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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY , 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
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AUTOMOTIVE ONE PARTS STORES, INC.
(Name of Small Business Issuer in Its Charter)
FLORIDA 5013 59-1867299
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
701 WEST CHURCH STREET
ORLANDO, FLORIDA 32802
(407) 422-1110
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business)
ROBERT H. GENTRY, III
PRESIDENT
AUTOMOTIVE ONE PARTS STORES, INC.
701 WEST CHURCH STREET
ORLANDO, FLORIDA 32802
(407) 422-1110
(Name, Address and Telephone Number of Agent for Service)
COPIES TO:
RANDOLPH H. FIELDS, ESQ. ROBERT E. ALTENBACH, ESQ.
GREENBERG TRAURIG HOFFMAN LIPOFF ROSEN & JOHNSON & MONTGOMERY
QUENTEL, P.A. ONE BUCKHEAD PLAZA
111 NORTH ORANGE AVENUE, SUITE 2050 3060 PEACHTREE ROAD, N.W.
ORLANDO, FLORIDA 32801 SUITE 400
TELEPHONE: (407) 420-1000 ATLANTA, GEORGIA 30305
TELECOPIER: (407) 420-5909 TELEPHONE: (404) 262-1000
TELECOPIER: (404) 262-1222
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, $.01 par value(2)................. $31,340,400 $9,500
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Redeemable Common Stock Purchase
Warrants(3)(4)................................ $ 267,566 $ 82
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Total...................................... $31,607,966 $9,582
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 (o) under the Securities Act of
1933, as amended.
(2) Includes (i) 1,640,000 shares of Common Stock offered hereby, (ii) 1,640,000
shares of Common Stock issuable upon exercise of the Redeemable Common Stock
Purchase Warrants (the "Warrants") offered hereby, (iii) 246,000 shares of
Common Stock subject to the Underwriters' over-allotment option, (iv)
246,000 shares of Common Stock issuable upon exercise of Warrants subject to
Underwriters' over-allotment option, (v) 164,000 shares of Common Stock
issuable upon exercise of Underwriters' Warrants and (vi) 164,000 shares of
Common Stock underlying the Warrants issuable upon exercise of Underwriters'
Warrants.
(3) Includes (i) 1,640,000 Warrants offered hereby, (ii) 246,000 Warrants
subject to the Underwriters' over-allotment option and (iii) 164,000
Warrants subject to the Underwriters' Warrants.
(4) Pursuant to Rule 416 under the Securities Act of 1933, this Registration
Statement also covers such indeterminable additional shares of Common Stock
as may become issuable as a result of any future anti-dilution adjustment in
accordance with the terms of the Warrants.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 15, 1997
PROSPECTUS
AUTOMOTIVE ONE PARTS STORES, INC.
1,640,000 SHARES OF COMMON STOCK AND
1,640,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Automotive One Parts Stores, Inc., a Florida corporation (the "Company"),
hereby offers (the "Offering") 1,640,000 shares of common stock, $.01 par value
(the "Common Stock"), of the Company and 1,640,000 Redeemable Common Stock
Purchase Warrants (the "Warrants"). The Common Stock and the Warrants offered
hereby (sometimes hereinafter collectively referred to as the "Securities") will
be separately tradable immediately upon issuance and may be purchased
separately. Investors will not be required to purchase shares of Common Stock
and Warrants together or in any particular ratio. Each Warrant entitles the
holder to purchase one share of Common Stock at a price of $9.00 per share
(assuming an initial Offering price of $6.00 per share) (the "Exercise Price"),
subject to adjustment, commencing one year after the date of this Prospectus
(the "Effective Date") until the close of business on the fifth year after the
Effective Date. The Warrants are each redeemable by the Company for $.125 per
Warrant at any time after one year from the Effective Date, upon thirty days'
prior written notice to the Warrant holders, provided the closing price of the
Common Stock exceeds $10.50 per share for a period of twenty consecutive trading
days ending on the third day prior to the date of the Company's redemption
notice. See "Description of Securities."
Prior to this Offering, there has been no public market for the Company's
Common Stock or Warrants, and there can be no assurance that such a public
market will develop or be sustained after the completion of the Offering. The
Company will submit an application for the listing of the Common Stock and
Warrants on the NASDAQ SmallCap Market ("NASDAQ") under the symbols [AONE] and
[AONEW], respectively, and on the Boston Stock Exchange ("BSE") under the
symbols [AOC] and [AOW], respectively. It is currently anticipated that the
initial offering price of the Common Stock will be between $5 and $7 per share
and the initial public offering price of the Warrants will be $.125 per Warrant.
For discussion of the factors considered in determining the offering prices of
the Common Stock and Warrants, see "Underwriting."
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THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION FROM THE PUBLIC OFFERING PRICE AND
SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED
UNDER THE CAPTION "RISK FACTORS" WHICH APPEAR BEGINNING ON PAGE OF THIS
PROSPECTUS. SEE ALSO "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS
TO PUBLIC COMMISSIONS(1) TO COMPANY(2)
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Per Share of Common Stock...................... $ $ $
Per Warrant.................................... $ $ $
Total(3)....................................... $ $ $
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(1) In addition, the Company has agreed to pay the Underwriters in the form of:
(i) a non-accountable expense allowance equal to 3% of the gross proceeds of
this Offering, of which $27,500 has been paid, and (ii) an option to
purchase 164,000 shares of Common Stock and 164,000 Warrants at 155% of the
initial public Offering price (the "Underwriters' Warrants), exercisable for
a period of four years, commencing one year after the Effective Date. The
Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses, estimated at $696,000, payable by the Company,
including the Underwriters' non-accountable expense allowance.
(3) The Company has granted the Underwriters an option, exercisable within 45
days from the date of this Prospectus, to purchase up to 246,000 additional
shares of Common Stock and/or 246,000 Warrants on the same terms and
conditions as set forth above, solely for the purpose of covering
over-allotments. If such option is exercised in full, the Price to Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be a
total of $ , $ and $ , respectively.
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The Securities offered by this Prospectus are being offered by the
Underwriters on a "firm commitment" basis subject to prior sale, when, as and if
accepted by the Underwriters, approval of certain legal matters by counsel for
the Underwriters and certain other conditions. The Underwriters reserve the
right to withdraw, cancel or modify such offer without notice and reject any
order in whole or in part. It is expected that delivery of the certificates
representing the Securities will be made in Atlanta, Georgia on or about
, 1997.
ARGENT SECURITIES, INC.
THE DATE OF THIS PROSPECTUS IS , 1997
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(continued from cover page)
In addition to the 1,640,000 shares of Common Stock and 1,640,000 Warrants
to be sold under this Prospectus, the Company has concurrently registered
1,640,000 shares of Common Stock issuable upon exercise of the Warrants; and
164,000 shares of Common Stock issuable upon exercise of the Underwriters'
Warrants (the "Additional Registered Securities").
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OR
WARRANTS OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK AND
WARRANTS OFFERED HEREBY, INCLUDING PURCHASES OF THE COMMON STOCK OR WARRANTS TO
STABILIZE ITS MARKET PRICE, PURCHASES OF THE COMMON STOCK OR WARRANTS TO COVER
SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK OR WARRANTS MAINTAINED BY
THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
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PROSPECTUS SUMMARY
The following is a summary of certain information (including financial
statements and notes thereto) contained in this Prospectus and is qualified in
its entirety by the more detailed information appearing elsewhere herein. Unless
otherwise specified, all references herein reflect a 23,600 for one split of the
Company's Common Stock which will be effected for shareholders of record
immediately prior to consummation of this Offering. Further, unless otherwise
indicated, the information in this Prospectus assumes that the Underwriters'
over-allotment option is not exercised. Each prospective investor is urged to
read this Prospectus in its entirety.
THE COMPANY
Automotive One Parts Stores, Inc. (the "Company" or "Automotive One") was
incorporated in Florida in November 1978. The Company is a specialty supplier
and retailer of automotive replacement parts, tools, supplies, equipment and
accessories ("Automotive Products") to both professional mechanics and service
technicians ("Professional Installers") and "do-it-yourself" ("DIY") customers.
The Company operates 15 auto parts stores, 1 machine shop, 1 speed shop and 1
warehouse facility in Central Florida, all of which are located in or within one
hour's drive of Orlando, Florida. All of the auto parts stores are traditional
stores selling both to Professional Installers and DIY customers. The Company
also maintains approximately 100 vehicles which guarantee the delivery of parts
to Professional Installers within 30 minutes. Stores carry an extensive product
line of brakes, belts, hoses, filters, cooling system parts, tuneup parts, shock
absorbers, gaskets, batteries, bearings, engine parts, remanufactured
alternators and starters, chassis parts and exhaust systems, and other hard
parts ("Hard Parts"). In addition, the Company also carries: (i) maintenance
items, such as oil, antifreeze, fluids, engine additives and appearance
products; (ii) accessories such as floor mats and seat covers; (iii) automotive
tools; and (iv) professional service equipment. For the year ended December 31,
1996, approximately 95% of the Company's sales was derived from Hard Parts, and
5% from other merchandise. Approximately 75% of the Company's product sales was
derived from Professional Installers and the remaining 25% from DIY customers
during 1996.
The Company maintains its principal executive offices at 701 W. Church
Street, Orlando, Florida 32802; telephone (407) 422-1110. The Company was
organized under the laws of the State of Florida in November 1978 succeeding to
a sole proprietorship which commenced operations in Kentucky in 1934.
OPERATING STRATEGIES
Accumulation of Market Share. By serving both the Professional Installer
and DIY markets through its store network, the Company believes it is able to:
(i) reach most consumers of Automotive Products within its market; (ii) offer a
broader selection of stock keeping units ("SKU's"); and (iii) provide responsive
customer service with its technically trained sales personnel and in-house
delivery force.
Inventory Management and Distribution System. The Company buys
approximately 75% of its merchandise from A.P.S., Inc. ("APS"), a national
distributor of automotive replacement parts headquartered in Houston, Texas. APS
carries over 160,000 SKU's and distributes its products through approximately
200 suppliers. The Company's stores have next day access to these products.
The Company also owns and operates its own 20,000 square foot warehouse
facility. This facility is used to inventory certain items which the Company
purchases directly from manufacturers. Thus, the Company is able to price such
parts competitively within the market. The warehouse provides all the Company's
stores with same-day delivery service.
Customer Service. The Company believes that each Company store attracts
new customers and retains existing customers by conducting a variety of
advertising and promotional programs and by offering: (i) in store service
through technically trained sales personnel, (ii) call-in-delivery service
available to all wholesale customers, (iii) an extensive selection of SKU's
stocked in each store, (iv) same day or next day delivery of Automotive
Products, (v) attractive stores in convenient locations, (vi) full-time sales
personnel,
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(vii) competitive pricing, and (viii) a counter in each store specifically
designated for wholesale customers to provide quick service. The Company's
commitment to service excellence has provided the foundation of a strong
relationship with both the Professional Installer and DIY segments of the
aftermarket automotive parts industry. The Company believes that while pricing
is essential in the highly competitive environment of the automotive aftermarket
business, ultimately it is customer satisfaction (whether the customer is a
Professional Installer or a DIY) through customer service that will generate
increased sales and profitability.
Development of Repeat Customers. The Company is committed to developing
repeat customers through (i) trained and experienced sales personnel who provide
customer service, (ii) a high concentration of convenient and accessible
neighborhood locations, (iii) prompt delivery service to wholesale customers
through approximately 100 vehicles and (iv) a broad selection of brand name and
other high quality products with an emphasis on replacement Hard Parts.
