<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: September 9, 1999
(Date of Earliest Event Reported)
MACE SECURITY INTERNATIONAL, INC.
(Exact name of Registrant as Specified in its Charter)
Delaware
(State of Incorporation)
0-22810
(Commission File Number)
03-0311630
(IRS Employer Identification No.)
1000 Crawford Place, Suite 400, Mount Laurel, New Jersey 08054
(Address of Principal Executive Offices)
(856) 778-2300
(Registrant's Telephone Number)
<PAGE>
Item 2. Acquisition of Quaker Car Wash, Inc.
On September 9, 1999, Mace Security International, Inc., a Delaware
corporation (the "Company" or "Registrant"), acquired all of the car wash
related assets of Quaker Car Wash, Inc. ("Hanna Car Wash" or "Quaker") pursuant
to the terms of a Car Wash Asset Purchase/Sale Agreement dated August 26, 1998
(collectively the "Agreement"). Pursuant to the terms and conditions of the
Agreement, the Registrant purchased all of the assets of the Sellers used in the
business of operating one full service car wash in Texas. Sellers are not
affiliated with the Registrant nor with any of the Registrant's subsidiaries.
The description of the acquisition transaction set forth herein is qualified in
its entirety by reference to the Agreement and related amendments which are
incorporated as Exhibits 2.1 through 2.9.
Pursuant to the Asset Purchase/Sale Agreement, Registrant purchased the
assets for a total consideration of $2,895,000 consisting of $1,850,000 worth of
unregistered shares of the Company's common stock, valued at a strike price of
$7.81 per share, and cash of $1,045,000 paid from working capital. The
Registrant intends to continue to use the acquired assets in the business of
operating a full service car wash in Lubbock, Texas. The acquisition is to be
accounted for using the "purchase" method of accounting.
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of business acquired.
Independent Auditor's Report
Balance Sheets as of December 31, 1998 and 1997
Statements of Income for the Two Years Ended December 31, 1998 and 1997
Statements of Changes in Stockholders' Equity for the Two Years Ended
December 31, 1998 and 1997
Statements of Cash Flows for the Two Years Ended December 31, 1998 and 1997
Notes to Financial Statements
Balance Sheets as of June 30, 1999 and June 30, 1998 (Unaudited)
Statements of Income for the Six Months Ended June 30, 1999
and 1998 (Unaudited)
Statements of Changes in Stockholders' Equity for the Six Months
Ended June 30, 1999 and 1998 (Unaudited)
Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998 (Unaudited)
Selected Notes to Financial Statements (Unaudited)
(b) Pro Forma Financial information
Pro forma Consolidated Statement of Operations for the Year Ended
December 31, 1998 (Unaudited)
Pro forma Consolidated Statement of Operations for the Six Months Ended
June 30, 1999 (Unaudited)
Pro forma Consolidated Balance Sheet as of June 30, 1999 (Unaudited)
(c) Exhibits
*2.1 Car Wash Asset Purchase/Sale Agreement dated as of August 26, 1998, between
Quaker Car Wash, Inc. and Millennia Car Wash, LLC.
*2.2 Amendment one of the Car Wash Asset Purchase/Sale Agreement dated as of
November 23, 1998.
*2.3 Amendment two of the Car Wash Asset Purchase/Sale Agreement dated as of
January 6, 1999.
*2.4 Amendment three of the Car Wash Asset Purchase/Sale Agreement dated as of
February 26, 1999.
*2.5 Amendment four of the Car Wash Asset Purchase/Sale Agreement dated as of
April 7, 1999.
<PAGE>
*2.6 Amendment five of the Car Wash Asset Purchase/Sale Agreement dated as of
May 10, 1999.
*2.7 Amendment six of the Car Wash Asset Purchase/Sale Agreement dated as of
June 25, 1999.
*2.8 Amendment seven of the Car Wash Asset Purchase/Sale Agreement dated as of
August 13, 1999.
*2.9 Amendment eight of the Car Wash Asset Purchase/Sale Agreement dated as of
August 27, 1999.
*99 Press Release dated September 9, 1999.
23.1 Consent of D. Williams & Co., P.C.
____________________________________________________________________________
* Incorporated by reference
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 19, 1999 MACE SECURITY INTERNATIONAL, INC.
By: /s/ Gregory M. Krzemien
-----------------------
Gregory M. Krzemien
Chief Financial Officer and Treasurer
<PAGE>
QUAKER CAR WASH, INC.
Table of Contents
<TABLE>
<CAPTION>
Page
number
------
<S> <C>
Independent Auditors' Report 1
Balance Sheets 2
Statements of Income 4
Statements of Changes in Stockholders' Equity 5
Statements of Cash Flows 6
Notes to Financial Statements 8
</TABLE>
* * * * * * * * * * * * * * *
<PAGE>
The Board of Directors
Quaker Car Wash, Inc.
Independent Auditors' Report
We have audited the accompanying balance sheets of Quaker Car Wash, Inc. (the
"Company") as of December 31, 1998 and 1997 and the related statements of
income, changes in stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1998 and 1997, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ D. Williams & Co., P.C.
September 17, 1999
<PAGE>
QUAKER CAR WASH, INC.
