (3,598) (223) (4,531) (223)
Discontinued operations
Loss from operations of discontinued venue division
and subsidiary -- (119) -- (339)
Loss from operations of discontinued race team subsidiary -- (764) -- (2,522)
Loss from operations of discontinued specialty chemical
subsidiary (802) (1,312) (1,111) (1,545)
Loss from sale of discontinued specialty chemical subsidiary
including provision of $185 for operating losses
during phase-out period (185) -- (185) --
Loss from operations of automotive parts and accessories
subsidiaries (909) (1,894) (1,090) (2,641)
Loss from sale of discontinued automotive parts and
accessories subsidiaries including provision of $267
for operating losses during phase-out period (1,685) -- (1,685) --
----------- ----------- ----------- -----------
Loss from discontinued operations (3,581) (4,089) (4,071) (7,047)
----------- ----------- ----------- -----------
Loss before extraordinary item (7,179) (4,312) (8,602) (7,270)
Extraordinary item
Gain from extinguishment of debt -- -- -- 259
----------- ----------- ----------- -----------
NET LOSS $ (7,179) $ (4,312) $ (8,602) $ (7,011)
=========== =========== =========== ===========
Loss per common share basic and diluted
Loss before discontinued operations
and extraordinary item $ (0.56) $ (0.04) $ (0.72) $ (0.06)
Discontinued operations (0.55) (0.71) (0.64) (1.77)
Extraordinary item -- -- -- 0.07
----------- ----------- ----------- -----------
$ (1.11) $ (0.75) $ (1.36) $ (1.76)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 5
Automotive Performance Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Six Months ended
June 30,
------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Increase (Decrease) in Cash
Cash flows from operating activities:
Net loss $(8,602) $(7,011)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 109 1,045
Deferred revenue -- (100)
Forgiveness of debt -- (259)
Equity in losses from affiliates 8 377
Provision for losses on discontinued operations 1,870 (40)
Write-off of goodwill 3,047 759
Issuance of common stock for services 78 --
Loss (gain) on disposal of assets 42 (201)
Write-off of notes receivable 507 --
Changes in assets and liabilities:
Accounts receivable (76) 305
Notes receivable -- 33
Inventories (212) (206)
Prepaid expenses and other assets (7) (135)
Accounts payable 719 1,177
Accrued liabilities 11 (38)
------- -------
Net cash used in operating activities s (2,506) (4,294)
Cash flows from investing activities:
Purchase of equipment (78) (82)
Investment in future acquisitions (5,393) --
Investment in subsidiaries (1,194) --
Proceeds from the disposition of equipment 1 979
------- -------
Net cash provided by (used in) investing activities (6,664) 897
Cash flows from financing activities:
Payments on long-term obligations (222) (794)
Payments on capital leases (51) --
Proceeds from issuance of preferred stock 5,591 1,000
Proceeds from notes payable 2,023
Borrowings on line of credit, net 124 939
------- -------
Net cash provided by financing activities 7,465 1,145
Net decrease in cash (1,705) (2,252)
Cash at beginning of period 1,829 3,511
------- -------
Cash at end of period $ 124 $ 1,259
======= =======
Cash paid during the period for interest $ 127 $ 187
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 6
Automotive Performance Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - FINANCIAL STATEMENTS
The unaudited consolidated condensed financial statements and related notes are
presented as permitted by Form 10-QSB, and do not contain certain information
included in the Company's audited consolidated financial statements and notes
for the fiscal year ended December 31, 1998. The information furnished reflects,
in the opinion of management, all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the results of the interim
periods presented. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the entire fiscal year
ending December 31, 1999. The accompanying unaudited consolidated condensed
financial statements and related notes should be read in conjunction with the
audited consolidated financial statements and the Form 10-KSB of Automotive
Performance Group, Inc. and subsidiaries (the "Company" or "APG") and notes
thereto, for its fiscal year ended December 31, 1998.
NOTE 2 - INVENTORIES
Inventories are stated at the lower of cost, on a first-in, first-out basis, or
market and consisted of the following at:
<TABLE>
<CAPTION>
December 31,
1998
-----------
<S> <C>
Raw materials $ 203,000
Work in process --
Finished goods 704,000
-----------
Total Inventories $ 907,000
===========
</TABLE>
Inventories totaling approximately $505,000 and $614,000 at June 30, 1999 are
included in net assets of discontinued automotive parts and accessories
subsidiaries and net assets of discontinued specialty chemical subsidiary,
respectively. See note 4.