GROWTH STRATEGIES
Repayment of Debt. The Company has experienced recent losses due to
increased debt and an inability to take advantage of available vendor discount
programs due to cash constraints. The Company's growth strategy involves
repayment of debt from the Offering proceeds, restructuring the Company's
internal accounting system, consolidating certain stores in the Orlando market,
and acquiring additional auto parts businesses in Florida and other areas in the
Southeastern United States.
The Company will be repaying approximately $5.5 million in debt and accrued
and unpaid interest currently owed to APS. As a result of the debt repayment,
the Company will no longer be accruing approximately $550,000 per year in
interest payments on the APS obligations. Further, the Company will be able to
take advantage of discounts offered by APS and other vendors for early payments
of invoices.
Consolidation of Overlapping Stores. The Company has 15 stores located in
the Orlando market. The Company plans on consolidating four of its stores with
overlapping geographic markets into two stores. The Company expects to retain
the same market share in those areas but at a reduced overhead cost.
New Store Openings. Due to the recent trend of consolidation in the
aftermarket automotive parts industry at the expense of smaller independent
operators and less specialized mass merchandisers, the Company anticipates its
future growth will occur primarily as a result of acquisitions of single and
multiple store operations. The Company will concentrate its efforts on acquiring
stores in other Florida locations and in markets in the Southeastern United
States. The Company's strategy for its new store openings is to focus on
expanding into population pockets of 75,000 to 100,000 in metropolitan
statistical areas of 1,000,000 or more population.
Continuing Improvement of Merchandising. The Company stocks a broad line
of nationally recognized products for domestic and imported vehicles. The
Company constantly seeks to improve its merchandising concepts, primarily by
broadening product selection and emphasizing the sale of replacement Hard Parts.
The Company plans on updating certain stores to improve merchandise presentation
and in-stock positions.
THE OFFERING
Securities Offered......... 1,640,000 shares of Common Stock, $.01 par value.
1,640,000 Warrants. Each Warrant entitles the
holder, for $9.00, (assuming an initial offering
price of $6.00 per share) to purchase one share of
Common Stock for a period of four years commencing
one year after the date of this Prospectus (the
"Effective Date"). The Warrants are each redeemable
by the Company for $.125 per Warrant at any time
after one year from the Effective Date, upon thirty
days' prior written notice to the Warrant holders,
provided the average closing price of the Common
Stock exceeds $10.50 per share for a period of
twenty consecutive trading days ending on the third
day prior to the date of the
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Company's redemption notice. See "Description of
Securities -- Warrants."
Securities Outstanding
Prior to the Offering...... 2,360,000 shares of Common Stock(1)
Securities Outstanding
Subsequent to the
Offering(2).............. 4,000,000 shares of Common Stock(1)
1,640,000 Warrants(1)
Estimated Net
Proceeds(3)................ $8,344,500
Use of Proceeds by
Company.................... The Company intends to use the net proceeds of this
Offering for repaying loans from APS and certain
other loans (including loans from certain
principals of the Company in the approximate
aggregate amount of $595,000), working capital and
general corporate purposes. See "Use of Proceeds."
Risk Factors............... Investment in the Securities offered hereby are
speculative and involve a high degree of risk and
immediate substantial dilution. See "Risk Factors"
and "Dilution."
Proposed NASDAQ SmallCap
Market Symbols(4)........ Common Stock -- [AONE]
Warrants -- [AONEW]
Proposed BSE Symbols(4).... Common Stock -- [AOC]
Warrants -- [AOW]
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(1) Does not include (i) 500,000 shares of Common Stock reserved for future
issuance under the Company's 1997 Stock Option Plan, (ii) 164,000 shares of
Common Stock reserved for issuance upon exercise of the Underwriters'
Warrants, (iii) 164,000 shares of Common Stock reserved for issuance upon
exercise of Warrants issuable upon exercise of the Underwriters' Warrants,
and (iv) 142,000 shares of Common Stock reserved for issuance upon exercise
of outstanding non-public warrants. See "Management -- Consulting
Agreements" and "-- Stock Option Plan."
(2) Does not include 246,000 additional shares of Common Stock or 246,000
Warrants issuable upon exercise of the Underwriters' over-allotment option.
See "Underwriting."
(3) After deducting expenses of this Offering payable by the Company estimated
at $1,700,500 (inclusive of commissions and underwriting discounts and
assuming no exercise of the Underwriters' over-allotment option, and
assuming an initial offering price of $6.00 per share).
(4) Although the Company will apply for listing the Securities for quotation on
the NASDAQ SmallCap Market and the Boston Stock Exchange, there can be no
assurance that the Company's securities will be accepted for listing or that
if listed it will be able to continue to meet the requirements for continued
quotation, or that a public trading market will develop or that if such
market develops, it will be sustained. See "Risk Factors -- Lack of Prior
Market for Securities, "-- Possible Delisting of Securities; NASDAQ SmallCap
Market," "-- Penny Stock Regulation."
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SUMMARY FINANCIAL INFORMATION
The following financial data as of December 31, 1996 and for the years
ended December 31, 1995 and 1996 has been derived from the financial statements
of the Company which have been audited by Grant Thornton LLP, independent
certified public accountants, whose report (which includes an explanatory
paragraph for a going concern uncertainty) on the Balance Sheet as of December
31, 1996 and the related Statements of Operations, Shareholders' Equity and Cash
Flows for each of the two years in the period ended December 31, 1996, is
included elsewhere herein. The summary financial information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the Financial Statements (including the
Notes thereto) presented elsewhere in this Prospectus.
DECEMBER 31, 1996
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ACTUAL AS ADJUSTED(1)
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SUMMARY BALANCE SHEET DATA
Working capital (deficiency)................................ $(1,847,194) $ 6,497,306
Total assets................................................ 9,951,469 13,068,823
Total liabilities........................................... 9,571,492 4,344,346
Shareholders' equity........................................ $ 379,977 $ 8,724,477
YEARS ENDED DECEMBER 31,
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1995 1996
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SUMMARY INCOME STATEMENT DATA
Net sales................................................... $11,691,338 $12,094,341
Cost of goods sold.......................................... 7,689,551 8,075,176
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Gross profit................................................ 4,001,787 4,019,165
Selling, general and administrative expenses................ 3,986,570 4,463,849
----------- -----------
Earnings (loss) from operations............................. 15,217 (444,684)
Rental income............................................... 165,245 191,804
Interest expense............................................ (495,174) (785,088)
----------- -----------
Net loss.................................................... $ (314,712) $(1,037,968)
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Pro forma information(2)
Historical net loss....................................... $ (314,712) $(1,037,968)
Income tax expense (benefit).............................. -- --
----------- -----------
Pro forma net loss........................................ $ (314,712) $(1,037,968)
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Pro forma net loss per common share(3)(4)................. $ (0.13) $ (0.44)
=========== ===========
Weighted average common shares outstanding(3)............. 2,360,000 2,360,000
=========== ===========
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(1) Adjusted to give effect to the sale of 1,640,000 shares of Common Stock and
1,640,000 Warrants at the assumed public offering prices of $6.00 per share
and $.125 per Warrant, less underwriting discounts and commissions and
estimated Offering expenses payable by the Company, and the application of
net proceeds therefrom. (See "Use of Proceeds"). No effect has been given to
the exercise of the (i) Warrants, (ii) the Underwriters' over-allotment
option, (iii) the Underwriters' Warrants, or (iv) other outstanding
warrants.
(2) Prior to this Offering, the Company was taxed as an S corporation. The pro
forma net loss for the years ended December 31, 1995 and 1996 reflects
historical data as adjusted for all income being taxed as a C corporation.
See Note I of the Notes to Financial Statements.
(3) Adjusted to give effect to 23,600-for-one stock split to be effected
immediately prior to consummation of this Offering.
(4) Supplemental pro forma earnings per common share for 1996 giving effect to
the reduction of outstanding indebtedness of approximately $5.5 million from
the use of a portion of the Offering's proceeds and the increased number of
shares, is $.15 per common share (assuming 3,295,590 weighted average common
shares outstanding).
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RISK FACTORS
The Securities offered hereby are speculative and involve a high degree of
risk and substantial dilution and should only be purchased by investors who can
afford to lose their entire investment. Prospective investors, prior to making
an investment, should carefully consider the following risks and speculative
factors, as well as other information set forth elsewhere in this Prospectus,
associated with this Offering, including the information contained in the
Financial Statements herein.
Recent Losses; Going Concern. The Company had net losses of $314,712 and
$1,037,968 for the years ended December 31, 1995 and 1996, respectively and a
working capital deficiency of $1,847,194 at December 31, 1996. Furthermore, the
Company has approximately $5.5 million of outstanding indebtedness that matures
no later than July 31, 1997. These matters raise substantial doubt about the
Company's ability to continue as a going concern. The Company's independent
certified public accountants have issued its report which includes an
explanatory paragraph for a going concern uncertainty on the Company's financial
statements as of December 31, 1996 and for the year then ended. The Company's
ability to continue as a going concern and achieve positive earnings is
dependent upon the Company's successful implementation of its operating strategy
which includes (1) reducing certain debt from proceeds of this Offering; (2)
completing its search for a qualified Chief Financial Officer candidate to
oversee the financial aspects of the Company's business; (3) evaluating the
network of its store locations in order to determine the most advantageous
number and locations of its stores to effectively and efficiently serve the
central Florida market and implementing the results of such evaluation; and (4)
implementing certain cost containment programs in order to reduce the current
level of selling, general and administrative expenses. There can be no assurance
that the implementation of these plans along with management's plans to use a
portion of the proceeds from this Offering to reduce debt will result in
increased profitability in the future. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and the Financial Statements
and Notes thereto presented elsewhere in this Prospectus.
Reliance on One Supplier. The Company's business is dependent in a
material respect upon its close relationship with its principal vendor, APS, and
its ability to continue to purchase products from this vendor at favorable
prices and favorable terms, including those offered through financial incentives
such as cooperative advertising arrangements, other marketing incentive programs
and non-financial benefits such as distribution services. The Company has
entered into a product purchasing agreement with APS ending in October 2000 to
purchase a minimum average of 75% of the Company's cost of goods sold, less
certain allowable exceptions, over any given consecutive four month billing
period. A disruption of this vendor relationship, or a material change in any of
the terms of purchase, advertising, incentive or other programs, would likely
have a material adverse effect on the Company's business. During the year ended
December 31, 1996, APS supplied the Company with approximately 75% of its total
product needs, which represented at least 55.4% of the Company's cost of goods
sold, after deduction of certain allowable exceptions. See
"Business -- Purchasing" and "-- Inventory Management."
Growth through Acquisitions. The Company's growth strategy includes
pursuing acquisition opportunities. There can be no assurance that the Company
will be able to successfully identify suitable acquisition candidates, secure
financing on acceptable terms, complete acquisitions, integrate acquired
operations into existing operations or expand into new markets. There can also
be no assurance that future acquisitions will not have an adverse effect upon
the Company's operating results, particularly in the fiscal quarters immediately
following the completion of such acquisitions while the operations of the
acquired business are being integrated into the Company's operations. Once
integrated, acquired operations may not achieve levels of revenues,
profitability or productivity comparable with those achieved by the acquired
company's existing operations, or otherwise perform as expected. In addition,
the Company competes for acquisition and expansion opportunities with companies
that have substantially greater resources. See "Business -- Growth Strategy" and
"-- Competition."