Balance Sheets
December 31, 1998 and 1997
Assets
------
<TABLE>
<CAPTION>
1998 1997
----------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 105,304 69,505
Accounts receivable 6,833 8,083
Prepaid expenses 3,674 5,830
Inventories 7,855 7,589
Trading securities 89,839 -
---------- ---------
213,505 91,007
---------- ---------
Property, plant and equipment:
Plant and equipment 1,037,036 1,024,973
Less: accumulated depreciation 392,364 340,284
---------- ---------
644,672 684,689
Land 113,025 113,025
---------- ---------
757,697 797,714
---------- ---------
Other assets:
Noncurrent notes receivable 1,088,367 809,316
Held to maturity securities 62,000 62,000
Available for sale securities 290,000 290,000
---------- ---------
1,440,367 1,161,316
---------- ---------
$2,411,569 2,050,037
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
Liabilities, Common Stock and Equity
------------------------------------
<TABLE>
<CAPTION>
1998 1997
----------- ---------
<S> <C> <C>
Current liabilities:
Accounts payable $ 12,791 14,179
Current maturities of notes payable 241,851 130,255
Accrued expenses 13,199 31,743
---------- ---------
267,841 176,177
---------- ---------
Long-term liabilities:
Notes payable 1,288,125 1,336,793
---------- ---------
1,555,966 1,512,970
---------- ---------
Stockholders' Equity:
Common stock - Paid in capital 1,000 1,000
Retained earnings (deficit) 854,603 536,067
---------- ---------
855,603 537,067
---------- ---------
$2,411,569 2,050,037
========== =========
</TABLE>
3
<PAGE>
QUAKER CAR WASH, INC.
Statements of Income
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ ----------
<S> <C> <C>
Operating revenues:
Car wash and detail $1,073,308 1,019,642
Other services
Fuel 23,202 33,540
Merchandise 53,714 47,972
---------- ---------
1,150,224 1,101,154
---------- ---------
Cost of sales:
Car wash and detail 481,710 507,720
Other services
Fuel 15,292 23,763
Merchandise 26,356 23,839
---------- ---------
523,358 555,322
---------- ---------
626,866 545,832
---------- ---------
Operating expense:
Depreciation 50,598 52,058
Sales, general and administrative 227,413 222,993
---------- ---------
278,011 275,051
---------- ---------
Operating income 348,855 270,781
---------- ---------
Other revenue and (expense):
Interest income 61,077 28,106
Interest expense (141,343) (99,966)
Other income 463 2,316
Rent income (net of expenses) 838 (1,824)
Realized gain on investments 32,985 -
Unrealized gain on investments 15,661 -
---------- ---------
(30,319) (71,368)
---------- ---------
Net income $ 318,536 199,413
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
QUAKER CAR WASH, INC.
Statements of Changes in Stockholders' Equity
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Common Stock Retained
Paid-in Earnings
Capital (Deficit) Total
------------ --------- -------
<S> <C> <C> <C>
Balance at January 1, 1997 $1,000 336,654 337,654
Net income - 199,413 199,413
------ ------- -------
Balance at December 31, 1997 1,000 536,067 537,067
Net income - 318,536 318,536
------ ------- -------
Balance at December 31, 1998 $1,000 854,603 855,603
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
QUAKER CAR WASH, INC.
Statements of Cash Flows
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 318,536 199,413
--------- ----------
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 52,081 53,541
Unrealized gain on investments (15,661) -
Interest accrued on note receivable (54,050) (26,006)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 1,249 (1,468)
(Increase) in inventory (266) (1,440)
Decrease in prepaid expenses 2,157 3,214
Purchase of investments (138,112) -
Sale of investments 63,934 -
(Decrease) in accounts payable (1,388) (9,597)
Increase (decrease) in accrued expenses (18,544) 29,709
--------- ----------
Total adjustments (108,600) 47,953
--------- ----------
Net cash provided by operating
activities 209,936 247,366
--------- ----------
Cash Flows from Investing Activities:
Additions to notes receivable (225,000) (775,443)
Purchase of property, plant and equipment (12,064) (9,591)
Purchase of held to maturity securities - (62,000)
Purchase of available for sale securities - (290,000)
--------- ----------
Net cash (used) by investing activties (237,064) (1,137,034)
--------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Cash Flows from Financing Activities:
Proceeds from short-term debt 114,000 -
Repayments of short-term debt (51,073) (29,195)
Proceeds from long-term debt - 1,468,278
Repayment of long-term debt - (514,340)
-------- ---------
Net cash provied (used) by financing
activities 62,927 924,743
-------- ---------
Net increase in cash and cash equivalents 35,799 35,075
Cash and cash equivalents at beginning of year 69,505 34,430
-------- ---------
Cash and cash equivalents at end of year $105,304 69,505
======== =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $133,943 89,341
======== =========
</TABLE>
7
<PAGE>
QUAKER CAR WASH, INC.
Notes to Financial Statements
December 31, 1998 and 1997
(1) Summary of Significant Accounting Policies
------------------------------------------
Nature of Operations
--------------------
The accompanying financial statements include the accounts of Quaker Car
Wash, Inc. Management believes that the presentation of financial
statements for the Company is appropriate based upon the agreement to sell
substantially all of the Company's operating assets as discussed in Note 7.
Quaker Car Wash, Inc. owns and operates a car wash in Lubbock, Texas. The
car wash provides a range of services which include full service car wash,
gasoline sales and a custom detail shop.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
-------------------------
For the purposes of the statement of cash flows, the corporation considers
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Inventories
-----------
Inventories consist of soap, car wash chemicals and merchandise. Inventory
is stated at lower cost (first in - first out) or market. Inventories by
major categories are as follows:
<TABLE>
<CAPTION>
1998 1997
------- -----
<S> <C> <C>
Merchandise $3,749 4,179
Soap and car wash chemicals 4,106 3,410
------ -----
$7,855 7,589
====== =====
</TABLE>
continued
8
<PAGE>
QUAKER CAR WASH, INC.