NOTE 3 - ACQUISITIONS AND MERGERS
In February 1999, the Company signed a Term Sheet and Option Agreement for the
acquisition of Ampersand Ventures' AC Tech Equity and Debt. Concurrent with the
execution of the Term Sheet and Option Agreement, the Company made a
non-refundable, $1,000,000 option payment to Ampersand Ventures. Ampersand
Ventures then invested this money as an unsecured, subordinated loan to AC Tech.
The Company's Chairman and CEO is also the Chairman and CEO of AC Tech, as well
a minority shareholder of AC Tech. As of June 30, 1999 the option payment is
included in current assets as "Purchase Option" and was subsequently used as
partial payment of the purchase price of a 22% equity interest in PBT Brands,
Inc., discussed below.
<PAGE> 7
Automotive Performance Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
In April 1999, APG acquired 80% of the current outstanding shares of the common
stock of Boyd's Wheels, Inc. out of bankruptcy protection for a total cash
purchase price of approximately $1,690,000 in addition to 200,000 shares of the
Company's common stock. The purchase was accounted for under the purchase method
of accounting. The excess of the total acquisition cost over the fair value of
net assets acquired in the amount of $3,047,000 was written off as of June 30,
1999 as the expected future operating discounted cash flows of the acquired
business are less than the carrying value of goodwill. The Company has agreed to
invest up to an additional $2,000,000 of cash in Boyd's Wheels, Inc.
In April 1999, APG formed a wholly-owned subsidiary, D'Artagnan Associates, Inc,
a Delaware Corporation for the purpose of merging with a California Corporation
of the same name, which was primarily owned by APG's board chairman and chief
executive officer, Dean M. Willard. On July 20, 1999, the merger was consummated
for a purchase price of 1,000,000 shares of APG's common stock, plus an
additional 1,000,000 shares of APG's common stock subject to certain
restrictions.
On July 13, 1999 the Company entered into an agreement with the Jordan Company
(TJC) which would allow the acquisition of Loctite's Automotive Aftermarket
Business to proceed and be purchased by PBT Brands, Inc. (PBT), a new company
formed to acquire the Automotive Aftermarket Business of Loctite Corporation
(Permatex) which is majority owned by TJC and affiliates, and allow APG to
acquire a 22% interest in the common stock of PBT as well as a $3.25 million
interest in PBT's Junior Redeemable Preferred Stock. On July 27, 1999, APG
incorporated APG Special Purpose Sub, a Delaware Corporation, for the purpose of
holding the investment in Permatex. As of June 30, 1999, the Company has
invested approximately $3,037,000 in Permatex. On July 31, 1999, APG completed
its acquisition of 22% of the common stock of PBT for $1.1 million and purchased
$3.25 million in junior redeemable preferred stock of PBT. Consideration
included cash, the AC Tech Term Sheet and Option Agreement, discussed above, and
certain fees paid in connection with the acquisition. In the future, APG will
have the option to invest up to 22% of the equity in subsequent acquisition
opportunities of PBT. Additionally, PBT entered into an agreement to purchase
100% of the outstanding stock of AC Tech, Inc.
On July 23, 1999, APG formed a wholly-owned subsidiary, Zeropaper.com, Inc.
(ZP), a Delaware Corporation, whereby APG received 1,000 shares of
Zeropaper.com, Inc.'s common stock with a par value of $.01. On July 29, 1999,
ZP purchased all the outstanding shares of Klein Engines and Competition
Components, Inc. (Klein) and Automotive Specialty Chemicals Group (ASCG),
whereby ZP received a total of 100 shares of common stock of each. ZP also
purchased all of APG's ownership of Boyds Wheels, Inc, (BWI) consisting of
102,629,814 shares of BWI's common stock and ZP purchased all of APG's ownership
of D'Artagnan Associates, Inc. (DAI), consisting of 1,000 shares of DAI's common
stock. ZP also assumes all other past, present, and future obligations of APG
related to APG's motor vehicles parts and accessories and specialty chemicals
businesses, excluding PBT.
