<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 June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 0-21467
-------
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 August 4, 1999: 8,331,800 shares of common
stock
Transitional Small Business Format (check one)
Yes[ ] No[ X ]
<PAGE>
Part I Financial Information
Item 1. Financial Statements
THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
2
<PAGE>
FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1999
(Unaudited)
ASSETS
<TABLE>
<S> <C>
Current Assets:
Cash and cash equivalents $2,489,882
Accounts receivable, less allowance for
doubtful accounts of $28,223 2,154,535
Prepaid expenses and other current assets 41,499
-----------
Total current assets 4,685,916
Property and equipment, net of accumulated
depreciation of $483,698 534,038
Security deposits and other non-current assets 137,220
-----------
Total assets $5,357,174
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,006,689
Accrued expenses and other current liabilities 1,262,947
Current portion of long-term debt 53,826
-----------
Total current liabilities 2,323,462
-----------
Long-term debt 26,913
-----------
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 (4,794,528)
-----------
3,096,799
Less common stock held in treasury, at
cost, 266,667 shares 90,000
-----------
Total shareholders' equity 3,006,799
-----------
Total liabilities and shareholders' equity $5,357,174
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unauditied)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
June 30, June 30,
1999 1998
---------------- ---------------
<S> <C> <C>
Revenue $4,082,248 $3,751,677
Costs of revenue (principally charges incurred
at repair facilities for services) 3,324,607 3,115,360
---------------- ---------------
Gross profit 757,641 636,317
Operating expenses 916,020 1,089,414
---------------- ---------------
Loss from operations (158,379) (453,097)
---------------- ---------------
Other income (expense):
Interest and other income 35,175 98,691
Other expenses - (294)
---------------- ---------------
Total other income 35,175 98,397
---------------- ---------------
Net loss $ (123,204) $ (354,700)
================ ===============
Basic and diluted loss per share $ (0.01) $ (0.04)
================ ===============
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
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30, June 30,
1999 1998
--------------- ------------
<S> <C> <C>
Revenue $7,660,854 $7,769,178
Costs of revenue (principally charges incurred
at repair facilities for services) 6,250,093 6,474,352
--------------- -------------
Gross profit 1,410,761 1,294,826
Operating expenses 1,821,011 2,067,698
--------------- -------------
Loss from operations (410,250) (772,872)
--------------- -------------
Other income (expense):
Interest and other income 79,104 150,041
Other expenses - (7,065)
--------------- -------------
Total other income 79,104 142,976
--------------- -------------
Net loss $ (331,146) $ (629,896)
=============== =============
Basic and diluted loss per share $ (0.04) $ (0.08)
=============== =============
Weighted average number of common shares outstanding 8,331,800 8,162,739
=============== =============
</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>
SIX MONTHS ENDED
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($331,146) ($629,896)
--------- ---------
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 82,502 66,446
Changes in assets and liabilities
Accounts receivable (442,891) 45,887
Inventories - 26,054
Prepaid expenses and other current assets 24,709 25,109
Security deposit and other assets (29,248) 13,590
Accounts payable (231,400) (374,848)
Accrued expenses and other liabilities 666,152 339,990
--------- ---------
Total adjustments 69,824 142,228
--------- ---------
Net cash used in operating activities (261,322) (487,668)
--------- ---------
Cash flows used in investing activities,
additions to property and equipment (15,117) (134,630)
--------- ---------
Cash flows from financing activities:
Repayment of long-term debt (15,859) -
Collection of shareholder note - 100,000
Proceeds from issuance of common stock - 1,000,000
--------- ---------
Net cash provided by (used in) financing activities (15,859) 1,100,000
--------- ---------
Net increase (decrease) in cash and cash equivalents (292,298) 477,702
Cash and cash equivalents at beginning of period 2,782,180 3,453,864
---------- ----------
Cash and cash equivalents at end of period $2,489,882 $3,931,566
========== ==========
</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 June 30, 1999 is unaudited, but includes all
adjustments, consisting of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the financial position and the
results of operations for these periods.
The financial statements and notes are presented as permitted by Form
10-QSB, and do not contain certain information included in the Company's
annual statements and notes. These financial statements should be read in
conjunction with the Company's annual financial statement as reported in its
most recent annual report on Form 10-KSB.
2. BUSINESS OF THE COMPANY
The Company, a New York corporation formed on June 28, 1985, is engaged in
automotive fleet management and administration of automotive repairs for
businesses, insurance companies and members of affinity groups.
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 six months ended June 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 six month periods ended June 30, 1999 and 1998, there was no
dilutive effect from stock options and warrants.
7
<PAGE>
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
$4,082,248, for the three months ended June 30, 1999, as compared to
$3,751,677 for the three months ended June 30, 1998, representing an increase
of $330,571, or 8.8%. The increased revenue is primarily attributable to the
full roll-out of services provided to a major new fleet client. The direct
cost of services related to such revenue (principally charges from automotive
repair facilities) was $3,324,607 and $3,115,360 for the three month periods
ended June 30, 1999 and 1998, respectively, resulting in an increase of
$209,247 or 6.7%. For the six months ended June 30, 1999 revenues from
services were $7,660,854 as compared to $7,769,178 for the same period in
1998, representing a decrease of $108,324 or 1.4%. The direct cost of services
related to such revenue was $6,250,093 and $6,474,352 for the six months ended
June 30, 1999 and 1998, respectively, resulting in a decrease of $224,259 or
3.5%. The gross profit percentage for the three months ended June 30, 1999 and
June 30, 1998 increased 1.6% to 18.6% from 17.0%. For the six months ended
June 30, 1999, gross profit increased 1.7% to 18.4% 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 $916,020 for the three months ended June 30,
1999, as compared to $1,089,414 for the three months ended June 30, 1998,
representing a decrease of $173,394 or 15.9%. For the six months ended June
30, 1999, total operating expenses decreased $246,687 or 11.9% to $1,821,011
as compared to $2,067,698 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.