Need for Additional Financing. The Company is dependent upon the proceeds
of this Offering to implement its growth strategy and to finance its working
capital requirements. To facilitate acquisitions, the Company intends to obtain
a line of credit once it reduces approximately $6.1 million of indebtedness from
the
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proceeds of this Offering. To the extent that the Company incurs indebtedness to
fund growth, the Company will be subject to the risks associated with incurring
additional indebtedness, including the risks that interest rates may fluctuate
and cash flow may be insufficient to pay principal and interest on any such
indebtedness. There can be no assurance that the Company will be successful in
obtaining a line of credit or, if obtained, that it will be available to the
Company on commercially reasonable terms, or that it will be sufficient for the
Company's growth. If such additional financing is not available, the Company may
have to curtail its long-range growth strategy. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Competition. Both the Professional Installer and DIY portions of the
Company's business are highly competitive. The Company's major competitors in
the Professional Installer portion of its business include independent warehouse
distributors and parts stores, automobile dealerships and national warehouse
distributors and associations, such as National Automotive Parts Association
("NAPA"), Carquest and All Pro. Competitors in the DIY portion of the Company's
business include national and regional automotive parts chains such as AutoZone,
Western Auto and Pep Boys, independently owned parts stores, automobile
dealerships and mass or general merchandise, discount and convenience chains
that carry Automotive Products. Many of the Company's competitors are larger and
have greater financial resources than the Company. Some of the larger DIY
competitors have entered into the Professional Installer portion of the business
and this could have material adverse effect on the Company's operations. See
"Business -- Competition."
Broad Discretion in Application of Proceeds. Approximately $2.2 million
(27%) of the Offering proceeds have been allocated to working capital. In
addition, management of the Company may adjust the application and allocation of
the net proceeds of this Offering, including funds received upon exercise of the
Underwriters' overallotment option or the exercise of any Warrants, if such
adjustment is determined to be in the best interests of the Company in order to
address changed circumstances and opportunities. Furthermore, to the extent that
the Company's expenditures are less than projected, the resulting balance will
be retained and used for general working capital purposes. As a result of the
foregoing, the success of the Company will be substantially dependent upon the
judgment of the management of the Company with respect to the application and
allocation of the net proceeds hereof. Pending use of such proceeds, the net
proceeds of this Offering may be invested by the Company in interest-bearing
accounts, or invested in government obligations, certificates of deposit or
similar short-term, low-risk investments. See "Use of Proceeds."
Dependence of Key Executives. The success of the Company is dependent on
the services and efforts of its existing key management personnel. Only Robert
H. Gentry, III has an employment agreement with the Company. The loss of the
services of one or more of existing management personnel would have a material
adverse effect on the Company's business. The Company intends to obtain a
key-man life insurance policy on Robert H. Gentry, III, but will not maintain
life insurance policies covering any other officer or employee. The Company's
success and plans for future growth will depend on its ability to attract and
retain additional qualified personnel. There is no assurance that the Company
will be able to hire or retain such personnel in the future. See "Management."
Control by Management. Robert H. Gentry, III is currently the sole
director of the Company and as such has sole authority to manage the policies
and direction of the Company. The Company anticipates having in place an
expanded board of at least four additional members by the Effective Date, at
least three of whom will be independent directors. The Company has identified
Messrs. Lawrence S. Goldfarb, William H. Burns and Stanley G. Miller as director
candidates and those individuals have agreed to serve on the board once they are
elected. See "Management."
Immediate and Substantial Dilution. Upon completion of this Offering, the
pro forma net tangible book value per share of the Common Stock would be $2.18,
representing an immediate dilution of $3.82 of net tangible book value per
share, or 63.7%, to the public investors and an increase of $3.66 per share to
existing shareholders. The exercise of the Warrants will result in further
dilution to the public investors. See "Dilution."
8
10
Benefits to Affiliates and Insiders from Offering Proceeds. Certain
benefits will accrue to certain shareholders and management as a result of the
Offering. Robert H. Gentry, III, the Company's principal shareholder, President
and Chief Executive Officer, advanced the Company approximately $500,000 for
working capital during 1997 and secured a loan to obtain such funds with a
mortgage on his residence. The outstanding principal balance of approximately
$500,000 plus Mr. Gentry's costs incurred in connection with the loan will be
paid from Offering proceeds. Further, to the extent that the Company applies a
portion of the net proceeds of this Offering to reduce the Company's obligations
to APS and Autoparts Finance Company, Inc. ("AFCO"), an affiliate of APS, Mr.
Gentry, and certain other family members, will be relieved of their personal
guarantees of such indebtedness. In addition, the Company is indebted to
Lawrence S. Goldfarb, a director nominee,in the approximate amount of $95,000
for advances to the Company during 1996. The Company plans to repay that
obligation from proceeds of this Offering. See "Use of Proceeds" and "Certain
Transactions."
Control by Current Shareholders. Upon consummation of this Offering,
Robert H. Gentry, III, and his sisters, Marguerite Seifert and Jennifer Rideout
will beneficially own approximately 60%, of the shares of Common Stock
outstanding. Together, they will be in a position to control the affairs of the
Company. For example, those shareholders, individually and as a group, or
together with others, including directors and executive officers of the Company,
will be able to control the outcome of shareholder votes, including votes
concerning the election of directors, the adoption of amendments to the
Company's articles of incorporation or bylaws and the approval of certain
mergers and other significant corporate transactions, including a sale of
substantially all of the Company's assets. Such control by existing shareholders
could also have the effect of delaying, deferring or preventing a change in
control of the Company. Mrs. Rideout is the wife of William Rideout, the
Company's Vice President of Purchasing and Inventory. Marguerite Seifert is
employed by the Company in its Accounts Payable and Human Resources Departments.
See "Beneficial Ownership of Principal Stockholders and Management" and
"Description of Securities."
No Dividends Anticipated. The Company does not intend to pay dividends in
the foreseeable future. Any earnings which the Company may realize in the
foreseeable future will be retained to finance the growth of the Company. See
"Dividend Policy."
No Prior Public Market; Arbitrary Determination of Offering Prices;
Possible Volatility of Securities. Prior to this Offering, there has been no
public market for the Company's Securities. Accordingly, there can be no
assurance that an active trading market will develop or, if developed, that it
will be sustained upon the completion of this Offering or that the market prices
of the Securities will not decline below the initial public offering prices. The
initial public offering prices of the Securities and the terms of the Warrants
have been arbitrarily determined by negotiations between the Company and the
Underwriters and do not necessarily bear any relationship to the Company's
assets, book value, net earnings, net sales or other established criteria of
value, and should not be considered indicative of the actual value of the
Securities. See "Underwriting." The stock market has, from time to time,
experienced extreme price and volume fluctuations, which often have been
unrelated to the operating performance of particular companies. Regulatory
developments and economic and other external factors, as well as
period-to-period fluctuations in financial assets of the Company, may have a
significant impact on market prices of the Securities.
Prior S Corporation Status and Other Tax Matters. The Company has been
treated as an S Corporation for federal (and most state) tax purposes, however,
the Company will convert to a C Corporation upon the close of this Offering.
Unlike a C Corporation, an S Corporation is generally not subject to income tax
at the corporate level. In the event that the Internal Revenue Service were to
deny such S Corporation status for periods during which the Company was treated
as an S Corporation by reason of the failure to satisfy the S Corporation
requirements of the Internal Revenue Code of 1986, as amended (the "Code"), the
Company would be subject to income tax as a C Corporation. Any net operating
losses related to the Company's operation as an S Corporation will not be
available to offset taxable income, if any, of the Company once it converts to C
Corporation status.
Potential Adverse Effect of Redemption of Warrants. The Warrants are
subject to redemption by the Company. Redemption of the Warrants could force the
holders to exercise the Warrants and pay the exercise
9
11
price at a time when it may be disadvantageous for the holders to do so, to sell
the Warrants at the current market price when they might otherwise wish to hold
the Warrants, or to accept the redemption price, which may be substantially less
than the market value of the Warrants at the time of the redemption. The holders
of the Warrants will automatically forfeit their rights to purchase the shares
of Common Stock issuable upon exercise of such Warrants unless the Warrants are
exercised before they are redeemed. The holders of Warrants will not possess any
rights as shareholders of the Company unless and until the Warrants are
exercised. See "Description of Securities -- Warrants."
Current Prospectus and State Blue Sky Registration in Connection with
Exercise of Warrants. The Company will be able to issue shares of its Common
Stock upon exercise of the Warrants only if there is a then current prospectus
relating to the Common Stock issuable upon the exercise of the Warrants under an
effective registration statement filed with the Securities and Exchange
Commission ("SEC") and only if such Common Stock is then qualified for sale or
exempt from qualification under applicable state securities laws of the
jurisdictions in which the various holders of Warrants reside. Although the
Company will use its best efforts to meet such requirements, there can be no
assurance that the Company will be able to do so. The failure of the Company to
meet such requirements may deprive the Warrants of any value and cause the
resale or other disposition of Common Stock issued upon the exercise of the
Warrants to become unlawful. See "Description of Securities -- Warrants."
Possible Adverse Impact on Market of Warrant Exercise. In the event of the
exercise of a substantial number of Warrants within a reasonably short period of
time after the right to exercise commences, the resulting increase in the amount
of Common Stock of the Company in the trading market could substantially affect
the market price of the Common Stock. See "Description of
Securities -- Warrants."
Possible Adverse Impact of Underwriters' Warrants. In connection with the
Offering, the Company will sell to the Underwriters, for nominal consideration
of $10, an Underwriters' Warrants exercisable for 164,000 shares of Common Stock
and 164,000 Warrants, exercisable per share at 155% of the initial public
offering price. The Underwriters' Warrants will be exercisable for a period of
four years, commencing one year after the date of this Prospectus. The
Underwriters' Warrants will not be redeemable by the Company. The holders of the
Underwriters' Warrants will have the opportunity to profit from a rise in the
market price of the Securities, if any, without assuming the risk of ownership.
The Company may find it more difficult to raise additional equity capital if it
should be needed for the business of the Company while the Underwriters'
Warrants are outstanding. At any time when the holders thereof might be expected
to exercise them, the Company would probably be able to obtain additional
capital on terms more favorable than those provided by the Underwriters'
Warrants.
The Underwriters have "piggy back" and demand registration rights with
respect to the Common Stock issuable upon exercise of the Underwriters' Warrants
(and the Warrants issuable thereunder). Any future exercise of these
registration rights may cause the Company to incur substantial expense and could
impair the Company's ability to raise capital through the public sale of its
securities. See "Dilution," "Shares Eligible for Future Sale" and
"Underwriting."
Underwriters' Significant Influence on the Company. The Company has
entered into an Underwriting Agreement with Argent Securities, Inc., the
Representative and managing underwriter (the "Representative") pursuant to
which, among other things, the Company has granted the Underwriters a two-year
preferential right with respect to future financing relating to the offering of
the Company's securities. The Underwriting Agreement also gives the Underwriters
the right, for a period of two years from the Effective Date, to designate two
persons for the election as directors of the Company.
Effect of Certain Charter and Bylaw Provisions; Antitakeover
Effects. Certain provisions of Florida law and the Company's Amended and
Restated Articles of Incorporation ("Articles of Incorporation") may deter or
frustrate a takeover attempt of the Company that a shareholder might consider in
his best interest. The Company is subject to the "affiliated transactions" and
"control share acquisition" provisions of the Florida Business Corporation Act.
These provisions require, subject to certain exceptions, that an "affiliated
transaction" be approved by the holders of two-thirds of the voting shares other
than those beneficially owned by an "interested shareholder" or by a majority of
disinterested directors. Voting rights must also be conferred
10
12
on "control shares" acquired in specified control share acquisitions, generally
only to the extent conferred by resolution approval by the shareholders,
excluding holders of shares defined as "interested shares." The Company's
Articles of Incorporation, among other things, provide that (i) any action
required or permitted to be taken by the shareholders of the Company may be
effected only at an annual or special meeting of shareholders, and not by
written consent of the shareholders, (ii) any meeting of the shareholders may be
called only the Board of Directors or upon the written demand of the holders of
not less than 50% of the votes entitled to be cast at a special meeting, (iii)
an advance notice procedure must be followed for nomination of directors and for
other shareholder proposals to be considered at annual shareholders' meetings,
and (iv) the Company's Board of Directors, divided into three classes, each of
which serves for staggered three year periods. In addition, the Company will be
authorized to issue additional shares of Common Stock and up to five million
shares of preferred stock in one or more series, having terms fixed by the Board
of Directors without shareholder approval, including voting, dividend or
liquidation rights that could be greater than or senior to the rights of holders
of Common Stock. Issuance of additional shares of Common Stock or new shares of
Preferred Stock could also be used as an anti-takeover device. Except as set
forth herein, the Company has no current intentions or plans to issue additional
Common Stock or issue Preferred Stock. See "Description of Securities."
