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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 September 30, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-23705
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Automotive Performance Group, Inc.
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(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
Delaware 86-0938742
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(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
</TABLE>
7341 Anaconda Avenue, Garden Grove, California 92841
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(Address of principal executive offices)
(714) 373-2837
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: On October 31, 2000 the
issuer had 12,577,404 outstanding shares of common stock, par value $0.0001.
Transitional Small Business Disclosure Format (Check One):
Yes [ ] No [X]
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PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS.
Automotive Performance Group, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(unaudited)
----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 187 $ 161
Accounts receivable, net 16 65
Prepaid expenses and other 51 77
-------- --------
Total current assets 254 303
FURNITURE and EQUIPMENT, net 41 54
OTHER ASSETS
Investment in PBT Brands, Inc., net -- 3,077
Intangible assets, net 1,729 1,823
-------- --------
$ 2,024 $ 5,257
======== ========
CURRENT LIABILITIES
Accounts payable $ 571 $ 1,013
Net liabilities of discontinued specialty chemical subsidiary 566 548
Payable to related party 200 150
-------- --------
Total current liabilities 1,337 1,711
COMMITMENTS AND CONTINGENCIES -- --
COMMON STOCK WITH PUT OPTION 207 --
STOCKHOLDERS' EQUITY
Preferred stock - authorized 13,000,000 shares, $0.0001 par value:
Series A - authorized 5,650,000 shares; no shares outstanding -- --
Series B - authorized 7,000,000 shares; 3,480,000 shares outstanding;
liquidation preference $3,480 -- --
Common Stock - authorized 130,000,000 shares, $0.0001 par
value, 12,577,404 and 12,404,071 shares outstanding, respectively 1 1
Additional contributed capital 62,623 62,765
Accumulated other comprehensive income 28 28
Accumulated deficit (62,172) (59,248)
-------- --------
480 3,546
-------- --------
$ 2,024 $ 5,257
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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Automotive Performance Group, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited) (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------ ------------------------
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Revenues $ 23 $ -- $ 89 $ --
Expenses
Direct expenses 16 -- 69 --
Selling, general and administrative 26 (71) 113 435
Salaries, payroll taxes and benefits 32 114 97 526
Professional expenses 88 310 188 1,135
Depreciation and amortization 36 5 107 14
Write-off of goodwill -- -- -- 3,047
-------- -------- -------- --------
198 358 574 5,157
-------- -------- -------- --------
Operating loss (175) (358) (485) (5,157)
Other income (expense)
Equity in losses of affiliate -- (1,926) (2,527) (1,926)
Interest expense (5) (341) (10) (364)
Financing costs -- (9,902) -- (9,902)
Other income 34 96 144 147
-------- -------- -------- --------
29 (12,073) (2,393) (12,045)
-------- -------- -------- --------
Loss from continuing operations before discontinued
operations (146) (12,431) (2,878) (17,202)
Discontinued operations
Loss from operations of discontinued specialty chemical
subsidiary (1) -- (46) (1,111)
Loss from sale of discontinued specialty chemical subsidiary
including operating losses during phase-out period -- (622) -- (807)
Loss from operations of discontinued automotive parts
and accessories subsidiaries -- -- -- (850)
Loss from sale of discontinued automotive parts and
accessories subsidiaries including operating losses
during phase-out period -- 181 -- (1,504)
-------- -------- -------- --------
Loss from discontinued operations (1) (441) (46) (4,272)
-------- -------- -------- --------
NET LOSS $ (147) $(12,872) $ (2,924) $(21,474)
======== ======== ======== ========
Loss per common share basic and diluted
Loss before discontinued operations $ (0.01) $ (1.16) $ (0.23) $ (2.20)
Discontinued operations (0.00) (0.04) (0.00) (0.54)
-------- -------- -------- --------
$ (0.01) $ (1.20) $ (0.23) $ (2.74)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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Automotive Performance Group, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) (In Thousands)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
2000 1999
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<S> <C> <C>
Increase (Decrease) in Cash:
Cash flows from operating activities:
Net loss $ (2,924) $(21,474)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 107 157
Equity in losses from affiliates -- 20
Equity losses (earnings) in investment in PBT Brands, Inc. 2,527 (141)