Notes to Financial Statements
Property, Plant and Equipment and Related Depreciation
------------------------------------------------------
Plant and equipment are stated at cost less accumulated depreciation. The
straight-line method is used to calculate depreciation with the estimated
useful lives as follows:
Buildings 40 years
Furniture, fixtures and equipment 10 - 15 years
Automobile 5 years
Rent house 40 years
A summary of property, plant and equipment follows:
<TABLE>
<CAPTION>
1998 1997
----------- ---------
<S> <C> <C>
Buildings $ 642,861 642,861
Furniture, fixtures and equipment 300,179 288,116
Automobile 34,686 34,686
Rent house 59,310 59,310
---------- ---------
$1,037,036 1,024,973
========== =========
</TABLE>
Maintenance, repairs and minor renewals are charged to operations during
the year incurred. Major renewals and betterments are charged to the
property accounts. Upon the sale or retirement of property, plant and
equipment, the cost thereof and the accumulated depreciation are removed
from the accounts. Gains or losses on the sale or retirement of property,
plant and equipment are credited or charged to operations.
Depreciation expense for the purpose of the statements of income includes
amounts for the car wash and operating equipment. Depreciation expense on
the rent house is netted against rent income. A summary of depreciation
expense follows:
<TABLE>
<CAPTION>
1998 1997
-------- ------
<S> <C> <C>
Car Wash $16,206 16,116
Operating equipment 34,392 35,942
Rent house 1,483 1,483
------- ------
Total depreciation expense $52,081 53,541
======= ======
</TABLE>
Common Stock and Equity
-----------------------
The Company has 5,000,000 shares of no par common stock authorized which
carries voting rights of one vote per share. At December 31, 1998 and 1997,
1,000 shares were issued and outstanding.
Retained earnings (deficit) represents the undistributed portion of
stockholders' capital contributions and net income allocations.
continued
9
<PAGE>
QUAKER CAR WASH, INC.
Notes to Financial Statements
(2) Accounts Receivable
-------------------
Accounts receivable are stated at estimated net realized value. Amount
represents credit extended to various business in the Lubbock area and
balance due from Texaco for services charged on Texaco credit card.
Accounts receivable related to these activities were $6,833 and $8,083 at
December 31, 1998 and 1997, respectively.
The Company sells fuel to customers utilizing cash and credit card
transactions. The Company purchases substantially all of its fuel on
consignment from Rip Griffin Oil Company, a petroleum marketer. The Company
also processes all credit card transactions through Rip Griffin Oil
Company.
(3) Notes Receivable
----------------
Summary of long-term notes receivable is as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -------
<S> <C> <C>
Unsecured note from Patrick Simek,
shareholder. Original amount of $636,909,
plus additional amounts advanced. Payment
due in full December 31, 2001 unless
extended. Interest rate is 6% at December
31, 1998. $1,008,310 783,310
Interest due on note 80,057 26,006
---------- -------
1,088,367 809,316
Less current portion - -
---------- -------
$1,088,367 809,316
========== =======
</TABLE>
(4) Investments
-----------
Held to maturity
----------------
Quaker Car Wash, Inc. holds 62 debentures in Planet Enterprises, Inc.
These bonds are valued at $1,000 each with a 5 year term and interest at
12%. The bonds are convertible to stock at any time at the option of the
holder at 13 1/3 shares per bond. They are callable after December 15,
1999. Market value is not readily determinable at December 31, 1998 and
1997.
continued
10
<PAGE>
QUAKER CAR WASH, INC.
Notes to Financial Statements
<TABLE>
<CAPTION>
Unrealized Aggregate
Cost Holding gain fair value
-------- ------------ ----------
<S> <C> <C> <C>
December 31, 1998
-----------------
Planet Enterprises, Inc. $62,000 - 62,000
======= === ======
December 31, 1997
-----------------
Planet Enterprises, Inc. $62,000 - 62,000
======= === ======
</TABLE>
Available for sale
------------------
The company owns 4,000 shares of common stock in Planet Enterprises, Inc.
Market value is not readily determinable at December 31, 1998 and 1997.
<TABLE>
<CAPTION>
Unrealized Aggregate
Cost Holding gain fair value
--------- ------------ ----------
<S> <C> <C> <C>
December 31, 1998
-----------------
Planet Enterprises, Inc. $290,000 - 290,000
======== === =======
December 31, 1997
-----------------
Planet Enterprises, Inc. $290,000 - 290,000
======== === =======
</TABLE>
(5) Notes Payable
-------------
Notes payable to Plains National Bank of West Texas bear interest at
variable rates. Substantially all of the company's assets are pledged as
security on these notes.
A summary of the balances and maturities of notes payable as of December
31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Plains National Bank of West Texas 1998 1997
---------------------------------- -------- ------
861906
------
<S> <C> <C>
Term note dated October 23, 1995 in the
original amount of $34,686 for the purchase
of an automobile. Due on demand, or if not
demanded, in monthly installments including
interest and principal of $733, final payment
due October 26, 2000. Variable interest rate
of 8.75% on December 31, 1998. $14,531 21,568
</TABLE>
continued
11
<PAGE>
QUAKER CAR WASH, INC.