Interest and other income was $35,175 and $79,104 for the three and six
months ended June 30, 1999, as compared to $98,691 and $150,041 for the same
periods in 1998, representing a decrease of $63,516 and $70,937, 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.
As a result of the foregoing, the net loss from continuing operations for
the three and six months ended June 30, 1999 was $123,204 ($.01 per share) and
$331,146 ($.04 per share) as compared to a net loss of $354,700 ($.04 per
share) and $629,896 ($.08 per share) for the comparable periods in 1998.
New Business Developments
On April 19, 1999, the Company announced the formation of a new wholly
owned subsidiary, Collision Depot.com, Inc. ("Collision Depot") to provide
collision repair claims and management services for the insurance industry
nationwide through the
8
<PAGE>
Internet. Additionally, the Company announced that Collision Depot retained
Fahnestock & Co., Inc. to act as its exclusive placement agent in a private
offering of equity securities.
Collision Depot has since changed its name to driversshield.com Corp.
("driversshield.com"). The Company holds the registered trademark of Driver's
Shield(R) and is in the process of assigning this trademark to its subsidiary,
driversshield.com Corp. driversshield.com will offer, in addition to the
collision repair claims and management services for the insurance industry
nationwide through the Internet, a wide array of automotive services and
discounts on a nationwide basis, some of which are already being sold
wholesale through affinity groups and financial institutions under the
Company's existing Driver's Shield(R) label.
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 to substantially increase
customer satisfaction and retention, decrease costs and increase sales.
Liquidity and Capital Resources
As of June 30, 1999, the Company had cash and cash equivalents of
$2,489,882 and working capital was $2,362,454. The Company's operating
activities used $261,322 of cash in the first six months of 1999, an
improvement of $226,346, as compared to the same period of 1998 where
operating activities used $487,668 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 has two computer systems and software products coded to accept
only two digit entries to represent years. For example, the year "1998" would
be represented by "98." These systems and products will need to be able to
accept four digit entries to distinguish years beginning with 2000 from prior
years. As a result, systems and products that do not accept four digit year
entries will be replaced to comply with such "Year 2000" requirements. The
Company believes that its internal systems are Year 2000 compliant or will be
replaced in connection with previously planned changes to information systems
prior to the need to comply with Year 2000 requirements. Expenses related to
Year 2000 compliance amounted to approximately $100,000 in 1998 and are
expected to amount to approximately $100,000 in 1999. The anticipated costs of
any Year 2000 modifications are based on management's best estimates, which
were derived utilizing numerous assumptions of future events, including the
continued availability of certain resources and other factors. However, there
can be no guarantee that these estimates will be achieved and actual results
could differ materially from those anticipated. Specific factors that might
cause such material differences include, but are not limited to the
availability or cost of personnel
9
<PAGE>
trained in this area, the ability to locate and correct all relevant computer
codes and similar uncertainties. In addition, there can be no assurance that
Year 2000 compliance problems will not be revealed in the future which could
have a material adverse affect on the Company's business, financial condition
and results of operations. Many of the Company's customers and suppliers may
be affected by Year 2000 issues that may require them to expend significant
resources to modify or replace their existing systems. This may result in
those customers having reduced funds to purchase the Company's products or in
those suppliers experiencing difficulties in producing or shipping key
components to the Company on a timely basis or at all.
Forward Looking Statements - Cautionary Factors
Certain information contained herein includes information that is forward
looking. The matters referred to in forward-looking statements may be affected
by the risks and uncertainties involved in the Company's business. These
forward-looking statements are qualified in their entirety by the cautionary
statements contained in the Company's Form 10-KSB for the year ended December
31, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedules
(b) Reports on Form 8-K
None
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: August 13, 1999 By: /s/ Barry Siegel
----------------
Barry Siegel
Chairman of the Board
of Directors, Chief Executive Officer
Treasurer, Secretary and Principal
Financial and Accounting Officer
10
<PAGE>
Index of Exhibits
Exhibit No. Description
27 Financial Data Schedules
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,489,882
<SECURITIES> 0
<RECEIVABLES> 2,182,758
<ALLOWANCES> 28,223
<INVENTORY> 0
<CURRENT-ASSETS> 4,685,916
<PP&E> 1,017,736
<DEPRECIATION> 483,698
<TOTAL-ASSETS> 5,357,174
<CURRENT-LIABILITIES> 2,323,462
<BONDS> 0
0
0
<COMMON> 128,977
<OTHER-SE> 2,967,822
<TOTAL-LIABILITY-AND-EQUITY> 5,357,174
<SALES> 0
<TOTAL-REVENUES> 7,660,854
<CGS> 0
<TOTAL-COSTS> 6,250,093
<OTHER-EXPENSES> 1,821,011
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (331,146)
<INCOME-TAX> 0
<INCOME-CONTINUING> (331,146)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (331,146)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
