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: December 29, 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)
Item 2. Acquisition of Cherry Hill Car Wash
On December 29, 1999, Mace Security International, Inc., a Delaware
corporation (the "Company" or "Registrant"), through a wholly owned
subsidiary, Mace Car Wash, Inc., acquired substantially all of the assets of
the car wash facility (the "Facility") having the address of 1505 East
Marlton Pike, Cherry Hill, New Jersey 08034 (the "Cherry Hill Car Wash") from
Cherry Hill Car Wash, Inc., 1505 Associates General Partnership, a New Jersey
General Partnership, Henry Gorenstein and Joan Rambler (the "Sellers").
Pursuant to the terms and conditions of the Agreement of Sale (the
"Agreement"), the Company purchased the real estate, inventory, fixed assets,
trade names and trademarks, and intangibles of the car wash operations of
Sellers. 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 of
Sale, which is incorporated herewith as Exhibits 2.1.
At Closing under the Agreement, the Company paid to Sellers an aggregate
purchase price of $2,450,000 (the "Purchase Price"), consisting of $1,900,000
cash from working capital and approximately 63,309 shares of the Company's
common stock at a price of $8.6875 per share. The acquisition is accounted
for using the "purchase" method of accounting.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of business acquired.
Independent Auditors' Report
Combined Balance Sheets as of December 31, 1998 and 1997
Combined Statements of Operations, Retained Earnings and Partners'
Equity for the years ended December 31, 1998 and 1997
Combined Statements of Cash Flows for the years ended December 31, 1998
and 1997
Notes to Financial Statements
Balance Sheet as of September 30, 1999 and 1998 (Unaudited)
Statements of Income for the Nine Months Ended September 30, 1999 and
1998 (Unaudited)
Statements of Cash Flows for the Nine Months Ended September 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 Nine Months Ended
September 30, 1999 (Unaudited)
Pro forma Consolidated Balance Sheet as of September 30, 1999 (Unaudited)
(c) Exhibits
*2.1 Agreement of Sale dated as of August 31, 1999, by and among Cherry
Hill Car Wash, Inc., 1505 Associates General Partnership, Henry
Gorenstein and Joan Rambler, and Mace Car Wash, Inc., a wholly owned
subsidiary of Mace Security International, Inc.
23.1 Consent of Daniel P. Irwin and Associates P.C.
* Incorporated by reference
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: March 9, 2000 MACE SECURITY INTERNATIONAL, INC.
By: /s/ Gregory M. Krzemien
Gregory M. Krzemien
Chief Financial Officer and Treasurer
CHERRY HILL CAR WASH, INC. AND
1505 ASSOCIATES (A PARTNERSHIP)
COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
CHERRY HILL CAR WASH, INC. AND
1505 ASSOCIATES
DECEMBER 31, 1998 AND 1997
TABLE OF CONTENTS
PAGE NO.
Independent Auditors' Report 1
FINANCIAL STATEMENTS:
COMBINED BALANCE SHEETS 2
COMBINED STATEMENTS OF OPERATIONS
RETAINED EARNINGS AND PARTNERS' EQUITY 3
COMBINED STATEMENTS OF CASH FLOWS 4
NOTES TO FINANCIAL STATEMENTS 5-7
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Cherry Hill Car Wash, Inc. and
1505 Associates
Cherry Hill, New Jersey 08034
We have audited the Accompanying Combined Balance Sheets of Cherry Hill
Car Wash, Inc. and 1505 Associates as of December 31, 1998 and 1997, and the
Related Combined Statements Operations, Retained Earnings/Partners' Equity
and Cash Flows for the years ended December 31, 1998 and 1997. These
Financial Statements are the responsibility of Cherry Hill Car Wash, Inc. and
1505 Associates. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly in all material respects, the combined financial position of Cherry
Hill Car Wash, Inc. and 1505 Associates as of December 31, 1998 and 1997, in
conformity with generally accepted accounting principles.
/s/ Daniel P. Irwin and Associates P.C.