Notes to Financial Statements
<TABLE>
<CAPTION>
1998 1997
----------- ---------
<S> <C> <C>
1063494
-------
Term note dated June 18, 1997 in the original
amount of $1,406,279 for the purpose of
combining outstanding notes. Note is secured
by car wash. Due in monthly installments
including interest and principal, of $14,685,
final payment due June 18, 2012. Variable
interest rate of 8.75% at December 31, 1998. 1,339,445 1,383,480
1086032
-------
Unsecured term note due on demand, or if not
demanded, in a single payment of $62,000 with
a variable rate of 8.75% at December 31, 1998.
Payment due February 17, 1999. 62,000 62,000
1235944
-------
Revolving line of credit collateralized by
equipment dated December 2, 1998 with variable
interest rate of 9.75% at December 31, 1998.
Payment due March 30, 1999. 114,000 -
---------- ---------
1,529,976 1,467,048
Less current maturities of principal 241,851 130,255
---------- ---------
Total long-term debt $1,288,125 1,336,793
========== =========
</TABLE>
The aggregate contractual maturities of long-term debt for each of the next
five years ending December 31, are as follows:
<TABLE>
<S> <C>
2000 $ 56,414
2001 62,013
2002 68,167
2003 74,933
2004 and thereafter 1,026,598
----------
$1,288,125
==========
</TABLE>
continued
12
<PAGE>
QUAKER CAR WASH, INC.
Notes to Financial Statements
(6) Federal income taxes
--------------------
The Company is taxed as an S Corporation under the Internal Revenue Code
and applicable state statutes. Under an S Corporation election, the income
of the corporation flows through to the stockholders to be taxed at the
individual level rather than the corporate level. Accordingly, the Company
will have no tax liability (with limited exceptions) as long as the S
Corporation election is in effect.
(7) Commitments
-----------
On September 13, 1999, Quaker Car Wash, Inc. sold substantially all of the
Company's operating assets to Mace Securities International, Inc. for
$2,905,000 as follows:
<TABLE>
<S> <C>
Mace Securities International stock $1,850,000
Assumption of debt 1,000,000
Cash 55,000
----------
$2,905,000
==========
</TABLE>
13
<PAGE>
QUAKER CAR WASH, INC.
Balance Sheets
June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Assets
------
1999 1998
---------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 70,702 82,462
Accounts receivable 12,954 14,319
Prepaid expenses 3,674 3,660
Inventories 7,855 7,589
---------- ---------
95,185 108,030
---------- ---------
Property, plant and equipment:
Plant and equipment 1,037,036 1,037,036
Less: accumulated depreciation 418,599 366,324
---------- ---------
618,437 670,712
Land 113,025 113,025
---------- ---------
731,462 783,737
---------- ---------
Other assets:
Noncurrent notes receivable 1,154,052 944,279
Held to maturity securities 62,000 62,000
Available for sale securities 290,000 290,000
---------- ---------
1,506,052 1,296,279
---------- ---------
$2,332,699 2,188,046
========== =========
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Liabilities, Common Stock and Equity
------------------------------------
1999 1998
---------- ---------
<S> <C> <C>
Current liabilities:
Accounts payable $ 15,318 16,336
Current maturities of notes payable 53,807 119,033
Accrued expenses 14,143 22,808
---------- ---------
83,268 158,177
---------- ---------
Long-term liabilities:
Notes payable 1,260,060 1,320,774
---------- ---------
1,343,328 1,478,951
---------- ---------
Stockholders' Equity:
Common stock - Paid in capital 1,000 1,000
Retained earnings 988,371 708,095
---------- ---------
989,371 709,095
---------- ---------
$2,332,699 2,188,046
========== =========
</TABLE>
3
<PAGE>
QUAKER CAR WASH, INC.
Statements of Income
Six months ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Operating revenues:
Car wash and detail $478,024 592,389
Other services
Fuel 6,717 12,348
Merchandise 22,677 29,208
-------- -------
507,418 633,945
-------- -------
Cost of sales:
Car wash and detail 244,421 249,866
Other services
Fuel 4,404 8,055
Merchandise 12,794 15,449
-------- -------
261,619 273,370
-------- -------
245,799 360,575
-------- -------
Operating expense:
Depreciation 25,493 25,299
Sales, general and administrative 111,846 123,947
-------- -------
137,339 149,246
-------- -------
Operating income 108,460 211,329
-------- -------
Other revenue and (expense):
Interest income 34,594 27,805
Interest expense (65,418) (67,999)
Other income (expense) (34) 28
Rent income (net of expenses) 490 865
Realized gain on investments 55,676 -
-------- -------
25,308 (39,301)
-------- -------
Net income $133,768 172,028
======== =======
</TABLE>
4
<PAGE>
QUAKER CAR WASH, INC.
Statements of Changes in Stockholders' Equity
Six months ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Retained
Paid-in Earnings
Capital (Deficit) Total
------------ --------- -------
<S> <C> <C> <C>
Balance at January 1, 1998 $ 1,000 536,067 537,067
Net income - 172,028 172,028
------------ --------- -------
Balance at June 30, 1998 1,000 708,045 709,095
============ ========= =======
Balance at January 1, 1999 $ 1,000 854,603 855,603
Net income - 133,768 133,768
------------ --------- -------
Balance at June 30, 1999 $ 1,000 988,371 989,371
============ ========= =======
</TABLE>
5
<PAGE>
QUAKER CAR WASH, INC.