NOTE 4 - DISCONTINUED OPERATIONS
During the second quarter of 1999, the Company decided to sell or spin off
substantially all of its operating subsidiaries. Accordingly as of June 30,
1999, these operations were considered
<PAGE> 8
Automotive Performance Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
discontinued and offered for sale. These operations are reflected as
discontinued operations in the Company's Consolidated Condensed Statement of
Operations for the three and six months ended June 30, 1999 and 1998.
Specialty Chemical Subsidiary
In July 1999, the Company completed the sale of certain operating assets
totaling approximately $1,060,000 of its Royal Purple Motor Oil subsidiary
(RPMO), which marketed and distributed a product line of high performance
synthetic oils and lubricants. The proceeds from the sale of the assets will be
used to pay off the liabilities of the subsidiary totaling approximately
$502,000, net of the provision for operating losses totaling $185,000.
The Company recorded losses from RPMO's operations of $802,000 and $1,312,000
for the three months ended June 30, 1999 and 1998, respectively, and $1,111,000
and $1,545,000 for the six months ended June 30, 1999 and 1998, respectively, as
discontinued operations. The Company has recorded $185,000 as a provision for
the loss on the sale of the subsidiary and operating losses during the phase-out
period.
Automotive Parts and Accessories Subsidiaries
The Company has committed itself to a formal plan of disposal of the Company's
automotive parts and accessories subsidiaries by either sale or abandonment. The
Company has identified net assets totaling approximately $3,606,000 and
liabilities totaling approximately $5,772,000, which includes a provision for
losses of approximately $1,685,000, for sale or disposal.
The Company recorded losses from its automotive parts and accessories
subsidiaries of $909,000 and $1,894,000 for the three months ended June 30, 1999
and 1998, respectively, and $1,090,000 and $2,641,000 for the six months ended
June 30, 1999 and 1998, respectively, as discontinued operations. The Company
has recorded a loss of $1,418,000 as a provision for the losses on the sale or
abandonment of the subsidiaries and a provision of $267,000 for operating losses
during the phase-out period.
NOTE 5 - LOSS PER COMMON SHARE
The Company accounts for loss per common share under Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share," which established
standards for computing and presenting earnings per share. Loss per share is
based on the average number of shares outstanding during each period and income
available to common stockholders. The weighted average number of common shares
outstanding was 6,449,727 and 5,769,370 for the three months ended June 30, 1999
and 1998, respectively and was 6,344,841 and 3,973,977 for the six months ended
June 30, 1999 and 1998, respectively. The computation for loss per common share
assuming dilution for the six months ended June 30, 1999 and 1998 was
anti-dilutive, and therefore, is not included.
NOTE 6 - NOTES PAYABLE
In May 1999, APG borrowed short term funds totaling $2 million. The notes bear
interest at 10% per annum and are due on July 31, 1999. As discussed in note 7,
the notes were converted into shares of the Company's Series B preferred stock.
<PAGE> 9
Automotive Performance Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
NOTE 7 - PREFERRED STOCK
During the six months ended June 30, 1999, the Company issued 2,574,000 shares
of Series A Preferred Stock at $2.50 per share to accredited investors in
conjunction with a private placement of 4,000,000 preferred shares. An
additional 30,000 shares were issued to the underwriter as a placement fee. The
preferred shares are convertible to Common shares of the Company at a conversion
rate of one share of Common stock for each share of Preferred stock. A total of
540,000 preferred shares had been issued in conjunction with this placement
prior to December 31, 1998. On July 28, 1999, the Company's Series A Preferred
Shares were converted to common shares.
In July 1999, APG authorized 7 million shares of Series B Preferred Stock to be
partially issued for the purpose of converting approximately $1.5 million in
guaranteed debt owed to a majority shareholder of APG for approximately
1,480,000 shares. In addition, the Company converted the $2 million short term
borrowings from May 1999 to 2,000,000 shares of Series B Preferred Stock.
NOTE 8 - CONTINGENCIES
The Company is involved in certain claims arising in the normal course of
business. An estimate of the possible loss resulting from these matters cannot
be made; however, with the exception of the subsequently discussed case, the
Company believes that the ultimate resolution of these matters will not have a
material effect on its financial position or results of operations.
The Company originally entered into an agreement with Triumph Partners
to provide financing on an acquisition transaction. Triumph subsequently
changed the terms of the original agreement and the Company elected to secure
financing with another firm that provided more favorable terms for the Company.