February 10, 2000
CHERRY HILL CAR WASH, INC. AND
1505 ASSOCIATES (A PARTNERSHIP)
COMBINED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
Current Assets:
Cash and Cash Equivalents 37,519 54,397
Prepaid Expenses NONE 1,000
TOTAL CURRENT ASSETS 37,519 55,397
Property and Equipment:
Property and Equipment 841,441 816,251
LESS: Accumulated Depreciation (130,473) (106,049)
NET PROPERTY AND EQUIPMENT 710,968 710,202
TOTAL ASSETS 748,487 765,599
LIABILITIES AND STOCKHOLDERS/PARTNERS EQUITY
Current Liabilities:
Accounts Payable 12,526 22,972
Accrued Payroll 5,940 5,125
Sales Tax Payable 5,207 NONE
Loans Payable - Stockholders 660 660
Loans Payable 313,395 331,395
TOTAL CURRENT LIABILITIES 337,728 360,152
Stockholders' and Partners' Equity:
Common Stock - No Par Value;
Authorized 1,000 Shares;
Issued and Outstanding 100 Shares 100 100
Retained Earnings and Partners' Equity 410,659 405,347
TOTAL STOCKHOLDERS' AND
PARTNERS' EQUITY 410,759 405,447
TOTAL LIABILITIES AND STOCKHOLDERS'
AND PARTNERS' EQUITY 748,487 765,599
SEE NOTES TO FINANCIAL STATEMENTS
CHERRY HILL CAR WASH, INC. AND
1505 ASSOCIATES (A PARTNERSHIP)
COMBINED STATEMENT OF OPERATIONS AND
RETAINED EARNINGS AND PARTNERS' EQUITY
FOR THE CLAENDAR YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
Revenues - Car Wash and Detailing Services 1,102,424 1,114,289
Cost of Revenue 745,204 719,900
Selling General and Administrative Expense 331,910 326,716
Income From Operations 25,310 67,673
Other Expenses:
Interest Expense 19,495 20,900
Net Income - Before Taxes 5,815 46,773
State Corporate Taxes 503 200
NET INCOME 5,312 46,573
Retained Earnings and Partners' Equity -
Beginning of Period 405,347 358,774
Retained Earnings and Partners' Equity -
End of Period 410,659 405,347
SEE NOTES TO FINANCIAL STATEMENTS
CHERRY HILL CAR WASH, INC. AND
1505 ASSOCIATES (A PARTNERSHIP)
COMBINED STATEMENTS OF CASH FLOWS
FOR THE CALENDAR YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
Cash Flows From Operating Activities:
Net Income 5,312 46,573
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation 24,424 22,557
(Increase) Decrease in:
Prepaid Expenses 1,000 2,388
Increase (Decrease) in:
Accounts Payable (10,446) 2,196
Accrued Payroll 815 (220)
Sales Tax Payable 5,207 NONE
NET CASH PROVIDED BY OPERATING ACTIVITIES 26,312 73,494
Cash Flows From Investing Activities:
Purchase of Property and Equipment (25,190) (11,799)
NET CASH (USED) IN INVESTING ACTIVITIES (25,190) (11,799)
Cash Flows From Financing Activities:
Decrease in Loans Payable (18,000) (83,170)
Partners' Capital Contributions NONE 28,410
NET CASH (USED) IN FINANCING ACTIVITIES (18,000) (54,760)
Increase (Decrease) In Cash and Cash Equivalents (16,878) 6,935
Cash and Cash Equivalents
Beginning 54,397 47,462
Ending 37,519 54,397
SEE NOTES TO FINANCIAL STATEMENTS.
CHERRY HILL CAR WASH, INC. AND
1505 ASSOCIATES (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 NATURE OF BUSINESS:
Cherry Hill Car Wash, Inc., (The Company) was formed on October
22, 1991. The Common Stock outstanding is owned fifty percent
(50%) by Henry Gorenstein and fifty percent (50%) Joan Rambler.
1505 Associates (A Partnership) (The Company) was formed on July
26, 1985. The Partnership is fifty percent (50%) owned by Henry
Gorenstein and fifty percent (50%) owned by Joan Rambler.
The "Company" is in the business of operating a full service car
wash facility located in Cherry Hill, New Jersey.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES:
Principles of Combination:
The Accompanying Financial Statements include the following
organizations:
Cherry Hill Car Wash, Inc.
1505 Associates (A Partnership)
Inter-Company Balance Sheet Accounts and Significant Statement of
Operations Inter-Company transactions, have been eliminated.
Cash and Cash Equivalents:
For the purpose on the Statements of Cash Flows, the Company
considers all highly liquid debt instruments, purchased with
maturities of less then three months, to be cash equivalents.