Statements of Cash Flows
Six months ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 133,768 172,028
--------- --------
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 26,235 26,040
Interest accrued on note receivable (30,685) (24,960)
Changes in assets and liabilities:
(Increase) in accounts receivable (6,121) (6,237)
Decrease in prepaid expenses - 2,170
Purchase of investments (163,314) -
Sale of investments 253,154 -
Increase in accounts payable 2,527 2,156
Increase (decrease) in accrued expenses 944 (8,934)
--------- --------
Total adjustments 82,740 (9,765)
--------- --------
Net cash provided by operating
activities 216,508 162,263
--------- --------
Cash Flows from Investing Activities:
Additions to notes receivable (35,000) (110,000)
Purchase of property, plant and equipment - (12,064)
--------- --------
Net cash (used) by investing activities (35,000) (122,064)
--------- --------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
1999 1998
--------- -------
<S> <C> <C>
Cash Flows from Financing Activities:
Proceeds from short-term debt 90,410 -
Repayments of short-term debt (306,520) (27,242)
--------- -------
Net cash (used) by financing
activities (216,110) (27,242)
--------- -------
Net increase (decrease) in cash and cash equivalents (34,602) 12,957
Cash and cash equivalents at beginning of year 105,304 69,505
--------- -------
Cash and cash equivalents at end of period $ 70,702 82,462
========= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 71,928 65,266
========= =======
</TABLE>
7
<PAGE>
QUAKER CAR WASH, INC.
Selected Information - substantially all disclosures
required by generally accepted accounting principles
are not included.
June 30, 1999 and 1998
(Unaudited)
(1) Summary of Significant Accounting Policies
------------------------------------------
Nature of Operations
--------------------
The accompanying financial statements include the accounts of Quaker Car
Wash, Inc. Management believes that the presentation of financial
statements for the Company is appropriate based upon the agreement to sell
substantially all of the Company's operating assets as discussed in Note 2.
Quaker Car Wash, Inc. owns and operates a car wash in Lubbock, Texas. The
car wash provides a range of services which include full service car wash,
gasoline sales and a custom detail shop.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(2) Commitments
-----------
On September 13, 1999, Quaker Car Wash, Inc. sold substantially all of the
Company's operating assets to Mace Securities International, Inc. for
$2,905,000 as follows:
<TABLE>
<S> <C>
Mace Securities International stock $ 1,850,000
Assumption of debt 1,000,000
Cash 55,000
------------
$ 2,905,000
============
</TABLE>
8
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
AND THE SIX MONTHS ENDED JUNE 30, 1999
The following unaudited pro forma consolidated statements of operations for the
year ended December 31, 1998 and the six months ended June 30, 1999 give effect
to (i) the acquisition on May 17, 1999 of all the outstanding stock of Colonial
Full Service Car Wash, Inc. ("Colonial") by Mace Security International, Inc.
(the "Registrant" or "Mace") for total consideration paid by Mace of
approximately $15.1 million; (ii) the acquisition of substantially all of the
assets of Genie Car Wash, Inc. of Austin, Genie Car Care Center, Inc., and Genie
Car Service Center, Inc. (collectively, "Genie") from Genie and Cornett Limited
Partnership (collectively with Genie, the "Sellers") for total consideration of
approximately $11,750,000; (iii) the acquisition of the stock of American Wash
Services, Inc. ("AWS") from Louis D. Paolino, Jr. and Red Mountain Holdings,
Ltd. for total consideration of approximately $8,153,000; (iv) the acquisition
of substantially all of the assets of Stephen Bulboff and Stephen B. Properties,
Inc. ("Bulboff") for total consideration of approximately $3,744,000; (v) the
acquisition of the stock of Innovative Control Systems, Inc. ("ICS") for total
consideration of approximately $5 million; (vi) the acquisition of the stock of
50's Classic Car Wash of Lubbock, Inc. and CRCD, Inc. (collectively "50's
Classic") for total consideration of approximately $820,000; and (vii) the
acquisition of substantially all of the assets of Quaker Car Wash, Inc.
("Quaker") for total consideration of approximately $2,895,000. The ICS and 50's
Classic business combinations were accounted for using the pooling of interests
method, and as a result, no material pro forma adjustments were deemed necessary
to reflect the results of operations on a consolidated basis for this business
combination.
The following unaudited pro forma consolidated statement of operations for the
year ended December 31, 1998 and the six months ended June 30, 1999 gives effect
to the aforementioned transactions as if the transactions had occurred on
January 1, 1998. The following unaudited pro forma financial data may not be
indicative of what the results of operations or financial position of Mace
Security International, Inc. would have been, had the transactions to which such
data gives effect had been completed on the date assumed, nor are such data
necessarily indicative of the results of operations or financial position of
Mace Security International, Inc. that may exist in the future. The following
unaudited pro forma information should be read in conjunction with the notes
thereto, the other pro forma financial statements and notes thereto, and the
consolidated financial statements and notes of Mace Security International, Inc.
as of December 31, 1998 and for each of the three years in the period then ended
and the historical financial statements of Quaker appearing elsewhere in this
filing.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
(Dollars in thousands, except shares and per share data)
<TABLE>
<CAPTION>
Colonial Full American Stephen Bulboff
Mace Security Service Car Genie Wash and Stephen B.
International, Inc. Wash, Inc. Car Wash Services, Inc. Properties, Inc.
