<PAGE>
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, 1999
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-21467
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FIRST PRIORITY GROUP, INC
-------------------------
(Exact name of small business issuer as specified in its charter)
New York 11-2750412
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
51 East Bethpage Road
Plainview, New York 11803
-------------------------
(Address of principal executive offices)
(516) 694-1010
--------------
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of November 15, 1999: 8,331,800 shares of common stock
--------------------------------
Transitional Small Business Format (check one)
Yes[ ] No[X]
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Part I Financial Information
Item 1. Financial Statements
THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
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FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash and cash equivalents $ 2,416,396
Accounts receivable, less allowance for
doubtful accounts of $28,223 1,694,467
Prepaid expenses and other current assets 21,627
-----------
Total current assets 4,132,490
Property and equipment, net of accumulated
depreciation of $534,181 629,945
Security deposits and other non-current assets 34,238
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Total assets $ 4,796,673
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 675,325
Accrued expenses and other current liabilities 1,264,401
Current portion of long-term debt 53,825
-----------
Total current liabilities 1,993,551
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Long-term debt 11,521
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Shareholders' equity:
Common stock, $.015 par value, authorized
20,000,000 shares; issued 8,598,467 shares 128,977
Preferred stock, $.01 par value, authorized 1,000,000
shares; none issued or outstanding --
Additional paid-in capital 7,762,350
Deficit (5,009,727)
-----------
2,881,600
Less common stock held in treasury, at
cost, 266,667 shares 90,000
-----------
Total shareholders' equity 2,791,600
-----------
Total liabilities and shareholders' equity $ 4,796,672
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unauditied)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
September 30, September 30,
1999 1998
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<S> <C> <C>
Revenue $ 3,383,858 $ 3,230,990
Costs of revenue (principally charges incurred
at repair facilities for services) 2,715,238 2,687,637
----------- -----------
Gross profit 668,620 543,353
Operating expenses 914,871 1,088,102
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Loss from operations (246,251) (544,749)
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Other income (expense):
Interest and other income 31,053 42,846
Other expenses -- (550)
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Total other income 31,053 42,296
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Net loss $ (215,198) $ (502,453)
=========== ===========
Basic and diluted loss per share $ (0.03) $ (0.06)
=========== ===========
Weighted average number of common shares outstanding 8,331,800 8,231,800
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unauditied)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
September 30, September 30,
1999 1998
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<S> <C> <C>
Revenue $ 11,044,712 $ 11,000,168
Costs of revenue (principally charges incurred
at repair facilities for services) 8,965,331 9,161,989
------------ ------------
Gross profit 2,079,381 1,838,179
Operating expenses 2,735,882 3,155,800
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Loss from operations (656,501) (1,317,621)
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Other income (expense):
Interest and other income 110,157 192,887
Other expenses -- (7,615)
------------ ------------
Total other income 110,157 185,272
------------ ------------
Net loss $ (546,344) $ (1,132,349)
============ ============
Basic and diluted loss per share $ (0.07) $ (0.14)
============ ============
Weighted average number of common shares outstanding 8,331,800 8,186,010
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
September 30, September 30,
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (546,344) $(1,132,349)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 132,985 103,358
Changes in assets and liabilities
Accounts receivable 17,177 104,066
Inventories -- 25,493
Prepaid expenses and other current assets 44,580 (29,108)
Security deposit and other assets 73,734 7,090
Accounts payable (562,764) 66,599
Accrued expenses and other liabilities 667,606 77,303
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Total adjustments 373,318 354,801
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Net cash used in operating activities (173,026) (777,548)
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Cash flows used in investing activities,
additions to property and equipment (161,506) (195,749)
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Cash flows from financing activities:
Repayment of long-term debt (31,252) --
Collection of shareholder note -- 100,000
Proceeds from issuance of common stock -- 1,000,000
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Net cash provided by (used in) financing activities (31,252) 1,100,000
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Net increase (decrease) in cash and cash equivalents (365,784) 126,703
Cash and cash equivalents at beginning of period 2,782,180 3,453,864
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Cash and cash equivalents at end of period $ 2,416,396 $ 3,580,567
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. UNAUDITED FINANCIAL STATEMENTS
The information contained in the condensed consolidated financial
statements for the period ended September 30, 1999 and 1998 is unaudited, but
includes all adjustments, consisting of normal recurring adjustments, which the
Company considers necessary for a fair presentation of the financial position
and the results of operations for these periods.