Provision for losses on discontinued operations -- 1,159
Write-off of goodwill -- 3,047
Issuance of common stock for services -- 251
Issuance of warrants for financing costs -- 9,902
Issuance of warrants for acquisition costs -- 975
Issuance of stock options for acquisition costs -- 824
Loss on sale of assets of subsidiary -- 409
Loss on disposal of assets -- 43
Write-off of notes receivable -- 600
Accrued interest on put option 10 --
Changes in assets and liabilities:
Accounts receivable 49 (261)
Inventories -- 15
Prepaid expenses and other assets 26 203
Accounts payable (227) 267
Accrued liabilities -- 125
Payable to related party (150) --
-------- --------
Net cash used in operating activities (582) (3,879)
Cash flows from investing activities:
Purchase of equipment -- (80)
Proceeds from the disposition of equipment -- 11
Investment in subsidiaries -- (1,194)
Proceeds from sale of assets of subsidiary -- 461
Investment in PBT Brands, Inc. -- (4,350)
Proceeds from partial sale of investment in PBT Brands, Inc. 750 --
-------- --------
Net cash provided by (used in) investing activities 750 (5,152)
Cash flows from financing activities:
Payments on long-term obligations -- (265)
Payments on capital leases -- (61)
Proceeds from issuance of preferred stock -- 5,591
Proceeds from notes payable -- 2,023
Borrowings on line of credit, net -- 124
Repurchase of APG common stock (142) --
-------- --------
Net cash provided by (used in) financing activities (142) 7,412
-------- --------
Net increase (decrease) in cash 26 (1,619)
Cash at beginning of period 161 1,829
-------- --------
Cash at end of period $ 187 $ 210
======== ========
Cash paid during the period for interest $ -- $ 176
======== ========
Non cash activities:
Payable to related party added to investment in PBT Brands, Inc. $ 200 $--
Issuance of common stock with put option for accounts payable 197 --
</TABLE>
The accompanying notes are an integral part of these financial statements.
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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 Automotive Performance Group, Inc. and Subsidiaries'
(APG) audited consolidated financial statements and notes for the fiscal year
ended December 31, 1999. 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, 2000.
The accompanying unaudited consolidated condensed financial statements and
related notes should be read in conjunction with APG's audited consolidated
financial statements and notes thereto, and Form 10-KSB, for its fiscal year
ended December 31, 1999. Certain reclassifications have been made to the 1999
financial statements in order to conform to the 2000 presentation.
NOTE 2 - LOSS PER COMMON SHARE
APG accounts for loss per common share under Statement of Financial
Accounting Standards No. 128, "Earnings per Share," which established standards
for computing and presenting earnings and losses per share. Loss per share is
based on the average number of common shares outstanding during each period and
loss attributable to common stockholders. The weighted average number of common
shares outstanding was 12,732,187 and 10,741,864 for the three months ended
September 30, 2000 and 1999, respectively, and was 12,612,043 and 7,828,763 for
the nine months ended September 30, 2000 and 1999, respectively. The effect of
common stock equivalents on the computation of loss per common share for the
three months and for the nine months ended September 30, 2000 and 1999 was
anti-dilutive, and therefore, is not included in the computation of diluted loss
per common share.
NOTE 3 - INVESTMENT IN PBT BRANDS, INC.
APG accounts for its investment in PBT Brands, Inc. (PBT) under the
equity method of accounting whereby APG's share of the earnings or losses of PBT
are reflected in the Consolidated Condensed Statements of Operations. The amount
by which APG's carrying value exceeds its share of the underlying net assets of
PBT was being amortized over an 8-year period. This amortization expense is
included in equity in losses of affiliate on the accompanying Consolidated
Condensed Statements of Operations. Due to the size of APG's equity in PBT's
losses, all of the remaining unamortized carrying value was written off in June
2000 as part of the $482,000 discussed below.
On April 7, 2000, APG sold a portion of its investment in PBT to a
number of PBT employees and PBT investors, some of whom are also officers and
directors of APG. This sale generated $750,000 in cash for APG. The sale
included both PBT common and preferred stock in essentially the same ratio and
for essentially the same dollar amount as APG paid for those shares. APG's share
of PBT's common stock was reduced to 18.1% from 22% as a result of this sale. In
June 2000, $200,000 representing
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APG's share of additional expenses related to APG's initial acquisition of its
equity in PBT was added to the carrying value of the PBT investment.