Possible Dilutive Effect of Options and Warrants and Adverse Effect on
Market Price. No assurance can be given as to the effect, if any, that future
sales of Common Stock, or the availability of shares of Common Stock for future
sales, will have on the market price of the Common Stock from time to time.
Sales of substantial amounts of Common Stock (including shares issued upon the
exercise of warrants or stock options), or the possibility that such sales could
occur, could adversely affect the market price of the Common Stock and could
also impair the Company's ability to raise capital through an offering of its
equity securities in the future. The Company has established a Stock Option Plan
for employees, officers, directors and consultants, and has reserved 500,000
shares of Common Stock for issuance upon exercise of stock options that will be
granted under the Plan in the future. Further, the Company has outstanding
42,000 Common Stock purchase warrants issued, which are exercisable at $.25 per
share commencing on the closing of this Offering until August 27, 2006. In
addition, upon the closing of this Offering, the Company has agreed to issue to
Agent Securities, Inc. for consulting services 100,000 Common Stock purchase
warrants exercisable at $6.00 per share for five years commencing on the
Effective Date. The issuance of any additional shares by the Company in the
future may result in a reduction of the book value or market price of the then
outstanding Common Stock. For the life of the Warrants, the non-public warrants,
and options granted in the future, the holders thereof may be given the
opportunity to profit from a rise in the market price of the Common Stock. Any
rise in the market price of the Common Stock may encourage the holders to
exercise such warrants or options, which may result in a dilution of the
interests of other shareholders. As a result, the Company may find it more
difficult to raise additional equity capital if it should be needed for the
business of the Company while such warrants and options are outstanding. See
"Description of Securities."
Shares Eligible for Future Sale; Registration Rights; Possible Adverse
Effect on Future Market Prices. Sales of a substantial number of shares of
Common Stock in the public market following this Offering could adversely affect
the market price of the Common Stock. Upon completion of this Offering, the
Company will have outstanding 4,000,000 shares of Common Stock, of which the
1,640,000 shares of Common Stock and 1,640,000 Warrants sold in this Offering
will be freely tradable. Of the remaining shares, the Company anticipates that
2,360,000 shares will be subject to an agreement with the Representative under
which such shares may not be offered, sold or otherwise disposed of for a period
of six months after the date of this Prospectus without the prior written
consent of the Representative, but will thereafter be eligible for sale pursuant
to Rule 144 of the Securities Act. In recent offerings in which it has served as
lead manager of underwriters, the Representative has consented to early releases
from lock-up agreements only in a limited number of circumstances, after
considering all circumstances that it deemed to be relevant. The Representative
will, however, have complete discretion in determining whether to consent to
early releases from the lock-up agreements delivered in connection with this
Offering, and no assurance can be given that it will not consent to the early
release of all or a portion of the shares of Common Stock covered by such
lock-up agreements. See "Description of Securities -- Registration Rights" and
"Shares Eligible for Future Sale."
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13
Possible Delisting of Securities; NASDAQ SmallCap Market. Prior to this
Offering, there has been no established trading market for the Company's
Securities and there is no assurance that a trading market for such Securities
will develop after the completion of this Offering. If a trading market does in
fact develop for the Securities offered hereby, there can be no assurance that
it will be sustained. Trading in such Securities is subject to official notice
of issuance that the Common Stock and the Warrants have been approved for
trading on the SmallCap Market of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"). If the listing is approved, the continued
trading of the Common Stock and the Warrants on the NASDAQ SmallCap Market is
conditioned upon the Company meeting certain criteria. The National Association
of Securities Dealers ("NASD"), which administrators NASDAQ, currently requires
that, in order for a company's securities to be listed on the NASDAQ SmallCap
Market, the Company must have $4,000,000 in total assets, a $1,000,000 market
value of the public float and $2,000,000 in total capital and surplus. Further,
initial listing requires two market makers and a minimum bid price of $3.00 per
share. Continued inclusion on the NASDAQ SmallCap Market currently requires two
market makers and a minimum bid price of $1.00 per share; provided, however, if
the Company falls below the minimum bid price, it will remain eligible for
continued inclusion if the market value of the public float is at least
$1,000,000 and the Company has $2,000,000 in capital and surplus. NASDAQ has
approved rules increasing listing and maintenance criteria for the NASDAQ
SmallCap Market. If the new rules are enacted, it will be more difficult for the
Company to maintain its listing on the NASDAQ SmallCap Market. If the Company
fails to meet any of these criteria, the Common Stock and/or the Warrants could
be delisted from trading on the NASDAQ SmallCap Market, which delisting could
materially adversely affect the trading market for the Common Stock and/or the
Warrants. In such event, trading in the Securities would be conducted in the
over-the-counter market known as the NASD OTC Electronic Bulletin Board, or more
commonly referred to as "pink sheets." As a result, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of, the Company's Common Stock. There can be no assurance that the Securities
will not be delisted. See "Underwriting."
Penny Stock Regulation. In the event the Common Stock is delisted from
trading on NASDAQ SmallCap Market and the trading price of the Common Stock is
less than $5.00 per share, trading in the Common Stock would also be subject to
the requirements of Rule 15g-9 promulgated under the Securities Exchange Act of
1934 (the "Exchange Act"). Under such rule, broker/dealers who recommend such
low-priced securities to persons other than established customers and accredited
investors must satisfy special sales practice requirements, including a
requirement that they make an individualized written suitability determination
for the purchaser and receive the purchaser's written consent prior to the
transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of
1990 also require additional disclosure in connection with any trades involving
a stock defined as a "penny stock" (generally, according to recent regulations
adopted by the Securities and Exchange Commission of less than $5.00 per share,
subject to certain exceptions), including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith. Such requirements could severely limit the market
liquidity of the Common Stock and the ability of purchasers in this Offering to
sell their securities in the secondary market. There can be no assurance that
the Common Stock will not be treated as a penny stock.
Forward-Looking Statements and Associated Risk. Management believes that
this Prospectus contains forward-looking statements, including statements
regarding, among other items, the Company's future plans and growth strategies
and anticipated trends in the industry in which the Company operates. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, many of which are beyond the
Company's control. Actual results could differ materially from these
forward-looking statements as a result of the factors described herein,
including, among others, general business or economic influences. In light of
these risks and uncertainties, there can be no assurance that the
forward-looking information contained in this Prospectus will in fact transpire
or prove to be accurate.
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,640,000 shares of
Common Stock and 1,640,000 Warrants offered hereby will be approximately $8.3
million ($9.6 million if the Underwriters' over-allotment option is exercised in
full) at an assumed Offering price of $6.00 per share and $.125 per Warrant
after deducting aggregate underwriting discounts and the estimated expenses of
the Offering approximating $1,700,500 ($1,896,377 if the Underwriters'
over-allotment is exercised in full). See "Underwriting." The Company expects
such funds to be utilized approximately as follows:
APPROXIMATE
APPROXIMATE PERCENTAGE OF
APPLICATION OF PROCEEDS DOLLAR AMOUNT NET PROCEEDS
- ----------------------- ------------- -------------
Repayment of APS/AFCO Debt(1)............................... $5,500,000 65.9%
Repayment of Debt to Related Parties(2)..................... 595,000 7.1
Working Capital(3).......................................... 2,249,500 27.0
---------- ----
Total............................................. $8,344,500 100%
========== ====
- ---------------
(1) To be paid to APS and AFCO upon the closing of this Offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(2) Of this amount, approximately $500,000 will be paid to Barnett Bank, N. A.,
the mortgagor of residential property owned by Robert Gentry, III, the
principal shareholder, and an officer and director of the Company. In April
1997, Mr. Gentry obtained a loan for $500,000, secured by his residence
which funds were in turn loaned to the Company by Mr. Gentry for operations.
The Company intends to repay a $95,000 obligation owed to Lawrence Goldfarb,
a director nominee. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Certain Transactions".
(3) To be used for implementation of the Company's growth strategy,
refurbishment of several stores, the hiring of a Chief Financial Officer,
and general corporate purposes. The Company also intends to renegotiate
interest rates on outstanding indebtedness due to various holders of
mortgages against the Company's properties. Such amounts total $500,000 and
bear interest at rates currently ranging from 10.0% to 12.9% per annum. To
the extent the Company is unsuccessful in its renegotiations, it will repay
such indebtedness.
The foregoing represents the Company's current estimate of the allocation
of the net proceeds of the Offering based upon certain assumptions relating to
the costs associated with the Company's business operations. The Company
believes that the net proceeds of this Offering will satisfy the Company's
capital requirements for at least twelve months.
Prior to expenditures, the net proceeds of this Offering will be invested
principally in high grade short-term interest-bearing investments. Any proceeds
received upon exercise of the over-allotment option or any of the Company's
Warrants will be used for working capital.
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DILUTION
The net tangible book value of the Company at December 31, 1996 was
$379,977 or $0.16 per share of Common Stock. Net tangible book value per share
is determined by dividing the net tangible book value of the Company (total
tangible assets less total liabilities) by the number of shares of Common Stock
outstanding. After giving effect to the receipt of net proceeds from the sale of
the shares of Common Stock and warrants offered hereby by the Company at an
assumed Offering price of $6.00 per share of Common Stock (the midpoint of the
estimated initial public Offering price range), and $.125 per Warrant and after
deducting estimated offering expenses and underwriting discounts, the net
tangible book value of the Company at December 31, 1996, would have been
approximately $8,724,477 or $2.18 per pro forma share of Common Stock,
representing an immediate dilution of $3.82 (or approximately 63.7%) per share
to the public investors. This represents an immediate and substantial dilution
to new investors purchasing Common Stock in this Offering. The following table
illustrates the per share dilution:
Assumed Initial public offering price per share............. $6.00
Net tangible book value per share before Offering........... $0.16
Increase in net tangible book value per share attributable
to public investors....................................... 2.02
-----
Pro Forma net tangible book value per share after
Offering(1)(2)............................................ 2.18
-----
Dilution per share to public investors(5)................... $3.82
=====
The following table summarizes, on a pro forma basis, as of the date of
this Prospectus, the number of shares of Common Stock purchased, the percentage
of total shares purchased, the total consideration paid, the percentage of total
consideration paid and the average price per share paid by the existing
stockholders of the Company and the investors in this Offering.
AVERAGE
SHARES PURCHASED(1)(2) TOTAL CONSIDERATION(1)(2) PRICE(1)
---------------------- -------------------------- ---------
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
--------- ---------- ------------ ----------- ---------
Existing Stockholders..................... 2,360,000 59.0% $ 262,066 2.6% $0.11
Public Investors(3)(4).................... 1,640,000 41.0% 9,840,000 97.4 6.00
--------- ----- ----------- -----
Total........................... 4,000,000 100.0% $10,102,066 100.0%
========= ===== =========== =====
- ---------------
(1) Gives effect to the 23,600-for-one stock split to be effected immediately
prior to consummation of this Offering.
(2) Does not include: (a) up to 246,000 shares and 246,000 Warrants subject to
issuance under the overallotment option; (b) 164,000 shares and 164,000
Warrants (and shares issuable thereunder) subject to the Underwriters'
Warrants; (c) other outstanding warrants. To the extent that any warrants
are exercised, there may be further dilution to the public investors.