Property and Equipment:
Property and Equipment are stated at cost. Depreciation is
computed using the straight-line basis over the estimated use of
full lives of the respective classes of property. When assets are
retired or otherwise disposed of, the cost and related accumulated
depreciation is removed from the accounts and any resulting gain
or loss is recognized in income for the period. The cost of
repairs and maintenance is charged to income as incurred;
significant renewals and improvements are capitalized. Deductions
are made for retirements resulting from renewals or improvements.
CHERRY HILL CAR WASH, INC. AND
1505 ASSOCIATES (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
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
the assets and liabilities, income and expenses and disclosures of
contingencies. Actual results could differ from those estimates.
Revenue Recognition:
The Company derives its revenue primarily from the operation of a
fully serviced car wash in Cherry Hill, New Jersey, servicing the
general public. Revenues are billed and collected at the time the
car wash service is rendered.
"S" Corporation:
Cherry Hill Car Wash, Inc. and its Stockholders have elected to be
taxed as an "S" Corporation for Federal income tax purposes.
Generally, under this election, any federal taxable income of the
company is included in the personal income tax returns of the
stockholders. Consequently, no provision for federal income taxes
has been recorded in the accompanying financial statements.
NOTE 3 CASH:
The Company maintains its cash balances at financial institutions.
These balances are insured by the Federal Deposit Insurance
Corporation up to $100,000.00.
NOTE 4 PROPERTY AND EQUIPMENT:
Property and Equipment at December 31, 1998 and December 31, 1997,
is summarized as follows:
Land 145,464 145,464
Building and Improvements 485,469 476,019
Equipment 210,508 194,768
841,441 816,251
LESS: Accumulated Depreciation (130,473) (106,049)
NET PROPERTY AND EQUIPMENT 710,968 710,202
CHERRY HILL CAR WASH, INC. AND
1505 ASSOCIATES (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 5 LOANS PAYABLE:
Loans Payable at December 31, 1998, and December 31, 1997 are summarized
as follows:
1998 1997
Loan Payable - Ellen Gorenstein
Represents funds advanced during 1991 and
` 1992 totaling $291,590.00, payable on demand
at 6% per annum. Interest is paid annually. 213,838 231,838
Loan Payable - Evelyn Himmelstein Represents
funds advanced during 1991 and 1992 totaling
$99,637.00, payable on demand at 6% per annum.
Interest is paid annually. 99,557 99,557
313,395 331,395
NOTE 6 STATE TAXES:
At December 31, 1998 and December 31, 997, respectively, the
Company reflected net income for State tax purposes of $6,705.00
and $274.00. The resulting State taxes were $503.00 for 1998 and
$200.00 for 1997.
NOTE 7 RETAINED EARNINGS AND PARTNERS' EQUITY:
1998 1997
Retained Earnings - Cherry Hill Car Wash, Inc. 135,323 132,389
Partners' Equity - 1505 Associates
(A Partnership) 275,336 272,958
410,659 405,347
SUBSEQUENT EVENTS
On August 31, 1999, Cherry Hill Car Wash, Inc. and 1505 Associates (A
Partnership) entered into a real estate and asset sales agreement with Mace
Car Wash, Inc., (Purchaser). Under the terms of the agreement, purchaser will
acquire all of the operating assets of Cherry Hill Car Wash, Inc. and 1505
Associates for $2,450,000.00.
CHERRY HILL CAR WASH, INC. AND
1505 ASSOCIATES (A PARTNERSHIP)
COMBINED BALANCE SHEETS
(Unaudited)
ASSETS
September 30,
1999 1998
CURRENT ASSETS
Cash and cash equivalents $ 41,679 $ 76,946
PROPERTY AND EQUIPMENT 879,832 824,936
Less accumulated depreciation 151,362 124,367
728,470 700,569
$770,149 $777,515
LIABILITIES AND STOCKHOLDERS'/PARTNERS' EQUITY
CURRENT LIABIITIES
Sales tax payable $ 6,321 $ 6,001
Accrued expenses 17,293 26,350
Loan payable-Stockholder 660 660
Loans payable 307,909 318,395
332,183 351,406
STOCKHOLDERS'/PARTNERS' EQUITY
Common stock, no par value
1,000 shares authorized,
issued and outstanding 100 100
Retained Earnings and Partners' Equity 437,866 426,009
437,966 426,109
$770,149 $777,515
Page 1
CHERRY HILL CAR WASH, INC. AND
1505 ASSOCIATES (A PARTNERSHIP)
COMBINED STATEMENTS OF INCOME
(Unaudited)
Nine months ended
September 30,
1999 1998
INCOME
Car wash sales $907,858 $803,282
Rental income 48,000 54,000
955,858 857,282
COST OF SALES 592,486 507,564
GROSS PROFIT 363,372 349,718
Occupancy costs 101,313 107,055
General and administrative costs 204,464 189,062
305,777 296,117
INCOME BEFORE INTEREST AND DEPRECIATION 57,595 53,601
Interest 9,500 14,621
INCOME BEFORE DEPRECIATION 48,095 38,980
Depreciation 20,888 18,318
NET INCOME 27,207 20,662
Retained earnings and partners' equity, beginning 410,659 405,347
RETAINED EARNINGS AND PARTNERS' EQUITY, end $437,866 $426,009
Page 2
CHERRY HILL CAR WASH, INC.