------------------- ------------- -------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Net sales $ 2,404 $ 10,697 $ 6,553 $ 645 $ 1,288
Cost of sales 1,230 9,248 4,708 453 603
Selling, general and administrative 1,719 955 1,914 126 297
------------------- ------------- -------- -------------- ----------------
Operating (loss) income (545) 494 (69) 66 388
Other income (expense):
Interest income 137 - 5 - -
Interest expense (95) (528) - - (211)
Other income 221 53 6 - -
------------------- ------------- -------- -------------- ----------------
(Loss) income from operations before
income tax expense (282) 19 (58) 66 177
Income tax expense (4) (19) - (16) -
------------------- ------------- -------- -------------- ----------------
Net (loss) income $ (286) $ - $ (58) $ 50 $ 177
=================== ============= ======== ============== ================
Net (loss) income per common share: $ (0.04)
===================
Weighted average number of
common shares outstanding 6,987,127
===================
<CAPTION>
Innovative 50's Car Wash of
Control Lubbock, Inc. and Quaker Car Pro Forma Pro Forma
Systems, Inc. CRCD, Inc. Wash, Inc. Adjustments Consolidated
------------- ----------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 2,029 $ 780 $ 1,150 $ - $ 25,546
Cost of sales 1,206 437 432 (297) (1) 18,002
79 (2)
(32) (7)
(59) (8)
(6) (9)
Selling, general and administrative 944 210 369 (569) (4) 5,605
(360) (5)
------------- ----------------- ---------- ----------- ------------
Operating (loss) income (121) 133 349 1,244 1,939
Other income (expense):
Interest income - - 61 - 203
Interest expense (30) (61) (141) (380) (6) (1,446)
Other income - 5 50 - 335
------------- ----------------- ---------- ----------- ------------
(Loss) income from operations before
income tax expense (151) 77 319 864 1,031
Income tax expense - - - (300) (10) (339)
------------- ----------------- ---------- ----------- ------------
Net (loss) income $ (151) $ 77 $ 319 $ 564 $ 692
============= ================= ========== =========== ============
Net (loss) income per common share: $ 0.06
============
Weighted average number of
common shares outstanding 11,199,696 (3)
============
</TABLE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999
(Dollars in thousands, except shares and per share data)
<TABLE>
<CAPTION>
Colonial Full American Stephen Bulboff
Mace Security Service Car Genie Wash and Stephen B.
International, Inc. Wash, Inc. Car Wash Services, Inc. Properties, Inc.
------------------- ------------- -------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Net sales $ 4,087 $ 4,050 $ 2,748 $ 1,143 $ 799
Cost of sales 2,516 3,239 2,004 713 409
Selling, general and administrative 1,569 741 870 430 217
Restructuring and change in control charges 1,519 - - - -
------------------- ------------- -------- ----------- ----------------
Operating (loss) income (1,517) 70 (126) - 173
Other income (expense):
Interest expense, net (27) (191) 1 - (157)
Other income (expense) (16) 23 5 - -
------------------- ------------- -------- ----------- ----------------
(Loss) income
before income tax expense (1,560) (98) (120) - 16
Income tax expense (benefit) (350) - - - -
------------------- ------------- -------- ----------- ----------------
Net (loss) income $ (1,210) $ (98) $ (120) $ - $ 16
=================== ============= ======== =========== ================
Net loss per common share $ (0.16)
===================
Weighted average number of
common shares outstanding 7,454,292
===================
<CAPTION>
Innovative 50's Car Wash
Control of Lubbock, Inc. Quaker Car Pro Forma Pro Forma
Systems, Inc. and CRCD, Inc. Wash, Inc. Adjustments Consolidated
------------- ---------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 1,613 $ 397 $ 507 $ - $ 15,344
Cost of sales 970 233 287 (119) (1) 10,204
48 (2)
(62) (7)
(31) (8)
(3) (9)
Selling, general and administrative 521 124 112 (232) (4) 4,157
(195) (5)
Restructuring and change in control charges - - 1,519
------------- --------------- ---------- ----------- ------------
Operating (loss) income 122 40 108 594 (536)
Other income (expense):
Interest expense, net (21) (27) (31) (144) (6) (597)
Other income (expense) (13) 4 56 - 59
------------- --------------- ---------- ----------- ------------
(Loss) income
before income tax expense 88 17 133 450 (1,074)
Income tax expense (benefit) - - - - (350)
------------- --------------- ---------- ----------- ------------
Net (loss) income $ 88 $ 17 $ 133 $ 450 $ (724)
============= =============== ========== =========== ============
Net loss per common share $ (0.06)
============
Weighted average number of
common shares outstanding 11,238,305 (3)
============
</TABLE>
<PAGE>
Notes to Unaudited Pro Forma Consolidated Statement of Operations Adjustments
The Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended
December 31, 1998 has been adjusted to reflect the following:
(1) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of
Colonial had been completed on January 1, 1998, net of historical
depreciation and amortization expense of Colonial.
(2) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of Genie
had been completed on January 1, 1998, net of historical depreciation and
amortization expense of Genie.
(3) For purpose of determining pro forma earnings per share, the issuance of
1,251,000, 533,333, 628,362, 860,000, 603,721, 91,677 and 236,876 shares,
respectively, of unregistered shares of common stock to affect the
acquisition of Colonial, Genie, AWS, Bulboff, ICS, 50's Classic and Quaker
were assumed to be outstanding from January 1, 1998 by Mace.
(4) To eliminate intercompany administrative charges of $569,000 related
directly to cost sharing arrangements provided by Genie's prior parent,
which were terminated as a result of the purchase transaction. Such
administrative services were absorbed by excess capacity of the Company and
the Company has not hired additional employees to perform these
administrative services.