A claim was subsequently filed against the Company, certain of its affiliates
and Mr. Dean M. Willard in the Massachusetts Superior Court on August 18, 1999,
which seeks damages in excess of $160 million. While management does not expect
the plaintiff to prevail in this claim, it is too early to provide any
evaluation of the claim at this time.
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties. All forward-looking statements are based on information available
to the Company on the date hereof, and the Company assumes no obligation to
update any such forward-looking statements. The Company's actual results could
differ materially from those anticipated in these forward-looking statements as
a result of a number of factors, including those set forth below.
The following discussion and analysis provides information that
management believes is relevant to an assessment and understanding of APG's
level of operation and financial condition. This discussion should be read with
the financial statements appearing in Part 1, Item 1 of this report.
HISTORICAL
Automotive Performance Group, Incorporated ("APG" or the "Company") was
formed to be the parent company for high performance automotive- and specialty
chemical-related operating subsidiaries. The objective of the Company was to
develop and successfully market a spectrum of integrated mutually supportive
brands of products and services for the high-performance automotive and
specialty chemicals industries. Specialty chemicals comprise an important part
of the overall automotive market as well as certain non-automotive market
niches.
NEW BUSINESS STRUCTURE
On August 4, 1999 APG announced a multi-faceted restructuring program
following its acquisition of a 22% equity ownership position in PBT Brands, Inc.
(PBT). PBT was formed to acquire the Automotive Aftermarket Business of Loctite
Corporation (Permatex). Permatex manufactures, distributes and markets premium
functional chemical products to the automotive maintenance and repair markets
under the Permatex, Right Stuff and Fast Orange brand names. The restructuring
when completed will result in APG's assets being primarily made up of its
investment in PBT. APG has the right to invest up to 22% of the equity in
subsequent acquisitions by PBT. APG will also seek acquisition opportunities in
areas that do not interfere with the business of PBT.
As a result of these restructuring changes, which are explained in more
detail in the notes to the financial statements appearing in Part 1, Item 1 of
this report, virtually all of APG's business activities that were extant a year
ago no longer exist as continuing operations. In addition, virtually all of
APG's business activities that will continue on a going-forward basis are new to
the Company. Because of this restructuring, management believes it would be
misleading to present comparative financial statements or analyses. Notes 3 and
4 to the financial statements provide details regarding these divestitures and
acquisitions.
OUTLOOK
Management believes that the restructuring of APG as outlined above and
in the notes to the financial statements has placed the Company in a position to
realize positive earnings and growth beginning in the third quarter of 1999 and
continuing into the future.
LIQUIDITY AND CAPITAL RESOURCES
Upon completing the restructuring of the business as discussed above,
the Company's assets will be made up primarily of its investment in PBT.
Although temporarily the Company will not have any direct operations it will
seek acquisition opportunities. Future acquisition activities are expected to be
financed through a combination of earnings from investments, private placements
of stock and debt.
RELATED PARTY TRANSACTIONS
As discussed in the notes to the financial statements, various
acquisitions, including the D'Artagnan and AC Tech acquisitions, involved
related parties. In addition, a significant amount of the Company's liquidity
was obtained from related parties.
<PAGE> 11
SEASONALITY
While the Company's former operating units were seasonally affected,
the ongoing investments are not expected to be affected by seasonal trends.
Divestiture efforts and the amounts finally realized from divestiture may be
adversely affected by the drop in fourth quarter revenues if the divestiture
activities are not completed in a timely manner.
FORWARD-LOOKING STATEMENTS
Matters discussed herein contain forward-looking statements. The
Company's actual results may differ significantly from results indicated by
forward-looking statements. Factors that might cause some differences include,
but are not limited to, changes in the public's interest in racing, and shifts
in leisure time pursuit preferences; changes in government regulations affecting
racing, sponsors, customers, the Company, or its subsidiaries; risks generally
involved in the high performance automotive business including, but not limited
to, product liability risk as a result of high performance engines and certain
specialty chemicals which are intended to improve automotive performance,
sometimes in extreme or severe conditions; the ability of the Company to
continue to produce quality products at competitive prices in markets which are
historically intensely competitive; the Company's ability to raise sufficient
debt and equity capital to meet increased operating and acquisition
requirements; the Company's ability to recruit and retain key personnel;
unfavorable results in litigation which the Company is currently involved in, or
may become subject to; the ability to effectively integrate the personnel and
operations of acquired companies; the effect of the Company's investment on the
operations and reputation of Permatex; compliance with hazardous waste disposal
regulations and standards; and the Company's history of operating losses and
limited operating history.