1505 ASSOCIATES (A PARTNERSHIP)
COMBINED STATEMENTS OF CASH FLOW
(Unaudited)
Nine Months Ended
September 30,
1999 1998
OPERATING ACTIVITIES
Net income $ 27,207 $ 20,662
Adjustments to reconcile net income to
cash provided by operating activities
Depreciation 20,888 18,318
Changes in assets and liabilities
Increase (decrease) in current assets
Prepaid expenses - 1,000
Increase (decrease) in current liability
Accrued expenses (1,173) (1,747)
Sales taxes payable 1,114 6,001
CASH PROVIDED BY OPERATING ACTIVITIES 48,036 44,234
INVESTING ACTIVITIES
Purchase of property and equipment (38,391) (8,685)
CASH USED BY INVESTING ACTIVITIES (38,391) (8,685)
FINANCING ACTIVITIES
Payments on loans payable (5,485) (13,000)
CASH USED IN FINANCING ACTIVITIES (5,485) (13,000)
INCREASE IN CASH 4,160 22,549
CASH, beginning 37,519 54,397
CASH, end $ 41,679 $ 76,946
Page 3
CHERRY HILL CAR WASH, INC.
1505 ASSOCIATES (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Nine Months Ended September 30, 1999 and 1998
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The corporation operates a car wash facility in the Southern New Jersey area.
The partnership engages in rental real estate activities in Southern New
Jersey.
Property and equipment
Property and equipment are stated at cost. Depreciation and amortization are
provided using straight-line and accelerated methods over the estimated
useful lives of the assets.
Income taxes - S corporation status
Effective January 1, 1992 the Corporation, with the consent of its
shareholders, elected to be an S corporation for federal income tax purposes.
In lieu of corporation income taxes, the shareholders of an S corporation are
taxed on their proportionate share of the Company's taxable income.
Therefore, no provision or liability for federal or state income taxes has
been included in the financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Cash equivalents
For purposes of the statement of cash flows, the company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents.
Advertising Costs
The corporation incurs nondirect-response advertising costs in the course of
their business. These costs are expensed as incurred. Advertising costs
charged against income for the nine months ended September 30, 1999 and 1998
were $15,626 and $15,313 respectively.
NOTE 2 -- PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
1999 1998
Land 145,463 145,463
Building 476,019 476,019
Equipment 229,600 203,454
Improvements 28,750 -
$879,832 $824,936
Page 4
CHERRY HILL CAR WASH, INC.
1505 ASSOCIATES (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
(Unaudited)
Nine Months Ended September 30, 1999 and 1998
NOTE 3 -- LEASE
The company leases automobiles under a non-cancellable operating leases
through April 2000. Rent expensed during the nine months ended September 30,
1999 and 1998 was $6,539 and $7,372 respectively. Annual aggregate rentals
for the years succeeding September 30, 1999 are as follows:
09/30/00 $4,397
NOTE 4 -- OFFICER LOAN
The loan represents amounts payable to an officer of the corporation with no
stated interest.
NOTE 5 -- LOANS PAYABLE
The loans payable represent amounts payable to related parties with interest
at 6%.
NOTE 6 -- CASH FLOWS INFORMATION
No cash was paid for income taxes for the nine months ended September 1999
and 1998. Interest paid for the nine months ended was $9,500 and $14,621
respectively.