(3) In the event that the Underwriters exercise their over-allotment option in
full, the net tangible book value after this Offering would be $10,035,349
per share which would result in an immediate dilution of $3.64 to the public
investors.
(4) Allocates no value to the Warrants offered hereby.
(5) Assumes no exercise of Warrants related to the Offering.
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CAPITALIZATION
The following table sets forth the debt and capitalization of the Company
at December 31, 1996, and as adjusted to give effect to the sale of 1,640,000
shares of Common Stock and 1,640,000 Warrants by the Company in the Offering at
an assumed Offering price of $6.00 per share of Common Stock and $.125 per
Warrant, and the application of the net proceeds therefrom. This information
should be read in conjunction with the financial statements and the notes
thereto, as well as "Summary Financial Information," appearing elsewhere in this
Prospectus.
DECEMBER 31, 1996
---------------------------
ACTUAL(1) AS ADJUSTED(2)
--------- --------------
(IN THOUSANDS)
Long-term debt, including current portion................... $6,676 $ 1,449
------ -------
Shareholders' equity
Preferred Stock, $.01 par value; authorized: 5,000,000
shares; issued and outstanding: none................... -- --
Common Stock, $.01 par value; authorized: 20,000,000
shares; issued and outstanding: 2,360,000 actual and
4,000,000 as adjusted.................................. 24 40
Additional paid-in capital.................................. 434 8,762
Accumulated deficit......................................... (78) (78)
------ -------
Total Shareholders' equity........................ 380 8,724
------ -------
Total capitalization...................................... $7,056 $10,173
====== =======
- ---------------
(1) Gives effect to the 23,600-for-one stock split to be effected immediately
prior to consummation of this Offering.
(2) Does not include: (a) up to 246,000 shares and 246,000 Warrants subject to
issuance under the overallotment option; (b) 164,000 shares and 164,000
Warrants (and shares issuable thereunder) subject to the Underwriters
Warrant; or (c) other outstanding warrants.
DIVIDEND POLICY
The Company does not anticipate paying any dividends on its Common Stock in
the foreseeable future. Any earnings which the Company may realize in the
foreseeable future will be retained to finance the growth of the Company. Future
dividend policy will depend upon the Company's earnings, capital requirements,
financial condition and other factors considered relevant by the Company's Board
of Directors. See "Description of Securities."
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
financial statements and notes thereto included elsewhere in this Prospectus.
This discussion contains forward looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward looking statements. Factors that might cause
such a difference include but are not limited to those discussed in "Risk
Factors."
OVERVIEW
The Company opened its first store in Florida in 1978 and by 1996 expanded
to 15 stores, one speed shop and one machine shop. In 1996, the Company opened a
manufacturing unit at its headquarters to manufacture axles. Historically, the
Company purchased its merchandise directly from various manufacturers and
distributors, including APS. However, in October, 1993, the Company entered into
a product purchasing agreement with APS, a national distributor of auto parts,
from which the Company purchases approximately 75% of its merchandise. The
agreement was subsequently amended in October 1995.
RESULTS OF OPERATIONS
The following table sets forth certain selected historical operating
results for the Company as a percentage of net sales.
YEAR ENDED
DECEMBER 31,
------------------
1995 1996
------ ------
Net sales................................................... 100.0% 100.0%
Cost of goods sold.......................................... 65.8 66.8
------ ------
Gross profit.............................................. 34.2 33.2
Selling, general and administrative expenses................ 34.1 36.9
------ ------
Earnings (loss) from operations........................... .1 (3.7)
Rental income............................................... 1.4 1.6
Interest expense............................................ (4.2) (6.5)
------ ------
Net loss.................................................... (2.7) (8.6)
====== ======
Year Ended December 31, 1995 Compared to Year Ended December 31, 1996
Net Sales. Product sales increased by approximately $400,000, or
approximately 3.5%, from $11,691,338 in 1995 to $12,094,341 in 1996. This
increase was primarily due to (1) the substantial expansion of an arrangement
with one of the Company's regional accounts during 1996 which resulted in
increased sales and (2) the continued improvement in the Company's customer
service. Total net sales to such regional account was less than 10% of the
Company's total net sales in 1995 and 1996. See "Business -- Operating
Strategy."
Cost of Goods Sold. Cost of goods sold increased from $7,689,551 or 65.8%
of net sales in 1995 to $8,075,176 million or 66.8% of net sales in 1996. The
increased dollar amount was primarily attributable to the Company's inability to
take advantage of vendor discount programs due to the Company's cash constraints
while offering sales discounts to the Company's regional accounts. Further,
marginal working capital during 1996 periodically prohibited the Company from
maintaining adequate inventory on certain items. Therefore, the Company
satisfied customer demand for such items by buying from competitors at prices
that generated minimal gross margins. In addition, in connection with its
expanded relationship with a regional account in 1996, the Company replaced
certain obsolete inventory held by that account, which resulted in a one-time
expense write-off for the obsolete inventory. The Company also opened a
manufacturing unit in 1996 which was not profitable. Management plans to cease
operations of this unit by the end of 1997 or during the first six months of
1998.
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Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased from $3,986,570 or 34.1% of net sales
in 1995 to $4,463,849 or 36.9% of net sales in 1996. The increased dollar amount
of SG&A expenses resulted primarily from (1) hiring additional sales personnel
in anticipation of the Company's planned growth strategies, (2) expenses
incurred in establishing and operating the manufacturing unit opened in 1996,
(3) the expenses associated with the settlement of a lawsuit and (4) the
increased operating expenses resulting from the Company's inadequate cash
position.
Interest Expense. Interest expense increased from $495,174 in 1995 or 4.2%
of net sales to $785,088 in 1996 or 6.5% of net sales. This increase was
primarily attributable to an increase in weighted average outstanding
indebtedness from 1995 to 1996. In October 1995, the Company consolidated
various obligations into two loans from APS and AFCO totaling $4.95 million.
Many of the obligations that were consolidated were non-interest bearing.
However, the APS and AFCO loans bear interest at interest rates ranging from 10%
to prime plus 2% (10.25% at December 31, 1996), which substantially increased
the Company's interest expense. In addition, in October 1995, APS began to
charge the Company interest of 10% per annum on its open account balance.
Rental Income. The Company receives rental income from various commercial
and residential properties it owns that are not related to its core business.
Rental income increased from $165,245 in 1995 to $191,804 in 1996.
Income Taxes. There are no income taxes recorded in 1995 and 1996 because
the Company was an S Corporation.
New Accounting Pronouncements. Effective January 1, 1996, the Company
adopted Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of (SFAS
No. 121). Under SFAS No. 121, impairment losses on long-lived assets are
recognized when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amounts. The impairment loss is equal to the difference between the
carrying amount of the long-lived asset and the estimated fair value of such
asset. SFAS No. 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The adoption of SFAS No. 121 by the Company did not
result in an impairment loss. The Company did not incur an impairment loss
during the year ended December 31, 1996.
Effective January 1, 1996 the Company adopted SFAS No. 123, Accounting for
Stock Based Compensation. As it relates to stock options granted to employees,
SFAS No. 123 permits companies who have not done so already to, either adopt the
accounting method promulgated by Accounting Principles Board Opinion No. 25 (APB
No. 25), Accounting for Stock Issued to Employees to measure compensation, or to
adopt the fair value base method prescribed by SFAS No. 123. If APB No. 25's
method is followed, pro forma disclosures are required as if SFAS No. 123
accounting recognition method was adopted. SFAS No. 123 pertains to stock
options granted after December 31, 1995. Management has determined not to adopt
SFAS No. 123's accounting recognition provisions related to stock options
granted to employees and accordingly, will continue following APB No. 25's
accounting provisions. All other provisions of SFAS No. 123 have been
implemented effective January 1, 1996. The implementation of SFAS No. 123 did
not have a material effect on the Company's financial statements.
SFAS No. 128, Earnings Per Share, will be effective for the Company's
financial statements issued after December 15, 1997. Early adoption of the new
standard is not permitted. The new standard eliminates primary and fully diluted
earnings per share and requires presentation of basic and diluted earnings per
share together with disclosure of how the per share amounts were computed. The
adoption of this new standard is not expected to have a material impact on the
disclosure of earnings per share in the financial statements.
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LIQUIDITY AND CAPITAL RESOURCES
The following table presents a summary of the Company's cash flow for 1996
and 1995:
1995 1996
----------- ---------
Net cash provided by (used in) operating activities........ $(3,763,058) $ 320,812
Net cash used in investing activities...................... (198,264) (248,186)
Net cash provided by (used in) financing activities........ 3,846,424 (86,536)
----------- ---------
Net decrease in cash and cash equivalents.................. $ (114,898) $ (13,910)
=========== =========
During 1996, the Company's operations provided $320,812 compared to using
approximately $3.8 million of cash during 1995. The increase in cash provided by
operations in 1996 was due primarily to an increase in the timing of payments on
the Company's trade accounts payable and certain other working capital
liabilities due to cash constraints. In addition, in 1995 the Company
substantially reduced the amount of non-interest bearing working capital
liabilities and consolidated certain other indebtedness through the use of
proceeds obtained from interest bearing debt obtained from APS and AFCO. The
increase in cash provided from operations was also due to a slower increase in
the build up of inventory in 1996. In 1995 the Company began to expand its
product line to carry more accessory items and tools based on recommendations
made by its primary supplier. As a result, per store inventory increased
substantially in 1995. The expansion of inventory continued in 1996, however, at
a slower pace as the Company achieved its desired product mix. Toward the end of
1996 the Company began to reevaluate this new product mix and during the first
quarter of 1997 has refined its product mix to focus its efforts on the
distribution of Hard Parts. The effects of the above resulting increases were
partially offset by the increase in the net loss in 1996 compared to 1995.
The Company used cash for investing activities in the amount of $198,264
and $248,186 in 1995 and 1996, respectively, for the purchase of property and
equipment.
Net cash used in financing activities in 1996 was $86,536 compared to net
cash provided from financing activities in 1995 of $3,846,424. Cash provided by
financing activities in 1995 was primarily from the proceeds of loans from APS
and AFCO. The proceeds from such indebtedness was used primarily to reduce the
amount of non-interest bearing working capital liabilities and to consolidate
certain other indebtedness. Cash was used in 1996 primarily for the repayment of
debt.
As a result of the foregoing, the Company's independent certified public
accountants issued its report, which included an explanatory paragraph for a
going concern uncertainty, on the Company's financial statements as of December
31, 1996. The ability of the Company to continue as a going concern is dependent
on the consummation of this Offering and repayment of the APS and AFCO
obligations in the approximate amount of $5.5 million and the improvement of its
future operations. Management believes the repayment of those obligations will
save the Company approximately $550,000 in annual interest.
The Company had a working capital deficiency $1,847,194 at December 31,
1996. Since 1995, the Company's cash flows have not been sufficient to finance
operations due to its substantial debt service, inability to take advantage of
vendor discounts, and increased selling, general and administrative expenses. As
a result, during 1996 and the first quarter of 1997, the Company has been
dependent on loans from third parties in order to maintain its operations. In
the second quarter of 1997, the Company borrowed $500,000 from Robert H. Gentry,
III, a shareholder and principal of the Company, who borrowed those funds from a
bank. During 1996, the Company borrowed $95,000 from Lawrence Goldfarb, a
director candidate whose company, S&G Automotive Warehouse, Inc., is one of the
Company's vendors. The $500,000 loan from Mr. Gentry, plus his expenses incurred
in connection with that loan, and the obligation owed to Mr. Goldfarb ($95,000,
plus accrued interest) will be paid from the proceeds of this Offering.