<PAGE> 12
PART II.
OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS
The Company is involved in certain claims arising in the normal course
of business. An estimate of the possible loss resulting from these matters
cannot be made; however, with the exception of the subsequently disclosed case,
the Company believes that the ultimate resolution of these matters will not have
a material effect on its financial position or results of operations.
The Company originally entered into an agreement with Triumph Partners
to provide financing on an acquisition transaction. Triumph subsequently
changed the terms of the original agreement and the Company elected to secure
financing with another firm that provided more favorable terms for the Company.
A claim was subsequently filed against the Company, certain of its affiliates
and Mr. Dean M. Willard in the Massachusetts Superior Court on August 18, 1999,
which seeks damages in excess of $160 million. While management does not expect
the plaintiff to prevail in this claim, it is too early to provide any
evaluation of the claim at this time.
ITEM 2. - CHANGES IN SECURITIES
During the second quarter of 1999, 200,000 shares of common stock were
issued in conjunction with the Boyds acquisition, and an additional 15,115
shares were issued for services rendered at fair value.
On July 28, 1999, the Company issued 2,000,000 shares to Dean M. and
Rebecca J. Willard in conjunction with the D'Artagnan acquisition. 1,000,000 of
these shares are being held by the Company and will be released to the Willards
when certain performance milestones are reached.
During the second quarter of 1999, 30,000 shares of Series A Preferred
Stock were issued to the underwriter as a placement fee.
ITEM 3. - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. - OTHER INFORMATION
The Company entered into letters of intent during the first quarter of
1999 to acquire Advanced Chemistry & Technology, Inc. and Loctite's AAD. These
companies fall within the Company's acquisition strategy, which is focused on
two primary market areas: specialty chemicals for aerospace and automotive
applications. These acquisitions were completed in the third quarter of 1999 as
described in note 3 to the financial statements and discussed in the paragraph
titled "New business structure" in Part I, Item 2, above.
During the second quarter of 1999, James Dunn, who was APG's Chief
Operating Officer, resigned from his position in the Company. In addition,
Jennifer Burns and Joe Marenda resigned as officers. The Company has no plans to
fill those positions. During the third quarter, Mr. Carl Walker resigned as
Chief Financial Officer and was succeeded by Mr. George Barraza. Mr. Walker
retained his position as Secretary. The Board of Directors is comprised of Dean
M. Willard, Chairman and Chief Executive Officer, George Barraza, Chief
Financial Officer, Carl Walker, Secretary, and Thomas Carmody.
<PAGE> 13
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 APG-IMSG Plan of Merger (2)
3.1 Certificate of Incorporation of APG (4)
3.2 Certificate of Amendment to Certificate of Incorporation (4)
3.3 Bylaws of Registrant (4)
4.1 Certificate of Designation with respect to Series A Preferred Stock of
APG (3)(*4)
10.1 Loan and Options Agreement dated as of September 16, 1997, among
International Motor Sports Group, Inc., Andrew L. Evans, Klein Engines
& Competition Components, Inc., and Thomas G. Klein (1)(*10.1)
10.2 Form of Promissory Note to International Motor Sports Group, Inc.
(1)(*10.2)
10.3 Registration Rights Agreement dated as of , 1998, between
Klein Engines & Competition Components, Inc. and Thomas G. Klein
(1)(*10.3)
10.4 Deed of Trust dated November 29, 1996 between Klein Engineered
Competition Components, Inc. and Bank of Arizona (1)(*10.4)
10.5 Note dated November 29, 1996 from Klein Engineered Competition
Components, Inc., as borrower, to Bank of Arizona as lender (1)(*10.5)
10.6 Commercial Security Agreement dated November 29, 1996 between Klein
Engineered Competition Components, Inc. and Bank of Arizona (1)(*10.6)
10.7 Guaranty of Thomas G. Klein dated November 29, 1996 (1)(*10.7)
10.8 Deed of Trust dated June 30, 1997 between Klein Engines & Competition
Components, Inc. and Century Bank (1)(*10.8)
10.9 Promissory Note dated June 30, 1997, from Klein Engines & Competition
Components, Inc., as borrower, to Century Bank, as lender (1)(*10.9)
10.10 Business Loan Agreement dated June 30, 1997 between Klein Engines &
Competition Components, Inc., and Century Bank (1)(*10.10)
10.11 Commercial Guaranty of Thomas G. Klein dated June 30, 1997 (1)(*10.11)
10.12 License Agreement date July 29, 1997, between Fueling Advanced
Technologies, Inc. and Klein Engines & Competition Components, Inc.