NOTE 7 -- SUBSEQUENT EVENTS
On August 31, 1999, Cherry Hill Car Wash, Inc. and 1505 Associates (A
Partnership) entered into a real estate and asset sales agreement with Mace
Car Wash, Inc. (Purchaser). Under the terms of the agreement, purchaser will
acquire all of the operating assets of Cherry Hill Car Wash, Inc. and 1505
Associates for $2,450,000.00
Page 5
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1999
The following unaudited pro forma consolidated statements of operations for
the year ended December 31, 1998 and the nine months ended September 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 603,721 shares of Mace common
stock; (vi) the acquisition of the stock of 50's Classic Car Wash of Lubbock,
Inc. and CRCD, Inc. (collectively "50's Classic") for 91,677 shares of Mace
common stock; (vii) the acquisition of substantially all of the assets of
Quaker Car Wash, Inc. ("Quaker") for total consideration of approximately
$2,895,000; (viii) the acquisition of the stock of Eager Beaver Car Wash,
Inc. ("Eager Beaver") for 656,869 shares of Mace common stock; (ix) the
acquisition of substantially all of the assets of Millennia Car Wash, L.L.C.
("Millennia") for total consideration of approximately $27,600,000; and (x)
the acquisition of substantially all of the assets of the Cherry Hill Car
Wash, Inc. ("Cherry Hill Car Wash") for total consideration of $2,450,000.
The ICS, 50's Classic and Eager Beaver 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 these business combinations.
The following unaudited pro forma consolidated statement of operations for
the year ended December 31, 1998 and the nine months ended September 30, 1999
gives effect to the aforementioned transactions as if the transactions had
occurred on January 1, 1998. Additionally, the pro forma consolidated
statement of operations for the year ended December 31, 1998 includes the
results of Eager Beaver for its fiscal year ended January 31, 1999. 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 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 two years in the period then
ended appearing in the Company's Form 10-KSB and the historical financial
statements of Cherry Hill Car Wash appearing elsewhere in this filing.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS For the Year Ended December 31, 1998
(In thousands, except shares and per share data)
Colonial American Stephen Bulboff Innovative 50's Car
Mace Security Full Service Genie Wash and Stephen B. Control Wash of
International, Car Wash, Car Wash Services, Properties, Inc. Systems, Lubbock,
Inc. Inc. Inc. Inc. Inc. and
CRCD,Inc.
Net sales $ 2,404 $10,697 $6,553 $645 $1,288 $2,029 $780
Cost of sales 1,230 9,248 4,708 453 603 1,206 437
Selling, general and administrative 1,719 955 1,914 126 297 944 210
Operating (loss) income (545) 494 (69) 66 388 (121) 133
Other income (expense):
Interest expense, net 42 (528) 5 - (211) (30) (61)
Other income 221 53 6 - - - 5
(Loss) income from operations before
income tax expense (282) 19 (58) 66 177 (151) 77
Income tax expense (4) (19) - (16) - - -
Net (loss) income $ (286) $ - $ (58) $ 50 $ 177 $ (151) $ 77
Net (loss) income per common share: $ (0.04)
Weighted average number of
common shares outstanding 6,987,127
Eager
Quaker Car Beaver Millennia Cherry Hill Pro Forma Pro Forma
Wash, Inc. Car Wash, Car Wash, Car Wash, Adjustments Consolidated
Inc. L.L.C. Inc.
Net sales $1,150 $3,986 $7,230 $1,102 $ - $ 37,864
Cost of sales 432 2,598 6,486 745 (297) (1) 27,657
79 (2)
(32) (7)
(59) (8)
(6) (9)
(177) (10)
3 (12)
Selling, general and administrative 369 460 1,073 332 (569) (4) 7,035
(360) (5)
(435) (11)
Operating (loss) income 349 928 (329) 25 1,853 3,172
Other income (expense):
Interest expense, net (80) (266) (434) (19) (380) (6) (1,962)
Other income 50 59 75 - - 469
(Loss) income from operations before
income tax expense 319 721 (688) 6 1,473 1,679
Income tax expense - - - - (631) (13) (670)
Net (loss) income $ 319 $ 721 $ (688) $ 6 $ 842 $ 1,009
Net (loss) income per common share: $ 0.07
Weighted average number of
common shares outstanding 15,422,227 (3)
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS For the Nine Months Ended September 30, 1999
(In thousands, except shares and per share data)
Mace
Security Colonial Full American Stephen Bulboff
International, Service Car Genie Wash and Stephen B. Quaker Car
Inc. Wash, Inc. Car Wash Services, Properties, Inc. Wash, Inc.