APG's equity in PBT's losses totaled $1,543,000 and $3,588,000 for the
three months and six months ended June 30, 2000, respectively. These amounts
include $85,000 and $147,000, respectively, of amortization of APG's excess cost
over underlying equity of PBT. The equity method of accounting dictates that APG
stop recognizing its proportional share of PBT's losses when APG's net
investment in PBT has been reduced to zero. This condition was met in the second
quarter of 2000, therefore APG recorded only the first $482,000 of its
$1,543,000 share of PBT's losses ($2,527,000 of $3,588,000 for the six month
period). Even though the remaining $1,061,000 does not appear on APG's financial
statements, it may reduce APG's future income. In addition, APG's equity in
PBT's losses for the third quarter of 2000 was $1,296,000 which does not appear
on APG's financial statements for the same reason. The equity method of
accounting allows APG to record its proportional share of PBT's future net
income only after this combined total of $2,357,000, plus APG's unrecognized
share of PBT's future losses, have been offset by an equal amount of APG's
unrecognized share of PBT's future net income.
NOTE 4 - COMMON STOCK
On April 13, 2000, APG granted 333,333 shares of its common stock to
one of its vendors as payment for approximately $200,000 owed to that vendor for
services rendered. As part of this arrangement to exchange APG's debt for
equity, the vendor was granted a "put option," or the right to require APG to
repurchase these shares. This put option may be exercised by the vendor during
the month of January 2002 for $200,000 plus seven percent interest from August
1, 1999. APG is amortizing the $39,000 interest from April 2000 through January
2002. Due to this put option, the value of these shares, plus interest accrued
through September 2000, is recorded on the balance sheet as temporary equity.
These 333,333 shares are included in the total number of shares outstanding when
computing APG's loss per share.
On September 28, 2000, APG reacquired 160,000 shares of its common
stock for a cash payment of $142,000. This transaction was part of a multi-party
negotiated settlement between APG and other parties. These shares were retired
and are available for future issuance.
NOTE 5 - CONTINGENCIES
APG is involved in certain claims arising in the course of business.
While it is too early to provide an evaluation of these claims at this time, it
is possible that, due to the size of the claims asserted against APG, these
matters, either individually or taken together, may have a material effect on
APG's financial position and results of operations. In addition, APG is aware of
several other matters that, while not presently a matter of litigation or
arbitration, may develop into litigation or arbitration in the future. Some of
these matters, either individually or taken together, may have a material effect
on APG's financial position and results of operations. It is too early to
estimate any possible loss resulting from these matters.
NOTE 6 - FUTURE EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 1999, the SEC staff issued Staff Accounting Bulletin 101,
Revenue Recognition in
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Financial Statements, (SAB 101), which outlines four basic criteria that must be
met before registrants can record revenue: (a) persuasive evidence that an
arrangement exists; (b) delivery has occurred or services have been rendered;
(c) the seller's price to the buyer is fixed and determinable; and (d)
collectibility is reasonably assured. The SEC staff originally deferred the
implementation date of SAB 101 (through SAB 101A and SAB 101B) until no later
than the fourth quarter of fiscal years beginning after December 15, 1999. APG
believes the adoption of SAB 101 will have no significant impact on APG's
financial statements.
NOTE 7 - SUBSEQUENT EVENT
On October 6, 2000, an agreement between APG and one of its vendors was
executed wherein APG will pay a total of $160,000 in three installments over
nine months. The vendor has agreed to accept these installments in full
satisfaction of all amounts owed to it by APG and APG's affiliates. As a result
of this agreement, APG recognized a reduction of its accounts payable of
$154,000 as of October 6, 2000.
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ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
This Plan of Operation contains forward-looking statements that involve
risks and uncertainties. All forward-looking statements are based on information
available to Automotive Performance Group, Inc. (APG) on the date hereof, and
APG assumes no obligation to update any such forward-looking statements. APG's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including those
risk factors described in APG's Annual Report on Form 10-KSB for the year ended
December 31, 1999.
It is assumed that the reader of this Form 10-QSB has read and is
familiar with the materials presented in APG's Annual Report on Form 10-KSB for
the year ended December 31, 1999. In addition, the following material should be
read with the rest of this Form 10-QSB in mind, especially the financial
statements appearing in Part I, Item 1.