In October 1995, APS and its financing affiliate, AFCO, loaned the Company
$2,450,000 (the "APS Note") and $2,500,000 (the "AFCO Note"), respectively, for
reduction of certain mortgage obligations and other debt. The APS Note had a one
year term and accrued interest of 10% per annum and matured in October 1996. The
AFCO Note has a term of 15 years, with a principal and interest payment payable
monthly at prime, plus 2% (10.25% at December 31, 1996). APS and AFCO obtained a
security interest in all of the
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Company's personal and real property in connection with those loans. The
outstanding principal balance and accrued and unpaid aggregated default and
non-default interest at January 31, 1997 was approximately $2,434,995 and
$437,198, respectively, on the APS loan, and $2,465,467 and $204,529,
respectively, on the AFCO loan.
On February 20, 1997, the Company entered into a Loan Modification
Agreement with APS and AFCO. Under the terms of this agreement, the APS Note and
AFCO Note will continue to accrue interest at their specific contractual
interest rates, however, no payments of principal and interest will be required
until the maturity date. The maturity date is the earlier of the date the
Company receives proceeds from its planned initial public offering of shares of
its Common Stock, or July 31, 1997. In addition, from the date of the Loan
Modification Agreement to the maturity date, the Company is required to pay APS
before the close of business on Monday of each week an amount equal to the
preceding week's purchases.
The Company's compliance with the financial covenants under the terms of
the original loan agreements with APS and AFCO were waived under the terms of
the Loan Modification Agreement. The Loan Modification Agreement contains
certain financial and other covenants that, among other things, require the
Company to (1) make timely payments to APS for its merchandise purchases, (2)
file a Registration Statement with the Securities and Exchange Commission in
connection with the Company's planned initial public offering by May 31, 1997,
and (3) complete its planned initial public offering by July 31, 1997. Failure
to comply with the covenants included in the Loan Modification Agreement would
cause the Company to be in default under the terms of such agreement. Should
such default occur APS and AFCO could foreclose on the Company's assets
collateralizing the APS Note and AFCO Note. As long as the Company complies with
the terms of the Loan Modification Agreement and repays by the maturity date,
the outstanding principal and accrued and unpaid interest amounts due under the
APS Note and AFCO Note, along with certain amounts due APS for merchandise
purchases, the default interest charge due to APS and AFCO will be waived. As of
May 12, 1997, the Company was in compliance with the terms of the Loan
Modification Agreement.
Management believes, based in part on discussions with representatives of
APS and AFCO, that APS and AFCO will not require repayment in full of the
Company's outstanding indebtedness, including any accrued and unpaid interest,
on July 31, 1997, as long as the Company continues to proceed with its planned
initial public offering and is in compliance with the remainder of the covenants
included in the Loan Modification Agreement dated February 20, 1997 and remains
in compliance with such other covenants until the initial public offering is
completed. However, no assurances can be given that APS and AFCO will not
require repayment of such indebtedness on July 31, 1997.
In January 1997, the Company was 60 days in arrears of its open account
with APS and at that time owed $1,473,533. The Company has since been making
substantial payments on that account and at April 25, 1997, the account balance
was at approximately $420,000 (which amount contemplates a $180,000 credit from
APS for returns). The account is considered current when the balance is
approximately $400,000. Once the account is current, as defined, the Company
will be able to take advantage of APS's 2% discount for early payment of
invoices, which it has not been able to do since February, 1996. Management
believes it will be in a position to take advantage of such discounts commencing
in the third quarter of 1997.
By making more efficient use of its alliance with APS, repaying the AFCO
and APS Notes, renegotiating certain high interest rate loans or repaying those
loans (up to $500,000), taking advantage of the discount offered by APS to
customers with current accounts, and by instituting cost containment programs,
management believes that the proceeds to the Company from this Offering and cash
expected to be provided by operating activities will be sufficient to fund the
capital needs of the Company for the foreseeable future. However, there can be
no assurance that the Company can return to profitability and generate
sufficient cash flows in the future to meet its obligations when due. The
Company's future performance is subject to general economic conditions and to
financial, business and other factors, including factors beyond the Company's
control.
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INFLATION AND SEASONALITY
The Company does not believe its operations are materially affected by
inflation. The Company has been successful, in many cases, in reducing the
effects of merchandise cost increases principally by taking advantage of vendor
incentive programs, economies of scale resulting from increased volume of
purchases and selective forward buying.
Although store sales have historically been somewhat higher in the second
and third quarters (March through August), the Company does not consider its
business to be materially affected by seasonality.
INDUSTRY OVERVIEW
According to industry estimates, the size of the domestic automotive
aftermarket for replacement parts, maintenance items and accessories is believed
to be in excess of $70 billion of which approximately $3.4 billion is generated
in the State of Florida. The Company believes that the market is growing because
of, among other things: (i) an increase in the size and age of the country's
automotive fleet, (ii) an increase in the number of miles driven annually per
vehicle, (iii) the increased number and higher cost of new cars and (iv) the
higher cost of replacement parts as a result of technological changes in more
recent models of vehicles.
The automotive aftermarket distribution channels are highly fragmented. The
Company believes, however, that the industry is consolidating as national and
regional specialty retail chains gain market share at the expense of smaller
independent operators and less specialized mass merchandisers. General repair
garages are being replaced by specialists and some stations are concentrating on
non-repair services. The Company believes that the DIY market is changing due to
the lack of tools and skills necessary to repair the newer, complex vehicle
systems. Today's consumers are depending more on the professional service
technicians. Automotive specialty chains with multiple locations in given market
areas are believed to enjoy competitive advantages in purchasing, distribution,
advertising and marketing compared to most small independent operators. In
addition, the increase in the number of automotive replacement parts caused by
the significant increase in recent years in the variety of domestic and imported
vehicle makes and models has made it difficult for smaller independent operators
and less specialized mass merchandise chains to maintain inventory selection
broad enough to meet customer demands. The Company believes that this has
created a competitive advantage for those automotive chains, such as the
Company, that have the resources and distribution capability to deliver an
inventory selection broad enough to meet customer needs.
The automotive aftermarket essentially operates three different types of
auto part outlets, the retail store, the traditional store, and the wholesale
store. These stores basically service two distinct types of customers, the
Professional Installer and the DIY customer. Each of the three different types
of outlets carries a different type of inventory selection -- a mixture of Hard
Parts and accessories (waxes, chemicals, car covers, etc.) Following are brief
descriptions of each type of outlet, its customer base, type of inventory, and
general marketing concept:
Retail Store. The retail store customer base is the DIY customer. The
store emphasizes accessories but carries Hard Parts. Both consist of mainly fast
moving items with limited stocking of less popular items. The retail store
relies on heavy advertising, sales clerks and extended store hours.
Traditional Store. The traditional store customer base is a mix of the
Professional Installer and DIY customers with a larger percentage of sales to
Professional Installers. The store emphasizes Hard Parts but carries
accessories. The larger mix of Professional Installers requires slow selling
items to be stocked as well as the fast moving items. The store uses outside
salesmen to call on the Professional Installers, has knowledgeable employees and
offers free delivery service. It generally spends less on advertising than the
retail store and keeps fewer store hours.
Wholesale Store. The wholesale customer base is limited to the
Professional Installer. Inventory consists of Hard Parts only. The store uses
outside salesmen to call on the Professional Installer, has knowledgeable
employees and offers free delivery service. Store hours are limited and
advertising is generally at a minimum.
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BUSINESS
The Company is a specialty supplier and retailer of automotive replacement
parts, tools, supplies, equipment and accessories to both Professionals
Installers and DIY customers. The Company operates 15 auto parts stores, one
speed shop that retails high-performance items primarily to the car enthusiast,
one machine shop engaged in the building and reconditioning of certain engine
parts, a manufacturing unit that manufactures certain parts, and one warehouse
facility that holds inventories of specific high-volume items which are
purchased in bulk directly from manufacturers, all of which are located in, or
within a one hour drive of Orlando, Florida. The Company also maintains
approximately 100 vehicles that can make most deliveries to its wholesale
customers within 30 minutes. Stores carry an extensive product line of Hard
Parts including brakes, belts, hoses, filters, cooling system parts, tune-up
parts, shock absorbers, gaskets, batteries, bearings, engine parts,
remanufactured alternators and starters, and chassis parts. In addition, the
Company carries (i) maintenance items, such as oil, antifreeze, fluids, engine
additives and appearance products; (ii) accessories, such as floor mats and seat
covers; (iii) automotive tools and (iv) professional service equipment. For the
fiscal year ended December 31, 1996, approximately 95% of the Company's product
sales was derived from Hard Parts and 5% from other merchandise. Approximately
75% of the Company's sales was derived from Professional Installers and the
remaining 25% from DIY customers during fiscal 1996.
STORE OPERATIONS
The Company's stores are traditional stores that generally range in size
from 3,000 to 8,000 square feet. The Company believes that its stores are
"destination stores" generating their own traffic rather than relying on the
traffic created by the presence of other stores in the immediate vicinity.
Consequently, most stores are freestanding buildings situated on or near major
traffic thoroughfares, which offer ample parking and easy customer access. Each
store carries a mixture of Hard Parts and accessories. The stores carry
16,000-18,000 different SKU's of which 15,000-17,500 represent Hard Parts. The
store sales are generated by a full-time technically trained sales force, a
call-in delivery service for wholesale customers, an extensive selection of
SKU's stocked in each store, express delivery for Professional Installers (with
approximate 30-minute delivery time) on in stock items, and a separate center
for Professional Installers in each store to facilitate quick service.
Company stores service two distinct types of customers -- the Professional
Installer (wholesale) customer and the DIY (retail) customer. The Company's
stores average 75% in Professional Installer sales and 25% in DIY sales. The
Company also provides a delivery service to its wholesale customers with
approximately 100 vehicles. Each of the Company's 15 stores also receive
inventory deliveries nightly from APS and four to six deliveries daily from the
Company's own warehouse. The deliveries replenish each store with the inventory
sold the previous day and also provides a store with the ability to special
order SKU's not normally stocked by the Company's stores. This enables the
Company to provide fast response service to both the wholesale and DIY
customers.
The Company's stores offer the Professional Installer and the DIY customer
a wide selection of nationally recognized brand names and "Big A" (APS private
label) products for domestic and imported automobiles, vans and trucks. In 1996,
new and remanufactured automotive Hard Parts, such as engines and transmission
parts, alternators, starters, water pumps, and brake shoes and pads, accounted
for approximately 95% of the Company's total sales. Each store also carries an
extensive selection if maintenance items, such as oil, antifreeze, fluids,
engine additives, appearance products, and accessories, such as floor mats and
seat covers, automotive tools and professional service equipment.
OPERATING STRATEGY
Accumulation of Marketshare. Because the Company pursues both the
Professional Installer and the DIY portions of the automotive aftermarket
through its store network, the Company believes that it is able to reach most
consumers of automotive products within its market areas. The demand generated
by this customer base permits the Company to offer a broad selection of SKUs and
restock and fill special orders from its principal supplier, APS, and from the
Company's own warehouse facilities, on an overnight or in some
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cases, a same-day basis. The Company maintains a warehouse for products it
purchases directly from the manufacturers; however, because of its distribution
arrangement with APS, the Company does not need to maintain a warehouse for
those products supplied by APS. This allows the Company to utilize its working
capital and management resources for store operations, but still provide its
customers with up to 160,000 SKUs. See "Purchasing" and "Inventory Management."
Quality Workforce. The Company believes that its service to both the
Professional Installer and DIY portions of the automotive market results in
additional benefits not generally enjoyed by competitors serving only one
portion of the market. Because the Company deals with the more
technically-oriented Professional Installer, the Company's sales personnel are
required to be more technically proficient, particularly with regard to Hard
Parts. The Company has found that such technical proficiency is also valued by
its DIY consumers, thereby enhancing the Company's ability to fulfill its
customer service strategy. The Company's philosophy is to be a wholesale
customer's one call and a DIY customer's one stop for all their automotive
needs.