Inc.
Net sales $ 16,640 $4,050 $2,748 $1,143 $ 799 $507
Cost of sales 10,818 3,239 2,004 713 409 287
Selling, general and administrative 4,205 741 870 430 217 112
Merger, restructuring and change
in control charges 3,393 - - - -
Operating (loss) income (1,776) 70 (126) - 173 108
Other income (expense):
Interest expense, net (548) (191) 1 - (157) (31)
Other income (expense) 148 23 5 - - 56
(Loss) income
before income tax expense (2,176) (98) (120) - 16 133
Income tax expense (benefit) (685) - - - - -
Net (loss) income $ (1,491) $ (98) $ (120) $ - $ 16 $133
Net loss per common share $ (0.13)
Weighted average number of
common shares outstanding 11,652,009
Millennia Car Cherry Hill Pro Forma Pro Forma
Wash, L.L.C. Car Wash, Inc. Adjustments Consolidated
Net sales $11,980 $908 $ - $ 38,775
Cost of sales 10,360 715 (119) (1) 27,807
48 (2)
(62) (7)
(31) (8)
(3) (9)
(570)(10)
1 (12)
Selling, general and administrative 1,081 204 (232) (4) 7,090
(195) (5)
(343)(11)
Merger, restructuring and change
in control charges 3,393
Operating (loss) income 539 (11) 1,506 483
Other income (expense):
Interest expense, net (941) (10) (144) (6) (2,021)
Other income (expense) (747) 48 - (467)
(Loss) income
before income tax expense (1,149) 27 1,362 (2,005)
Income tax expense (benefit) - - (127)(13) (812)
Net (loss) income $(1,149) $ 27 $1,489 $ (1,193)
Net loss per common share $ (0.07)
Weighted average number of
common shares outstanding 17,302,323 (3)
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, 236,876, 656,869,
3,500,000 and 63,309 shares, respectively, of unregistered shares of
common stock to affect the acquisition of Colonial, Genie, AWS, Bulboff,
ICS, 50's Classic, Quaker, Eager Beaver, Millennia, and Cherry Hill 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) To adjust depreciation and amortization expense for the change in the
basis of property and equipment and intangible assets as if the purchase
of Millennia had been completed April 2, 1998 (date of inception), net
of historical depreciation and amortization expense of Millennia.
(11) To eliminate general and administrative charges of $435,000 related
directly to Millennia's executive and acquisition personnel in
Millennia's San Diego, California office. Such administrative services
were absorbed by excess capacity of the Company and the Company has not
hired additional employees to perform these administrative services.
(12) To adjust depreciation and amortization expense for the change in the
basis of property and equipment and intangible assets as if the purchase
of Cherry Hill Car Wash had been completed January 1, 1998, net of
historical depreciation and amortization expense of Cherry Hill Car
Wash.
(13) The Company's pro forma tax provision reflects an effective tax rate of
40% considering federal and state income taxes and the effect of certain
non-deductible costs principally related to acquisitions consummated.
The Unaudited Pro Forma Consolidated Statement of Operations for the Nine
Months Ended September 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 on May 17, 1999 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 on May 18, 1999 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, 236,876, 656,869, 3,500,000 and 63,309 shares, respectively, of
unregistered shares of common stock to affect the acquisition of
Colonial, Genie, AWS, Bulboff, ICS, 50's Classic, Quaker, Eager Beaver,
Millennia, and Cherry Hill 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 on July 1, 1999 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 on July 1, 1999 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 on September 9, 1999 had been completed on January 1, 1999,
net of historical depreciation and amortization expense of Quaker.
(10) To adjust depreciation and amortization expense for the change in the
basis of property and equipment and intangible assets as if the purchase
of Millennia had been completed on January 1, 1999, net of historical
depreciation and amortization expense of Millennia.
(11) To eliminate general and administrative charges of $343,000 related
directly to Millennia's executive and acquisition personnel in
Millennia's San Diego, California office. Such administrative services
were absorbed by excess capacity of the Company and the Company has not
hired additional employees to perform these administrative services.
(12) To adjust depreciation and amortization expense for the change in the
basis of property and equipment and intangible assets as if the purchase
of Cherry Hill Car Wash had been completed January 1, 1999, net of
historical depreciation and amortization expense of Cherry Hill Car
Wash.