BUSINESS STRUCTURE
APG's business at September 30, 2000 primarily consists of three
elements: PBT, Boyds and D'Artagnan (all described below).
APG owns 18.1% of the outstanding common stock of PBT Brands, Inc.
(PBT). PBT manufactures, distributes and markets premium functional chemical
products to the automotive maintenance and repair markets under the Permatex,
Right Stuff, Fast Orange and other brand names. In addition, PBT owns Advanced
Chemistry and Technology which manufactures sealant and adhesives for use in the
aerospace industry, and No Touch North America which manufactures a line of car
care products. Several members of APG's management and APG security holders are
also members of PBT's management and PBT security holders. Since APG is a
minority owner of PBT, it recognizes its proportional share of PBT's net
income/loss as other income/loss each quarter. Accounting rules dictate that APG
stop recognizing its proportional share of PBT's loss when APG's net investment
in PBT has been reduced to zero. This condition was met in the second quarter of
2000 when APG's share of PBT losses exceeded APG's remaining investment in PBT
by $1,061,000. APG will be able to record its proportional share of PBT's future
net income only after this $1,061,000, plus APG's $1,296,000 unrecognized share
of PBT's losses for the third quarter of 2000 (total of $2,357,000), plus APG's
unrecognized share of any future PBT losses, have been offset by an equal amount
of APG's unrecognized share of PBT's future net income. In spite of PBT's
continuing net loss for financial statement reporting purposes, which primarily
is due to PBT's accelerated amortization of intangibles, PBT continues to show
positive earnings before income taxes, depreciation and amortization. APG feels
that the application of these accounting rules, while appropriate for financial
statement reporting purposes, does not reflect the true value of its investment
in PBT. Even though APG's investment in PBT is no longer reflected on APG's
balance sheets, APG believes that the true value of its investment in PBT has
been appreciating since acquisition and will continue to increase in value
throughout the foreseeable future.
APG owns 80% of the outstanding stock of Boyds Wheels, Inc. (Boyds).
Boyds designs, manufactures via contract with others, and sells specialty wheels
to the automotive, truck, trailer, and recreational vehicle markets. Boyds has
one employee who is responsible for designing and selling these specialty wheels
to customers whom he solicits. This same employee also identifies and contracts
with manufacturers to have the product produced to the customer's
specifications. While in bankruptcy, a period of over one year, Boyds
discontinued all of its operations and was out of the marketplace. Boyds
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is now in the process of attempting to re-establish its business. Boyds'
rebuilding is hampered by the fact that in the highly competitive specialty
wheel business there are numerous other manufacturers of competing products that
have ongoing business relationships with the major wheel distributors and
retailers. At the present, Boyds does not have any such ongoing relationships.
Since APG acquired its 80% interest in Boyds, significant amounts of management
time and financial resources have been required to protect various intangible
assets of Boyds, including trademarks and business reputation. In addition,
Boyds owns several trademarks and designs that it has licensed to others under
various royalty agreements. These royalty agreements provide small amounts of
ongoing revenue. One of the trademarks has been sold to raise cash for working
capital needs. In April 2000, APG announced its intent to cause Boyds to sell
its wheel business. No assurances can be given that Boyds will be able to
complete this sale. Until the sale of Boyds is consummated, Boyds continues to
operate and is reported in the operating section of APG's consolidated financial
statements.
D'Artagnan Associates, Inc. (D'Artagnan), a wholly-owned subsidiary of
APG, owns technology and assets used in the manufacture of iron carbonyl and
potential rights involving the use of signature control technology. D'Artagnan
has developed unique management systems and a management team having particular
relevance to the chemicals industry. D'Artagnan has had minimal revenues during
2000. Mr. Dean M. Willard, Chief Executive Officer and a director of both APG
and PBT, is also the Chief Executive Officer and a director of D'Artagnan.
THE NEXT TWELVE MONTHS
APG expects PBT to continue expanding its operations and reducing its
quarterly losses during the next twelve months. Boyds continues to work toward
re-establishing its business and making itself salable. In addition, APG
continues to seek additional acquisition and/or merger candidates that do not
interfere with the business of PBT and that may benefit from synergies created
by associating with APG. During the process of seeking, evaluating, and
negotiating with these candidates, APG will incur fees from various outside
consultants and other professionals. These fees may be material in future
quarters. Even though continuing efforts will be required during 2000 and 2001
to complete the divestiture efforts related to Boyds and to business elements
that were discontinued in prior periods and to resolve various legal and other
matters, these efforts have decreased significantly and are expected to decrease
further as the various matters are resolved.