Equity Financing. To enhance its potential for better financial
performance, the Company must reduce its debt obligations and improve
operations. Approximately $6.1 million of this Offering's net proceeds will be
used to reduce debt. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Further, the Company intends to retain a
Chief Financial Officer and is focusing on implementing improved receivables,
inventory and cash management systems.
The Company also plans to use some of its working capital to refurbish some
of its stores for improved merchandise presentation, and to consolidate four of
its stores that have overlapping markets into two stores. Although the Company
expects to retain market share and reduce overhead costs as a result of the
consolidation, there can be no assurance that market fluctuations, increased
competition, or other factors will not adversely impact these or other stores.
Inventory Management and Distribution System. The Company has formed an
alliance with APS, a national distributor of automotive replacement parts, which
allows the Company's stores to have next day access to over 160,000 SKUs.
Simultaneously with the APS alliance, the Company also maintains its own 20,000
square foot warehouse from which it provides same-day delivery, of inventory
purchased directly from manufacturers, to its stores. In the past, the Company
maintained a mix of high volume and lower volume items. The costs associated
with carrying the slower moving inventory affected the Company's profitability
in 1995 and 1996. The Company plans to improve its operating strategy by
warehousing primarily high volume items and to take better advantage of APS's
ability to carry slower moving inventory.
Customer Service. The Company believes it is not only in the business of
selling auto parts, but, as important, is in the service business. Heavy
emphasis is placed on having professional personnel provide responsive customer
service. Employees receive extensive on-the-job training.
The Company's number one priority is customer satisfaction. The Company
seeks to attract new Professional Installer and DIY customers and to retain
existing customers by conducting a variety of advertising and promotional
programs and by offering: (i) superior in-store service through highly
motivated, technically-proficient sales people; (ii) an extensive selection of
SKUs stocked in each store; (iii) next day delivery of over 160,000 SKUs, and
same day delivery for inventory maintained at the Company's warehouse; (iv)
attractive stores in convenient locations; (v) competitive pricing and (vi) a
national warranty program.
Each of the Company's sales personnel is required to be technically
proficient in the workings and application of Automotive Products. This degree
of technical proficiency is essential because of the significant portion of the
Company's business represented by the Professional Installer. The Company has
found that the typical DIY customer often seeks assistance from sales people,
particularly in connection with the purchase of Hard Parts. The Company believes
that the ability of its sales personnel to provide such assistance is valued by
the DIY customers, and therefore is likely to result in repeat DIY business.
GROWTH STRATEGY
Horizontal Integration. In addition to improving the efficiency of its
internal operations, the Company's growth strategy is to expand its operations
in other urban areas of Florida and the Southeast by purchasing
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automotive parts stores as they become available on terms acceptable to the
Company, as well as opening new stores. The Company's growth to date has been
accomplished primarily by opening new stores instead of acquiring existing
businesses. However, the Company believes that because of the recent trend in
consolidation occurring in the auto parts industry, its future growth will occur
as a result of acquisitions of both single and multiple store operations.
Depending on the competitive characteristics of the industry, the Company plans
to pursue all future acquisition opportunities in addition to, or in place of,
new store openings. Key factors considered by the Company in the opening of new
stores or the acquisition of existing automotive parts stores include population
density and growth-patterns, age and per capita income, vehicle traffic counts,
the number and type of existing automotive repair facilities, other auto parts
stores and other competitors within a predetermined radius, and the operational
strength of such competitors. Although the cost to acquire the business of an
independently owned parts store varies, depending primarily on the amount of
inventory and the size of real estate, if any, being acquired, the Company
estimates that the average cost to acquire such a business and convert it to a
Company store ranges from approximately $225,000 to $350,000, excluding real
estate. Of this amount, approximately $175,000 to $300,000 is allocable to
inventory and the remainder to fixed assets. The Company estimates that an
additional $50,000 would be needed to fund the stores' operations for the
initial four month period of operations. In the event acquisitions in a targeted
area are not possible, or impractical, the Company may attempt to lease a store
site and refurbish it as a Company store. The costs associated with opening a
new leased location are slightly greater than acquiring a business and
converting it to a Company store. The Company plans to focus on expanding into
areas having population pockets of 75,000 to 100,000 in an overall statistical
market area of approximately 1,000,000 population. Although the Company has
identified possible acquisition candidates, the Company has not entered into any
definitive agreements with them. The Company anticipates that it will consummate
acquisitions through the use of cash and/or stock. To facilitate its growth, the
Company anticipates that it will be able to negotiate a line of credit once the
APS and AFCO obligations are repaid. There is no assurance that the Company will
be able to successfully identify acquisition candidates or to successfully
finance or complete such transactions. See "Risk Factors -- Growth through
Acquisitions."
Increasing Existing Store Sales. Same store growth through increased sales
and profitability is also an important part of the Company's growth strategy. To
achieve improved sales and profitability at Company stores, the Company
continually strives to improve upon the service provided to its customers. The
Company believes that while pricing is essential in the highly competitive
environment of the automotive aftermarket business, ultimately it is customer
satisfaction (whether of the Professional Installer or the DIY customer),
resulting from superior customer service, that generates increased sales and
profitability.
Quality Assurance Reviews. In order to help assure continuous store
improvement and overall high level of customer service, the Company conducts
"Quality Assurance Reviews" of each of its stores semi-annually. Each review
encompasses a comprehensive agenda of store characteristics and performance
criteria. The review teams are comprised of store managers from high performing
locations, as well as senior management from the Company's corporate office. A
written evaluation is prepared for each store reviewed. The review team meets
with the location manager to discuss the evaluation and to provide direction in
seeking improvements in store performance. Management believes these reviews
help to improve overall store performance.
PURCHASING
In October, 1995, the Company entered into a product purchase agreement
with APS, a national distributor of a broad array of "Big A" brand and
manufacturers branded automotive replacement parts, as well as tools, equipment,
supplies and accessories. Under the terms of this agreement, the Company agreed
to purchase, for a period of five years, merchandise from APS over any given
four month consecutive billing period at a minimum average of 75% of the
Company's cost of goods, less certain exceptions. Purchases under this agreement
aggregated approximately $4.5 million during both years ended December 31, 1995
and 1996. Due to the fact that the Company has not been current on certain debt
obligations owed APS, it has not been able to take advantage of discounted
payment terms offered by APS. See "Risk Factors -- Recent Losses;
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Going Concern." However, the Company expects to bring its open account with APS
current before the close of this Offering and as a result will be able to take
advantage of APS's discount payment terms.
APS operates approximately 35 warehouses throughout the United States with
the nearest warehouse to the Company's stores being located in Ocala, Florida.
APS has been able to provide the Company with next day delivery of needed parts.
The Company participates in several APS "Big A" programs, among which are
the following:
- A national warranty program ("NWP"). The Company is able to offer its
customers a NWP, good at approximately 2,000 Big A parts sources across
the country. This program is fully funded by APS.
- A national advertising program. The Company believes that national
advertising is helpful in markets such as Orlando's four county market
area. The national advertising program, plus the NWP, gives the Company
stores added recognition and a competitive edge.
- A national account program. This program makes the Company a
pre-approved vendor to most national service centers such as Firestone,
Sears, Montgomery Ward, etc.
In addition to the above programs, APS provides the Company with: (i) brand
name products; (ii) pricing economies through increased purchasing power and
(iii) various services, including assistance in marketing, cataloging and
inventory control.
APS is a publicly held corporation whose shares of common stock are traded
on the NASDAQ National Market System. According to reports filed by APS with the
Securities and Exchange Commission, APS, formed in 1989, believes that it is the
second largest warehouse distributor of automotive replacement parts in the
United States. It supplies parts to more than 1,900 "Big A" parts stores owned
by independent jobbers and over 500 APS-owned auto parts stores. For the year
ended January 27, 1997, APS had net sales of approximately $858 million and a
net loss of approximately $10.8 million because of a first year write off in
connection with a major acquisition. Its total stockholders' equity at January
27, 1997 was approximately $114.6 million.
A disruption of the Company's vendor relationship with APS, or a material
change in any of the terms of purchase, advertising, incentive or other programs
offered by APS, would likely have a material adverse affect on the Company's
business. However, the Company believes that if its relationship with APS were
to end, it would be able to replace APS with another distributor of similar
parts which offers similar programs.
In addition to purchasing products from APS, the Company purchases in bulk
certain items directly from manufacturers, which it stores in its 20,000 square
foot warehouse. Purchasing such items direct in bulk enables the Company to
price such parts competitively and increase its gross margin.
INVENTORY MANAGEMENT
Through its alliance with APS, a national distributor of a broad range of
"Big A" brand manufacturers branded replacement parts, the Company is provided
next day access to over 160,000 different SKU's. The alliance with APS provides
the Company with flexibility and competitiveness in the aftermarket segments of
the industry. The Company constantly seeks to improve its merchandising concepts
by expanding product selection and emphasizing the sale of the high-margin Hard
Parts. As a result of its alliance with APS, the Company does not inherit all of
the extraordinary costs associated with carrying such a large inventory, such as
(i) development and maintenance of large warehouse facilities (larger than the
Company's current warehouse which houses certain items; (ii) planning,
procurement, and management of inventories and (iii) providing distribution
methods of inventory between different locations. APS provides the Company with
the ability to return slow moving APS inventory, thereby virtually eliminating
loss from obsolescence. The Company also utilizes its own 20,000 square foot
warehouse to inventory certain parts it orders direct from manufacturers to take
advantage of purchase price discounts offered on purchases from certain of its
vendors. The Company plans to improve its operating strategy by warehousing
primarily high volume items and to take better advantage of APS's ability to
carry slower moving inventory.
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MARKETING
Since a majority of the Company's revenues are derived from the sale of
Automotive Products to the Professional Installer, the Company devotes
substantial time and energy to the development of its Professional Installer
business. There are four full-time sales people operating from the Company's
stores dedicated solely to calling upon and selling to the Professional
Installer. Moreover, each store manager participates in these activities by
calling on existing and potential new Professional Installers on a regular and
periodic basis. The Company has approximately 100 vehicles to provide prompt
delivery service to the Professional Installer. Approximately 70 inside
technically trained sales personnel market products to retail and wholesale
customers.
The Company anticipates promoting sales to DIY consumers through an
advertising program which includes direct mail, newspaper and limited radio and
television advertising in selected markets. Newspaper advertisements are
generally directed toward specific product and price promotions, frequently in
connection with specific sales events and promotions. The Company also sponsors
several automotive related events in its market area each year in an effort to
reach wholesale and retail customers. Such events include sponsoring a trade
show and conducting training clinics several times a year for the Professional
Installers which focus on electrical, emission control, chassis and suspension,
and air conditioning. The Company believes that its advertising and promotional
activities have resulted in significant name recognition in its market area.
The Company believes that a competitive pricing policy is essential in
order to compete successfully. Product pricing is generally established to meet
the pricing policies of competitors in the market area selected by each store.
Most automotive products sold by the Company are priced at discounts from the
manufacturer's suggested list prices and additional savings are offered through
volume discounts and special promotional pricing.
COMPETITION
The automotive parts aftermarket is highly competitive. Automotive
products, similar or identical to those sold at the Company's stores, are
generally available from a variety of different competitors in the communities
served by the Company's stores. The principle arenas of competition are customer
service, merchandise selection and availability, location, and price. The
Company competes either directly or indirectly with each of these areas for the
business of both Professional Installers and DIY customers.