(1)(*10.12)
10.13 $500,000 Loan Agreement for Royal Purple Motor Oil, Inc. with Keybank
dated June 15, 1998, and maturing December 15, 1998 (3)(*10)
10.14 $1,000,000 Loan Agreement for Automotive Specialty Chemicals Group,
Inc. (formerly International Motor Sports Group, Inc.) with First
Capital Bank of Arizona dated November 4, 1998 (5)(*10.14)
10.15 $1,000,000 Loan Agreement for Automotive Specialty Chemicals Group,
Inc. (formerly International Motor Sports Group, Inc.) with First
Capital Bank of Arizona dated May 3, 1999 (7)(*10.2)
10.16 $719,733 Commercial Installment Note for Team Scandia with National
City Bank of Indiana dated November 19, 1998 (5)(*10.15)
10.17 Boyds Agreement (5)(*10.16)
10.18 Agreement to acquire Ampersand's investment interest in AC Tech.
(7)(*10.1)
10.19 1998 Stock Option Plan as amended May 22, 1998 (6)
27.1 Financial Data Schedule
- --------------------------------
(*) Exhibit Number of this document in original filing.
(1) Incorporated by reference to the Registration Statement on
Form 10-SB filed by Klein Engines & Competition Components,
Inc. (predecessor to APG) on February 2, 1998.
(2) Incorporated by reference to the Current Report on Form 8-K/A
filed on July 1, 1998.
(3) Incorporated by reference to the Quarterly Report on Form
10-QSB filed for the quarter ended June 30, 1998.
(4) Incorporated by reference to the Registration Statement on
Form SB-2 filed on December 16, 1998.
(5) Incorporated by reference to the Annual Report on Form 10-KSB
for the year ended December 31, 1998.
(6) Incorporated by reference to Appendix A of the Definitive
Information Statement on Form 14C filed on February 26, 1999.
<PAGE> 14
(7) Incorporated by reference to the Quarterly Report on Form
10-QSB filed for the quarter ended March 31, 1999.
(b) Reports on Form 8-K
On April 19, 1999, the Company filed a Current Report on Form 8-K. This
report disclosed the acquisition, on April 2, 1999, of 80% of the current
outstanding shares of common stock of Boyds Wheels, Inc. This acquisition was
consummated as discussed in the Annual Report for the year ended December 31,
1998 filed on Form 10-KSB. The agreement governing this acquisition was included
as Exhibit 10.16 of that Annual Report. The Form 8-K stated that the required
financial statements would be filed within 60 days.
On June 11, 1999, the Company amended the April 19 report by filing a
Current Report on Form 8-K/A. This report stated that financial statements were
not required for the acquisition of the Boyds stock.
The items omitted are either inapplicable or are items to which the answer is
negative.
<PAGE> 15
AUTOMOTIVE PERFORMANCE GROUP, INC.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AUTOMOTIVE PERFORMANCE GROUP, INC.
August 20, 1999 /s/ DEAN M. WILLARD
Dean M. Willard
Chairman of the Board and Chief Executive Officer
August 20, 1999 /s/ GEORGE BARRAZA
George Barraza
Chief Financial Officer
<PAGE> 16
ITEM 6. - EXHIBIT INDEX
2.1 APG-IMSG Plan of Merger (2)
3.1 Certificate of Incorporation of APG (4)
3.2 Certificate of Amendment to Certificate of Incorporation (4)
3.3 Bylaws of Registrant (4)
4.1 Certificate of Designation with respect to Series A Preferred Stock of
APG (3)(*4)
10.1 Loan and Options Agreement dated as of September 16, 1997, among
International Motor Sports Group, Inc., Andrew L. Evans, Klein Engines
& Competition Components, Inc., and Thomas G. Klein (1)(*10.1)