During 2000, APG had no direct employees other than the one person
working for Boyds. Required legal, accounting, and other professional services
are all outsourced. All APG officers are paid a salary of $1 per year.
Continuity and availability of competent officers has been maintained by
arrangement with PBT. APG's officers are now employed by PBT and/or a subsidiary
of PBT and are allowed sufficient time as needed to manage APG's business
matters. From time to time, APG's directors and officers have been granted
market-price options for APG common stock.
PARTIAL SALE OF INVESTMENT IN PBT
On April 7, 2000, APG sold a portion of its investment in PBT to a
number of PBT employees and PBT investors, some of whom are also officers and
directors of APG. This sale generated $750,000 in cash for APG. The sale
included both PBT common and preferred stock in essentially the same ratio and
for essentially the same dollar amount as APG paid for those shares. APG's share
of PBT's common stock was reduced to 18.1% from 22% as a result of this sale.
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LIQUIDITY AND CAPITAL RESOURCES
Historically, APG has financed its business primarily through private
placements of preferred stock and debt financing. Currently, APG has no
significant internal sources of continuing liquidity. APG expects to continue
funding its non-acquisition liquidity needs from cash on hand, from asset sales,
and from the issuance of additional debt and/or preferred stock, if needed. On
April 7, 2000, APG raised $750,000 in cash by selling a portion of its
investment in PBT as mentioned above. APG believes that cash on hand plus the
sale of certain assets, borrowings from related parties, borrowings from outside
parties, and/or the issuance of additional preferred stock, will provide APG
with enough liquidity to supply its needs for ongoing operating capital during
the next twelve months. APG also is continuing to negotiate with its creditors
to settle the amounts outstanding by various methods including long-term payment
plans and exchanging debt for equity. One such conversion of debt into equity
occurred on April 13, 2000 when approximately $200,000 of accounts payable was
exchanged for 333,333 shares of APG common stock as further described in Part
II, Item 2 below. Another negotiation was concluded on October 6, 2000 when a
vendor agreed to accept $160,000 over a nine month period in full satisfaction
of $314,000 owed as further described in Part II, Item 1 below.
Acquisitions will be funded through the issuance of additional debt
and/or equity.
CONSOLIDATED FINANCIAL STATEMENTS
As a result of the restructuring which occurred in 1999 and 1998, which
was explained in detail in APG's Annual Report on Form 10-KSB for the year ended
December 31, 1999, virtually all of APG's business activities that were extant
at the beginning of 1999 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 APG since the beginning of 1999. Because of this restructuring,
management cautions the reader that direct comparisons between current and
historical analyses and financial statements may not be meaningful, and may be
misleading. In particular, notes B, E, and L to the December 31, 1999 financial
statements provide details regarding these divestitures and acquisitions.
Balance Sheets - APG's assets at September 30, 2000 are comprised
primarily of the unamortized excess of the total acquisition cost over the
estimated fair value of assets acquired in the D'Artagnan acquisition (included
in the caption "intangible assets") (85% of total assets) and cash (9% of total
assets). APG's liabilities at September 30, 2000 are comprised primarily of
accounts payable (primarily for legal and other professional fees related to
APG's restructuring efforts) (28% of total liabilities and equity) and the
liabilities related to a discontinued subsidiary (28% of total liabilities and
equity). APG's combined temporary and permanent equity at September 30, 2000
represents 34% of total liabilities and equity.
The September 30, 2000 amounts have changed from those reported at
December 31, 1999 primarily due to the $3.1 million decrease in the investment
in PBT and the resulting $2.5 million increase in accumulated deficit as
discussed in note 3 to the financial statements. This $3.1 million decrease is
comprised of three elements: $2,527,000 as APG's share of PBT losses recognized
on APG's financial statements in the first two quarters of 2000, the April 2000
sale of 3.9% ownership of PBT for $750,000 cash, and the June 2000 recognition
of $200,000 of additional acquisition costs.