(5) To reflect the elimination of intercompany rental expense of $360,000 from
Genie's prior parent terminated as a result of the purchase transaction.
(6) To record additional interest expense of $380,000 resulting from a $4.75
million promissory note issued to Genie's prior parent to consummate the
acquisition of Genie.
(7) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of AWS
had been completed on January 1, 1998, net of historical depreciation and
amortization expense of AWS.
(8) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of
Bulboff had been completed on January 1, 1998, net of historical
depreciation and amortization expense of Bulboff.
(9) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of
Quaker had been completed on January 1, 1998, net of historical
depreciation and amortization expense of Quaker.
(10) The Company's pro forma tax provision reflects an effective tax rate of 30%
considering federal and state income taxes and the effect of certain
non-deductible costs principally related to acquisitions consummated and
federal and state net operating loss carryforwards.
<PAGE>
The Unaudited Pro Forma Consolidated Statement of Operations for the Six Months
Ended June 30, 1999 has been adjusted to reflect the following:
(1) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of
Colonial had been completed on January 1, 1999, net of historical
depreciation and amortization expense of Colonial.
(2) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of Genie
had been completed on January 1, 1999, net of historical depreciation and
amortization expense of Colonial.
(3) For purpose of determining pro forma earnings per share, the weighted
effect of the issuance of 1,251,000, 533,333, 628,362, 860,000, 603,721,
91,677 and 236,876 shares, respectively, of unregistered shares of common
stock to affect the acquisition of Colonial, Genie, AWS, Bulboff, ICS, 50's
Classic and Quaker were assumed to be outstanding from January 1, 1999 by
Mace.
(4) To eliminate intercompany administrative charges of $232,000 related
directly to cost sharing arrangements provided by Genie's prior parent,
which were terminated as a result of the purchase transaction. Such
administrative services were absorbed by excess capacity of the Company and
the Company has not hired additional employees to perform these
administrative services.
(5) To reflect the elimination of intercompany rental expense of $195,000 from
Genie's prior parent terminated as a result of the purchase transaction.
(6) To record additional interest expense of $144,000 resulting from a $4.75
million promissory note issued to Genie's prior parent to consummate the
acquisition of Genie.
(7) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of AWS
had been completed on January 1, 1999, net of historical depreciation and
amortization expense of AWS.
(8) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of
Bulboff had been completed on January 1, 1999, net of historical
depreciation and amortization expense of Bulboff.
(9) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of
Quaker had been completed on January 1, 1998, net of historical
depreciation and amortization expense of Quaker.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
American Stephen Bulboff Innovative
Mace Security Wash and Stephen B. Control
International, Inc. Services, Inc. Properties, Inc. Systems, Inc.
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,061 $ 70 $ 48 $ 33
Accounts receivable, net 1,099 2 - 281
Inventories 1,790 36 15 401
Deferred income taxes 714 - - -
Prepaid expenses and other 811 113 104 69
----------- ----------- ----------- -----------
Total current assets 10,475 221 167 784
Net assets of discontinued operations 245 - - -
Property and equipment, net 21,247 3,888 1,132 81
Intangibles, net 5,457 - - 126
Other assets 1,770 1,424 - -
----------- ----------- ----------- -----------
Total Assets $ 39,194 $ 5,533 $ 1,299 $ 991
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,243 $ 376 $ 60 $ 326
Accrued expenses 2,325 129 11 401
Current portion of long term debt 10,066 161 2,140 732
----------- ----------- ----------- -----------
Total current liabilities 13,634 666 2,211 1,459
Deferred income taxes 1,412 16 - -
Long term debt, less current portion 939 - - 27
Other long term liabilities - - -
----------- ----------- ----------- -----------
Total liabilities 15,985 682 2,211 1,486
Commitments and contingencies
Stockholders' equity:
Common stock 96 - 12 -
Additional paid-in capital 28,549 4,800 - 770
Treasury stock (52) - - -
(Accumulated deficit) retained earnings (5,384) 51 (924) (1,265)
----------- ----------- ----------- -----------
Total stockholders' equity 23,209 4,851 (912) (495)
----------- ----------- ----------- -----------
Total liabilities and
stockholders' equity $ 39,194 $ 5,533 $ 1,299 $ 991
=========== =========== =========== ===========
<CAPTION>
50's Car Wash of
Lubbock, Inc. and Quaker Car Pro Forma Pro Forma
CRCD, Inc. Wash, Inc. Adjustments Consolidated
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11 $ 70 $ (4,688) (1) $ 492
(1,113) (3)
Accounts receivable, net 2 13 (13) (3) 1,384
Inventories 12 8 (8) (3) 2,254
Deferred income taxes - - - 714
Prepaid expenses and other - 4 (4) (3) 1,097
----------- ----------- ----------- -----------
Total current assets 25 95 (5,826) 5,941
Net assets of discontinued operations - - 245
Property and equipment, net 678 731 2,312 (1) 33,935
2,527 (2)
1,339 (3)
Intangibles, net - - 991 (1) 7,087
513 (3)
Other assets - 1,506 (1,506) (3) 3,194
----------- ----------- ----------- -----------
Total Assets $ 703 $ 2,332 $ 350 $ 50,402
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 17 $ 15 $ (15) (3) $ 2,022
Accrued expenses 15 14 138 (3) 3,033
Current portion of long term debt 41 54 (240) (2) 12,900
(54) (3)
----------- ----------- ----------- -----------
Total current liabilities 73 83 (171) 17,955
Deferred income taxes - - - 1,428
Long term debt, less current portion 567 1,260 (1,260) (3) 1,533
Other long term liabilities - - 2,114 (1) 2,114
----------- ----------- ----------- -----------
Total liabilities 640 1,343 683 23,030