The financial statements and notes are presented as permitted by Form
10-QSB, and do not contain certain information included in the Company's annual
statements and notes. These financial statements should be read in conjunction
with the Company's annual financial statement as reported in its most recent
annual report on Form 10-KSB.
2. BUSINESS OF THE COMPANY
The Company, a New York corporation formed on June 28, 1985, is engaged in
automotive fleet management and administration of automotive repairs for
businesses, insurance companies and members of affinity groups.
On April 13, 1999, the Company formed a new wholly owned subsidiary,
Collision Depot.com, Inc. to provide collision repair claims management services
for the insurance industry nationwide through the Internet. On May 17, 1999,
this subsidiary was renamed driversshield.com, Corp.
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 nine months ended September 30,
1999 are not necessarily indicative of the results to be expected for the full
year.
4. EARNINGS PER SHARE
Basic earnings (loss) per share is computed by dividing earnings by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share reflects the potential dilution that could occur if common
stock equivalents, such as stock options and warrants, were exercised. During
the nine month periods ended September 30, 1999 and 1998, there was no dilutive
effect from stock options and warrants.
7
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Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
Automotive Management
Revenues from services of the automotive management operations were
$3,383,858, for the three months ended September 30, 1999, as compared to
$3,230,990 for the three months ended September 30, 1998, representing an
increase of $152,868, or 4.7%. This increase is a net result of a decrease in
revenues of $378,995 for the now discontinued Direct Repair Program and Recovery
Services and an increase in revenues of $531,863, from the same period of 1998,
in the Fleet and Affinity Services. This increase is attributable to the
addition of several new significant customers during the year. The direct cost
of services related to revenue (principally charges from automotive repair
facilities) was $2,715,238 and $2,687,637 for the three month periods ended
September 30, 1999 and 1998, respectively, resulting in an increase of $27,601
or 1.0%.
For the nine months ended September 30, 1999 revenues from services were
$11,044,712 as compared to $11,000,168 for the same period in 1998, representing
a increase of $44,544 or .4%. This net increase is a result of a decrease in
revenue of the Direct Repair Program and Recovery Services of $955,274 and an
increase in revenues of $999,818 for the Fleet and Affinity services. The direct
cost of services related to revenue was $8,965,331 and $9,161,989 for the nine
months ended September 30, 1999 and 1998, respectively, resulting in a decrease
of $196,658 or 2.1%. The gross profit percentage for the three months ended
September 30, 1999 and September 30, 1998 increased 3.0% to 19.8% from 16.8%.
For the nine months ended September 30, 1999, gross profit increased 2.1% to
18.8% from 16.7% for the same period in 1998. This increase represents better
pricing structures and an increase in the affinity program sales which yields a
higher gross profit than the traditional repair services.
Total operating expenses were $914,871 for the three months ended September
30, 1999, as compared to $1,088,102 for the three months ended September 30,
1998, representing a decrease of $173,231 or 15.9%. For the nine months ended
September 30, 1999, total operating expenses decreased $419,918 or 13.3% to
$2,735,882 as compared to $3,155,800 for the same period of 1998. The decrease
in operating expenses is mainly attributable to pay cuts taken by upper
management and a reduction in work force due to the discontinuation of the
Direct Repair Program and the Recovery Services divisions.
Interest and other income was $31,053 and $110,157 for the three and nine
months ended September 30, 1999, as compared to $42,846 and $192,887 for the
same periods in 1998, representing a decrease of $11,793 and $82,730,
respectively. The decrease is primarily attributable to lower average cash
balances available during 1999. Also, in June 1998, the Company had received the
proceeds of $40,000 in settlement of a lawsuit.
8
<PAGE>
As a result of the foregoing, the net loss for the three and nine months
ended September 30, 1999 was $215,198 ($.03 per share) and $546,344 ($.07 per
share) as compared to a net loss of $502,453 ($.06 per share) and $1,132,349
($.14 per share) for the comparable periods in 1998.
New Business Developments
On April 19, 1999, the Company formed a new wholly owned subsidiary,
Collision Depot.com, Inc. ("Collision Depot") to provide nationwide collision
repair claims management services for the insurance industry via the Internet.