(13) The Company's pro forma tax provision reflects an effective tax rate of
40% considering federal and state income taxes and the effect of certain
non-deductible costs principally related to acquisitions consummated.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of September 30, 1999
(In thousands)
Mace Security Millennia Car Cherry Hill Pro Forma Pro Forma
International, Wash, L.L.C. Car Wash, Inc. Adjustments Consolidated
Inc.
ASSETS
Current assets:
Cash and cash equivalents $ 3,912 $ 389 $ 42 $ (36) (1) $ 2,365
(1,942) (2)
Accounts receivable, net 1,837 161 - - 1,998
Inventories 2,360 346 - 10 (2) 2,716
Deferred income taxes 730 - - - 730
Prepaid expenses and other 1,075 92 - (415) (1) 752
Total current assets 9,914 988 42 (2,383) 8,561
Net assets of discontinued operations 33 - - - 33
Property and equipment, net 39,035 32,577 728 (8,597) (1) 65,267
1,524 (2)
Intangibles, net 12,464 354 - 4,275 (1) 17,266
173 (2)
Other assets 2,023 397 - (300) (1) 2,120
Total Assets $63,469 $34,316 $770 $(5,308) $93,247
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,532 $ 306 $ - $ - $ 1,838
Accrued expenses 3,068 1,229 24 93 (1) 4,478
64 (2)
Current portion of long term debt 10,695 583 308 (308) (2) 11,278
Total current liabilities 15,295 2,118 332 (151) 17,594
Deferred income taxes 1,827 - - - 1,827
Long term debt, less current portion 4,650 14,134 - - 18,784
Other long term liabilities 3,104 - - 35 (2) 3,139
Total liabilities 24,876 16,252 332 (116) 41,344
Commitments and contingencies
Stockholders' equity:
Common stock 175 - - 35 (1) 211
1 (2)
Additional paid-in capital 46,277 19,901 - (7,038) (1) 59,551
411 (2)
Treasury stock (52) - - - (52)
(Accumulated deficit) retained earnings (7,807) (1,837) 438 1,837 (1) (7,807)
(438) (2)
Total stockholders' equity 38,593 18,064 438 (5,192) 51,903
Total liabilities and
stockholders' equity $63,469 $34,316 $770 $(5,308) $93,247
Notes to Unaudited Pro Forma Consolidated Balance Sheet Adjustments
The unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1999
has been adjusted to reflect the following:
(1) On October 29, 1999, the Company acquired all of the car wash related
assets of Millennia pursuant to the terms of a Car Wash Asset
Purchase/Sale Agreement dated March 30, 1999 for an aggregate purchase
price of $27,600,000 consisting of $12,900,000 worth of unregistered
shares of the Company's common stock and warrants to purchase 62,500
shares of the Company's common stock and the assumption of approximately
$14,700,000 of long term debt. 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 17 full service car wash in Phoenix
and 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
historical 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, equipment and intangible assets 28,609,000
Net current liabilities assumed (1,091,000)
Other assets 82,000
$27,600,000
(2) On December 29, 1999, the Company acquired all of the car wash related
assets of Cherry Hill Car Wash pursuant to the terms of an Agreement of
Sale dated August 31, 1999 for an aggregate purchase price of $2,450,000
consisting of $550,000 worth of unregistered shares of the Company's
common stock and $1,900,000 cash 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 a full
service car wash in Cherry Hill, New Jersey. 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 historical 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, considering discount to
market value of stock for restrictions, is as follows:
Property, equipment and intangible assets 2,425,000
Net liabilities assumed (113,000)
$2,312,000
EXHIBIT INDEX
Exhibit No. Description
23.1 Consent of Daniel P. Irwin and Associates, P.C.
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 as amended December 23, 1999); Form S-4 (Registration No.
333-89717, filed on October 26, 1999 as amended December 21, 1999); and Form
S-8 (Registration No. 333-93311, filed December 21, 1999) of our report dated
February 10, 2000, with respect to the combined financial statements of
Cherry Hill Car Wash, Inc. and 1505 Associates included in Mace Security
International, Inc.'s Current Report on Form 8-K dated December 29, 1999 (as
amended March 9, 2000 on Form 8-K/A), filed with the Securities and Exchange
Commission.
/s/ Daniel P. Irwin and Associates P.C.
Strafford - Wayne, Pennsylvania
March 9, 2000