Commitments and contingencies
Stockholders' equity:
Common stock 2 1 6 (1) 117
(1) (2)
1 (3)
Additional paid-in capital 78 - (3,454) (1) 33,973
1,844 (2)
1,386 (3)
Treasury stock - - - (52)
(Accumulated deficit) retained earnings (17) 988 (51) (1) (6,666)
924 (2)
(988) (3)
----------- ----------- ----------- -----------
Total stockholders' equity 63 989 (333) 27,372
----------- ----------- ----------- -----------
Total liabilities and
stockholders' equity $ 703 $ 2,332 $ 350 $ 50,402
=========== =========== =========== ===========
</TABLE>
<PAGE>
Notes to Unaudited Pro Forma Consolidated Balance Sheet Adjustments
The unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1999 has been
adjusted to reflect the following:
(1) On March 26, 1999, the Company entered into a merger agreement for the
pending acquisitions of all the outstanding stock of American Wash
Services, Inc. for total cash consideration to be paid by Mace Security
International, Inc. of $4,688,000 and the issuance of 628,362 unregistered
shares of Mace common stock. Additionally, Mace will issue to certain of
new management assignable warrants to purchase 1,570,000 shares of common
stock at a purchase price of $1.375 per share and warrants to purchase an
additional 250,000 shares of common stock at a purchase price of $2.50 per
share. The terms of the warrants are more fully described in the Merger
Agreement. The acquisition is anticipated to be accounted for under the
purchase method. Pursuant to the terms of the merger agreement, all
property, equipment, other assets and working capital will be acquired and
all liabilities will be assumed. The allocation of the purchase price is
preliminary. The actual allocation will be based on management's final
evaluation of such assets and liabilities. The excess of the purchase price
over the historic cost of net assets was allocated to goodwill; however,
this excess may ultimately be allocated to other specific tangible and
intangible assets. The final allocation of the purchase price and the
resulting effect on operations may differ significantly from the pro forma
amounts included herein. The preliminary allocation of the purchase price
is as follows:
Property and equipment................................... $7,191,000
Current assets acquired.................................. 221,000
Other assets acquired.................................... 1,424,000
Other liabilities........................................ (682,000)
----------
$8,154,000
==========
(2) On July 1, 1999, the Company, through a wholly owned subsidiary, acquired
all of the car wash related assets of Stephen Bulboff and Stephen B.
Properties, Inc. ("Bulboff") pursuant to the terms of a Real Estate and
Asset Purchase Agreement dated March 8, 1999 for an aggregate purchase
price of 1,060,000 unregistered shares of the Company's common stock, par
value $.01 per share plus cash of $1,900,000 from working capital. Pursuant
to the terms and conditions of the Agreement, the Registrant purchased all
of the assets of the Sellers used in the business of operating 10 full
service car washes in Pennsylvania, Delaware and New Jersey. The
acquisition is anticipated to be accounted for using the "purchase" method
of accounting. The allocation of the purchase price is preliminary. The
actual allocation will be based on management's final evaluation of such
assets and liabilities. The excess of the purchase price over the historic
cost of net assets was allocated to goodwill; however, this excess may
ultimately be allocated to other specific tangible and intangible assets.
The final allocation of the purchase price and the resulting effect on
operations may differ
<PAGE>
significantly from the pro forma amounts included herein. The preliminary
allocation of the purchase price is as follows:
Property and equipment................................... $3,659,000
Current assets acquired.................................. 167,000
Other liabilities........................................ (82,000)
----------
$3,744,000
==========
(3) On September 9, 1999, the Company acquired all of the car wash related
assets of Quaker pursuant to the terms of a Car Wash Asset Purchase/Sale
Agreement dated August 26, 1998 for an aggregate purchase price of
$2,895,000 consisting of $1,850,000 worth of unregistered shares of the
Company's common stock, valued at a strike price of $7.81 per share, and
cash of $1,045,000 paid from working capital. Pursuant to the terms and
conditions of the Agreement, the Registrant purchased all of the assets of
the Sellers used in the business of operating one full service car wash in
Texas. The allocation of the purchase price is preliminary. The actual
allocation will be based on management's final evaluation of such assets
and liabilities. The excess of the purchase price over the historic cost of
net assets was allocated to goodwill; however, this excess may ultimately
be allocated to other specific tangible and intangible assets. The final
allocation of the purchase price and the resulting effect on operations may
differ significantly from the pro forma amounts included herein. The
preliminary allocation of the purchase price is as follows:
Property and equipment................................... $2,070
Other assets acquired.................................... 513
Other liabilities........................................ (152)
------
$2,431
======
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
23.1 Consent of D. Williams & Co., P.C.
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements of
Mace Security International, Inc. on Form S-8 (Registration No. 333-31757, filed
on July 22, 1997), Form S-3 (Registration No. 333-87981 filed on September 28,
1999) and on Form S-4 filed on October 26, 1999 of our report dated September
17, 1999, with respect to the combined financial statements of Quaker Car Wash,
Inc. included in Mace Security International, Inc.'s Current Report on Form 8-K
dated September 9, 1999 (as amended on or about November 17, 1999 on
Form 8-K/A), filed with the Securities and Exchange Commission.
/s/ D. Williams & Co., P.C.
Lubbock, Texas
November 17, 1999