Collision Depot changed its name to driversshield.com Corp.
("driversshield.com"). driversshield.com previously announced that it had
retained Fahnestock & Co., Inc. ("Fahnestock") to act as its exclusive placement
agent in a private offering of equity securities. Fahnestock had originally
advised driversshield.com that it would be able to fund its business through the
sale of equity prior to the actual construction of the driversshield.com web
site. The Company discovered, however, that it would be far more difficult to
raise funds at the predicted valuations, prior to the web-site being
interactive. Since the Company's cash position was still strong enough to
proceed without the aid of an immediate raise-up of funds management determined
that once an operational web site has been constructed, it will be much easier,
if necessary, to raise equity to further fund driversshield.com at higher
valuations than at the initial phase of the business. In keeping with the
Company's overall strategy, it intends to partner driversshield.com with much
larger and more powerful industry leaders, as it has done very successfully with
its other two profitable divisions. Therefore, the Company has terminated its
relationship with Fahnestock.
driversshield.com presently has operating a fifty page prototype Web site
providing potential insurance industry partners with information on how to use
this Internet based repair management service that will substantially increase
customer satisfaction and retention, decrease costs and increase sales.
Liquidity and Capital Resources
As of September 30, 1999, the Company had cash and cash equivalents of
$2,416,396 and working capital was $2,138,939. The Company's operating
activities used $173,026 of cash in the first nine months of 1999, an
improvement of $604,522, as compared to the same period of 1998 where operating
activities used $777,548 of cash.
The Company believes that its present cash position will enable the Company
to continue to support its operations for the short and longer term.
Year 2000 Compliance
The Company's internal computer systems have been updated to become Y2K
compliant or have been recently replaced by systems that were developed as Y2K
9
<PAGE>
compliant systems. Expenses related to Year 2000 compliance amounted to
approximately $100,000 in 1998 and are expected to exceed $100,000 in 1999. The
anticipated costs of any Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to the
availability or cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes and similar uncertainties.
The Company has completed its review of its internal critical core systems
and believes that it is fully Y2K compliant. The Company continues to test its
systems to insure that they are Y2K compliant and will have completed
development of contingency plans by year end should any internal or external
critical systems not be compliant.
In addition, there can be no assurance that Year 2000 compliance problems
will not be revealed in the future which could have a material adverse affect on
the Company's business, financial condition and results of operations. Many of
the Company's customers and suppliers may be affected by Year 2000 issues that
may require them to expend significant resources to modify or replace their
existing systems. This may result in those customers having reduced funds to
purchase the Company's products or in those suppliers experiencing difficulties
in producing or shipping key components to the Company on a timely basis or at
all.
Forward Looking Statements - Cautionary Factors
Certain information contained herein includes information that is forward
looking. The matters referred to in forward-looking statements may be affected
by the risks and uncertainties involved in the Company's business. These
forward-looking statements are qualified in their entirety by the cautionary
statements contained in the Company's Form 10-KSB for the year ended December
31, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedules
(b) Reports on Form 8-K
None
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
FIRST PRIORITY GROUP, INC.
Date: November 15, 1999 By: /s/ Barry Siegel
---------------------------------
Barry Siegel
Chairman of the Board of Directors,
Chief Executive Officer Treasurer,
Secretary and Principal Financial and
Accounting Officer
11
<PAGE>
Index of Exhibits
Exhibit No. Description
27 Financial Data Schedules
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 2,416,396
<SECURITIES> 0
<RECEIVABLES> 1,722,690
<ALLOWANCES> 28,223
<INVENTORY> 0
<CURRENT-ASSETS> 4,132,490
<PP&E> 1,164,126
<DEPRECIATION> 534,181
<TOTAL-ASSETS> 4,796,673
<CURRENT-LIABILITIES> 1,993,551
<BONDS> 0
0
0
<COMMON> 128,977
<OTHER-SE> 2,662,624
<TOTAL-LIABILITY-AND-EQUITY> 4,796,673
<SALES> 11,044,712
<TOTAL-REVENUES> 11,044,712
<CGS> 0
<TOTAL-COSTS> 8,965,331
<OTHER-EXPENSES> 2,735,882
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (546,344)
<INCOME-TAX> 0
<INCOME-CONTINUING> (546,344)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (546,344)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