Statements of Operations - The operations during the quarter ended
September 30, 2000 reflect a net loss of $0.1 million, 60% of which was incurred
for legal and accounting services. As explained in note 3 to the financial
statements and elsewhere in this Form 10-QSB, APG's loss for the third quarter
of
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2000 is significantly less than the losses in earlier quarters because APG is
no longer recognizing any portion of PBT's operating losses. APG's recognition
of PBT's losses comprised the majority (91%) of APG's loss in previous quarters
of 2000.
The operations during the third quarter of 2000 differ from the
corresponding period of 1999 primarily due to the large costs incurred for the
issuance of warrants and options related to (i) the acquisition and conversion
of certain financing, and (ii) the acquisition of APG's investment in PBT. These
expenses were a one-time non-cash item that comprised $11.7 million (91%) of the
third quarter 1999 loss of $12.9 million. Again, the reader is cautioned not to
infer comparability between previous periods and current periods due to APG's
restructuring as mentioned in the opening paragraph of this Consolidated
Financial Statements section.
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PART II - OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS.
APG is involved in certain claims arising in the course of its
business. Several of those claims were described in APG's Annual Report on Form
10-KSB for the year ended December 31, 1999. The following events have occurred
since the Form 10-QSB for the quarter ended June 30, 2000 was filed.
Boyd L. Coddington has filed suit against Boyds Wheels, Inc. (APG owns
80% of Boyds Wheels, Inc.) and several other parties including an employee and
an officer of APG. This suit was filed in the Superior Court of the State of
California in and for the County of Orange on June 5, 2000. The plaintiff
alleged that he personally fabricated a unique billet guitar and that the
defendants have possession of that guitar. The plaintiff seeks return of the
guitar or $500,000, additional damages of $50,000, exemplary and punitive
damages, interest, fees, and costs.
FUSA, Ltd. (an Ohio limited liability company named Formula USA, Ltd.)
has filed suit against APG. This suit was filed in the Court of Common Pleas,
Cuyahoga County, Ohio Civil Division on August 21, 2000. This suit is
essentially an amended and refiled version of the suit brought by FUSA against
International Motor Sports Group, Inc. (IMSG). The FUSA/IMSG suit was discussed
in APG's Form 10-KSB for December 31, 1999 and Form 10-QSB for March 31, 2000.
IMSG (a wholly owned subsidiary of APG) was dismissed from the FUSA/IMSG suit on
February 10, 2000. In both suits, FUSA alleged that it contracted with IMSG to
hold two events at a venue controlled by IMSG, and that IMSG sold its interest
in that venue to Road Atlanta prior to the events being held. FUSA further
alleged that Road Atlanta ratified the FUSA/IMSG contract but then refused to
allow FUSA to conduct the events. In the new FUSA/APG suit, FUSA has sued APG as
a successor in interest and is seeking no less than $450,000 in compensatory
damages, plus interest and costs. The old FUSA/IMSA suit and the new FUSA/APG
suit are based on the same underlying set of facts but differ in the court where
filed, the name of the defendant, and the amount of relief sought.
McKenna & Cuneo, L.L.P. (a California Limited Liability Partnership)
has filed suit against APG. This suit was filed in the Superior Court of the
State of California for the County of Los Angeles on September 8, 2000. McKenna
alleged that it provided legal services and incurred expenses on behalf of Boyds
Wheels, Inc. (which is now 80% owned by APG) and APG, and that charges in the
amount of $234,076 remained unpaid. McKenna seeks $234,076 plus interest,
punitive damages, and costs.
EMAP Petersen, Inc. (a Delaware corporation formerly known as Petersen
Publishing, Inc.) has filed suit against APG, Royal Purple Motor Oil, Inc. (a
wholly-owned subsidiary of APG), and certain of their current and former
officers and employees. This suit was filed in the California Superior Court,
County of Los Angeles, Central Division and amended on February 4, 2000 and
again on May 16, 2000. As discussed in APG's Form 10-KSB for the fiscal year
ended December 31, 1999, Petersen alleged that it provided advertising and event
sponsorships to APG and its affiliates, as authorized by its officers, and that
charges in the amount of $290,000 remained unpaid for those services. The
plaintiff sought $290,000 plus interest, fees and costs. APG had indemnified its
officers and employees from all claims in this matter. On October 6, 2000, a
Settlement Agreement and Mutual General Release was executed by the plaintiff
and APG wherein APG will pay a total of $160,000 in three installments over nine
months. The plaintiff has agreed to accept these installments in full
satisfaction of all amounts owed to it by APG and APG's officers, employees and
other affiliated parties. As a result of this Settlement
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Agreement and Mutual General Release, APG recognized a reduction of its accounts
payable of $154,000 as of October 6, 2000.