10.2 Form of Promissory Note to International Motor Sports Group, Inc.
(1)(*10.2)
10.3 Registration Rights Agreement dated as of , 1998, between
Klein Engines & Competition Components, Inc. and Thomas G. Klein
(1)(*10.3)
10.4 Deed of Trust dated November 29, 1996 between Klein Engineered
Competition Components, Inc. and Bank of Arizona (1)(*10.4)
10.5 Note dated November 29, 1996 from Klein Engineered Competition
Components, Inc., as borrower, to Bank of Arizona as lender (1)(*10.5)
10.6 Commercial Security Agreement dated November 29, 1996 between Klein
Engineered Competition Components, Inc. and Bank of Arizona (1)(*10.6)
10.7 Guaranty of Thomas G. Klein dated November 29, 1996 (1)(*10.7)
10.8 Deed of Trust dated June 30, 1997 between Klein Engines & Competition
Components, Inc. and Century Bank (1)(*10.8)
10.9 Promissory Note dated June 30, 1997, from Klein Engines & Competition
Components, Inc., as borrower, to Century Bank, as lender (1)(*10.9)
10.10 Business Loan Agreement dated June 30, 1997 between Klein Engines &
Competition Components, Inc., and Century Bank (1)(*10.10)
10.11 Commercial Guaranty of Thomas G. Klein dated June 30, 1997 (1)(*10.11)
10.12 License Agreement date July 29, 1997, between Fueling Advanced
Technologies, Inc. and Klein Engines & Competition Components, Inc.
(1)(*10.12)
10.13 $500,000 Loan Agreement for Royal Purple Motor Oil, Inc. with Keybank
dated June 15, 1998, and maturing December 15, 1998 (3)(*10)
10.14 $1,000,000 Loan Agreement for Automotive Specialty Chemicals Group,
Inc. (formerly International Motor Sports Group, Inc.) with First
Capital Bank of Arizona dated November 4, 1998 (5)(*10.14)
10.15 $1,000,000 Loan Agreement for Automotive Specialty Chemicals Group,
Inc. (formerly International Motor Sports Group, Inc.) with First
Capital Bank of Arizona dated May 3, 1999 (7)(*10.2)
10.16 $719,733 Commercial Installment Note for Team Scandia with National
City Bank of Indiana dated November 19, 1998 (5)(*10.15)
10.17 Boyds Agreement (5)(*10.16)
10.18 Agreement to acquire Ampersand's investment interest in AC Tech.
(7)(*10.1)
10.19 1998 Stock Option Plan as amended May 22, 1998 (6)
27.1 Financial Data Schedule
- --------------------------------
(*) Exhibit Number of this document in original filing.
(1) Incorporated by reference to the Registration Statement on
Form 10-SB filed by Klein Engines & Competition Components,
Inc. (predecessor to APG) on February 2, 1998.
(2) Incorporated by reference to the Current Report on Form 8-K/A
filed on July 1, 1998.
(3) Incorporated by reference to the Quarterly Report on Form
10-QSB filed for the quarter ended June 30, 1998.
(4) Incorporated by reference to the Registration Statement on
Form SB-2 filed on December 16, 1998.
(5) Incorporated by reference to the Annual Report on Form 10-KSB
for the year ended December 31, 1998.
(6) Incorporated by reference to Appendix A of the Definitive
Information Statement on Form 14C filed on February 26, 1999.
(7) Incorporated by reference to the Quarterly Report on Form
10-QSB filed for the quarter ended March 31, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated condensed financial statements of Automotive Performance
Group, Inc. and Subsidiaries for June 30, 1999 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,161
<SECURITIES> 0
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<CURRENT-ASSETS> 8,752
<PP&E> 103
<DEPRECIATION> 12
<TOTAL-ASSETS> 10,400
<CURRENT-LIABILITIES> 10,096
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0
0
<COMMON> 1
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<TOTAL-LIABILITY-AND-EQUITY> 10,400
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<INTEREST-EXPENSE> 249
<INCOME-PRETAX> (4,531)
<INCOME-TAX> 0
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<NET-INCOME> (8,602)
<EPS-BASIC> (1.36)
<EPS-DILUTED> (1.36)
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