ITEM 2. - CHANGES IN SECURITIES.
(a) Not applicable.
(b) Not applicable.
(c) Common Stock - On April 13, 2000 APG issued 333,333 shares of its common
stock to one of its vendors in payment for approximately $200,000 owed to that
vendor for services rendered. As part of this arrangement to exchange APG's debt
for equity, the vendor was granted a "put option," or the right to require APG
to repurchase these shares. This put option may be exercised by the vendor
during the month of January 2002 for $200,000 plus seven percent interest from
August 1, 1999. APG is amortizing the $39,000 interest from April 2000 through
January 2002. In addition, the vendor granted to Mr. Dean M. Willard, Chairman
and Chief Executive Officer of APG, a proxy to vote these shares subject to
termination upon the occurrence of certain events. APG relied on the exemptions
provided by Section 4 of the Securities Act and Regulation D promulgated
thereunder in not registering the offer and sale of these shares under the
Securities Act.
See Item 5 below for a discussion of APG's acquisition of 160,000
shares of its common stock.
(d) Not applicable.
ITEM 3. - DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. - OTHER INFORMATION.
LISTING OF APG STOCK ON PUBLIC STOCK EXCHANGES
Effective June 1, 2000, APG's common stock was no longer traded on the
OTC Bulletin Board. The OTC Bulletin Board indicated that it had delisted APG's
stock because APG's filings with the U. S. Securities and Exchange Commission
(SEC) were not current. APG had been unable to obtain all documents required to
complete its Current Report on Form 8-K for August 1999, its Annual Report on
Form 10-KSB for the year ended December 31, 1999, and its Quarterly Report on
Form 10-QSB for the period ended March 31, 2000 on a timely basis. Some of those
documents had to be prepared by other entities that APG did not control. The
missing documents subsequently were obtained and all delinquent reports have
been filed with the SEC. APG is now in full compliance with all SEC filing
requirements. In July, APG opened discussions with certain of its former market
makers to have APG's common stock
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relisted on the OTC Bulletin Board. During the time when APG's stock is not
listed on the OTC Bulletin Board, public trading in APG's common stock is
reported on the "pink sheets." The "pink sheets" are published daily by the
National Quotation Bureau.
Trading on the OTC Bulletin Board is characterized by low trading
volumes and high volatility, whereas trading on the "pink sheets" is
characterized by even lower trading volumes and even higher volatility than on
the OTC Bulletin Board as well as lower per-share prices. In addition, the OTC
Bulletin Board makes data on trades of its listed stocks readily available to
the public, whereas the National Quotation Bureau provides data on trades of
stocks listed on the "pink sheets" only to persons who pay for that service.
While APG anticipates that its common stock will be relisted on the OTC Bulletin
Board in the near future, APG cannot be sure that a broader or more stable
market will develop or that its per-share market price will fully recover to its
former levels, if at all. The investment community could show little or no
interest in APG in the future. As a result, persons receiving APG's securities
may have difficulty in reselling such securities should they desire to do so.
APG'S REACQUISITION OF ITS COMMON STOCK
On September 28, 2000, APG reacquired 160,000 shares of its common
stock for a cash payment of $142,000. This reacquisition was part of a
multi-party negotiated settlement between APG and other parties. These shares
were retired.
CHANGE OF SUBSIDIARY'S NAME
Zeropaper.com, Inc., a Delaware corporation wholly-owned by APG,
changed its corporate name to APG Holdings, Inc.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K.
(a) Index of Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
APG did not file a Current Report on Form 8-K during the third quarter
of 2000.
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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.
-------------------------------------------------
(Registrant)
Date November 8, 2000 By /s/ DEAN M. WILLARD
------------------ ---------------------------------------------
Dean M. Willard
Chairman of the Board and Chief
Executive Officer
Date November 8, 2000 By /s/ GEORGE BARRAZA
------------------ ---------------------------------------------
George Barraza
Chief Financial Officer
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Index of Exhibits
27.1 Financial Data Schedule
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