The Company's major competitors in the Professional Installer portion of
its business include independent warehouse distributors and independently owned
parts stores, automobile dealers and national warehouse distributors and
associations, such as National Automotive Parts Association (NAPA), Carquest,
All Pro, Ace Auto Parts, and Steego. The more traditional of those stores
emphasize Hard Parts which cater to the Professional Installers, but also carry
accessories and other items as demanded by the DIY segment. Those stores
typically use outside sales representatives to call on Professional Installers,
maintain operating hours similar to wholesale stores and generally spend less on
advertising than retail stores.
Competitors in the DIY portion of the Company's business within its current
market area include automotive parts chains such as AutoZone, Western Auto,
Discount Auto Parts and Pep Boys, independently owned parts stores, automobile
dealerships and mass or general merchandisers, discount and convenience chains
that carry automotive products. Such retail stores emphasize accessories and
carry few Hard Parts in inventory. They compete for the DIY customers through
heavy advertising, strong in-store customer service, and extended operating
hours. Some of the larger DIY competitors have entered into the Professional
Installer portion of the business and this could have a material adverse effect
on the Company's operations.
Since the Company's primary target market is the Professional Installer,
the Company is faced with a significant amount of direct competition from
wholesale stores. The customer base for wholesale stores is the Professional
Installer. The wholesale store limits inventory to Hard Parts, offers free
delivery service, and uses knowledgeable outside sales representatives to call
on the Professional Installers. Companies competing in this segment include
National Automotive Parts Association -- "NAPA" and APS -- "Big A."
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Although the Company believes that it competes effectively in its market
area, some of its competitors, or their parent organizations, are larger in
terms of sales volume and have access to greater capital and management
resources.
PROPERTIES
The Company operates, in the Orlando, Florida metropolitan area, 15 auto
parts stores, one speed shop (which retails high-performance items to car
enthusiasts), one machine shop, and a manufacturing unit. All of these
facilities are owned by the Company except for two stores, which are leased. The
Company's headquarters and administrative offices, which include the Company's
warehouse, machine shop, and manufacturing unit, consist of six buildings
totaling 48,000 square feet and are located on 2.5 acres in Orlando.
The Company also owns a 32,000 square foot warehouse in Virginia. The
Company leases the property to a manufacturing company and receives rental
income from that property of approximately $40,000 per year. The Company also
owns 12 other commercial and residential properties in the Orlando area and one
residential property in Virginia from which it receives aggregate rental income
of approximately $130,000 per year. These properties are commercial and
residential properties.
Eight of the Company's real properties are encumbered by approximately
$1,129,418 in outstanding notes, maturing between December 1, 1997 and March 3,
2010, with varying interest rates ranging from 7.00% to 12.95% per annum. The
aggregate monthly installments are $19,461, including interest. The Company is
current in its payments of those obligations. The Company intends to renegotiate
the interest rates on $500,000 of these loans and to the extent the Company is
not successful, the Company will repay those obligations.
All of the Company's properties are encumbered by a mortgage and a security
agreement in favor of APS and AFCO securing two loans with an aggregate current
balance of $5.5 million at May 1, 1997. Interest accrues at interest rates
varying from 10% to prime plus 2% (10.25% at December 31, 1996), and the
outstanding principal balance and accrued interest is due and payable on or
before July 31, 1997. The Company will be retiring this debt from the proceeds
of this Offering. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
EMPLOYEES
As of May 1, 1997, the Company had 172 full-time employees, 69 of whom are
employed at the Company's stores, 86 of whom are engaged as delivery personnel,
13 of whom are engaged as corporate and administrative personnel and 4 of whom
work at the warehouse facility. The Company's employees are not subject to a
collective bargaining agreement. The Company considers its relations with its
employees to be excellent.
SERVICE MARKS AND TRADEMARKS
The Company owns no registered marks or trademarks. The Company believes
that its business is not materially dependent on any patent, trademark, service
mark or copyright.
LEGAL
The Company is engaged in certain lawsuits as a plaintiff and defendant,
arising from the ordinary course of business. In the opinion of Management, the
ultimate outcome of these lawsuits should not have a material impact on the
Company's business, reputation or financial position.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
Robert H. Gentry, III.................. 54 President, Chief Executive Officer and
Director
Stanley G. Miller...................... 64 Director (nominee)
Lawrence S. Goldfarb................... 70 Director (nominee)
William H. Burns, Jr................... 50 Director (nominee)
David O. O'Neal........................ 55 Vice President
Herchel L. Rideout..................... 51 Vice President
ROBERT H. GENTRY, III, has served as President, Chief Executive Officer,
and a Director of the Company since 1980. From 1978 to 1980, Mr. Gentry was the
Company's Chief Operating Officer and was responsible for managing the Company's
stores and inventory. Mr. Gentry attended the University of Kentucky where he
studied Accounting and Business Administration.
STANLEY G. MILLER, is a director nominee. Although Mr. Miller has been
retired since March, 1992 he previously served as Senior Vice President for
Exide Corporation, one of the largest manufacturers of automobile batteries.
LAWRENCE S. GOLDFARB, is a director nominee. Since 1980, Mr. Goldfarb has
served as the President of S & G Automotive Warehouse, Inc., a seller of
automotive replacement parts in central Florida.
WILLIAM H. BURNS, JR., is a director nominee. From 1995 to 1996, Mr. Burns
was the Executive Vice President and Chief Operating Officer of Virtuem
Entertainment, Inc., a Chicago-based start-up corporation in the business of
entertainment, retail sales and interactive technology. From 1993 to 1995, Mr.
Burns held the position of President of Entertainment Center Division of the
Blockbuster Entertainment Group, a new operating division focused on identifying
acquisition candidates for Blockbuster in the entertainment field. From 1969
through 1993, Mr. Burns held various development and operations positions with
the Walt Disney World Company both in Orlando, Florida and Burbank, California.
Mr. Burns earned a Master in Business Administration from Rollins College and a
Bachelor of Science in Journalism from University of Florida.
DAVID O. O'NEAL has served as Vice President of Management Information
Systems since joining the Company in 1993. Prior thereto, from 1990 to 1993, Mr.
O'Neal was a Senior Programming Analyst at Autopower Corp., a software
development firm in Orlando. Mr. O'Neal earned a Masters of Business
Administration from the University of Central Michigan and a Bachelors of
Computer Science from the University of Southern Illinois.
HERCHEL L. RIDEOUT, JR. was appointed Vice President of Purchasing and
Inventory in 1996. From 1980 to 1996, Mr. Rideout worked for Automotive One in a
variety of positions of increasing responsibility in the areas of business
operations and employee management, including Store Operations
Manager -- Central Florida Region, Director of Risk Management, and Human
Resources Manager. Mr. Rideout is the brother-in-law of Mr. Gentry.
The Board and Shareholders of the Company intend to authorize the expansion
of the Board to 5 members and intend to enlist Messrs. Miller, Goldfarb, Burns,
and one other individual yet to be identified to serve on the Board with Mr.
Gentry commencing on or before the Effective Date.
EXECUTIVE COMPENSATION
The following table sets forth cash compensation paid by the Company to, as
well as any other compensation paid to or earned by, the President and Chief
Executive Officer of the Company and those executive officers compensated at or
greater than $100,000 for services rendered the Company in all capacities
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during the fiscal years ended December 31, 1995 and 1996. For information
regarding current compensation paid to the Company's executive officers, see
"Employment Agreements."
SUMMARY COMPENSATION TABLE
ANNUAL
COMPENSATION
YEAR OTHER ANNUAL
NAME AND POSITION ENDED SALARY BONUS COMPENSATION(1)
- ----------------- ------------ ------- ------- ---------------
Robert H. Gentry, III 12/31/96 $60,000 $30,000
President, CEO 12/31/95 60,000 30,000
- ---------------
(1) Reflects payments made by the Company for life insurance policies and
vehicle leases or payments.
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive compensation for
serving as directors. The Company anticipates compensating its independent
directors for their services in the form of fees and/or stock options, yet to be
determined. All directors will be reimbursed for their reasonable out-of-pocket
expenses incurred in connection with attending meetings of the Board of
Directors and for other expenses incurred in their capacity as directors of the
Company.
EMPLOYMENT AGREEMENTS
The Company entered into a five-year employment agreement with Robert H.
Gentry, III, the Company's President and CEO. Upon expiration of its initial
five-year term, the agreement is renewable for successive two-year periods.
Under the agreement, Mr. Gentry's annual salary is $80,000 for 1997, increasing
to $100,000 January 1, 1998 through December 31, 1999, and $120,000 January 1,
2000 through December 31, 2002. The employment agreement provides that the
Company's Board of Directors shall use its best efforts to establish by April 1,
1998 a bonus program and a discretionary stock option plan for executive
officers of the Company which will be tied to the Company's performance. The
agreement provides that in the event Mr. Gentry's employment is terminated
"without cause", he shall receive compensation and benefits equal to those he
was receiving immediately prior to said termination for the greater of the
remainder of the employment term or twelve months. In the event Mr. Gentry's
employment is terminated for any other reason, including for "cause", he will
receive severance payments in an amount equal to the compensation that Mr.
Gentry was receiving immediately prior to such termination for a period of
twelve months. Under the employment agreement, Mr. Gentry will also be entitled
to five weeks paid vacation, an automobile allowance of $800 per month, plus
reimbursements for expenses incurred in connection with Company business.
CONSULTING AGREEMENTS
In August, 1996, the Company retained a consulting company to assist the
Company in its planned initial public offering. The consultant was issued a
warrant to purchase 42,000 shares of Common Stock, exercisable at $.25 per share
commencing on the Closing Date of the initial public offering until August 27,
2002. In the event the Company sells a substantial portion of its assets by sale
or merger, the consulting company is to be paid $5000 and an additional 2% of
the sales prices which exceeds book value. The Company granted the consultant
"piggy back" registration rights in connection with a secondary offering.
The Company has agreed to issue to Argent Securities, Inc., for consulting
services, a Common Stock purchase warrant for 100,000 shares. The warrant will
be exercisable at $6.00 per share for a period of five years commencing on the
Effective Date.
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STOCK OPTION PLAN
In May 1997, the Company established a 1997 Employee Stock Option Plan (the
"Plan") under which 500,000 shares of Common Stock are reserved for issuance
upon exercise of stock options. The Plan is designed to serve as an incentive
for retaining qualified and competent employees. The Company's Board of
Directors, or a committee thereof (the "Committee"), will administer and
interpret the Plan and will be authorized to grant options thereunder to all
eligible employees of the Company, including officers and directors (whether or
not employees) of the Company and consultants.
The Plan provides for the granting of both incentive stock options and
non-qualified stock options. Options will be granted under the Plan on such
terms and at such prices as determined by the Committee, except that the per
share exercise price of incentive stock options cannot be less than the fair
market value of the Common Stock on the date of grant and the per share exercise
price of non-qualified stock options may not be less than par value. Each option
will be exercisable after the period or periods specified in the option
agreement, but no option can be exercised until six months after the date of
grant or after the expiration of 10 years from the date of grant. Options
granted under the Plan will not be transferable other than by will or by the
laws of descent and distribution.
The Plan contains anti-dilution provisions authorizing appropriate
adjustments in certain circumstances. Shares of Common Stock subject to options
which expire without being exercised or which are canceled as a result of
cessation of employment are available for further grants.
The Company has not granted options under the Plan.
The Company may grant independent directors of the Company non-qualified
stock options outside of the Plan.
INDEMNIFICATION, DIRECTORS AND OFFICERS
The Company's Amended and Restated Articles of Incorporation and Amended
and Restated Bylaws provide that the Company shall indemnify all directors and
officers of the Company to the full extent permitted by the Florida Business
Corporation Act. Under such provisions, any director or officer, who in his
capacity as such, is made or threatened to be made, a party to any suit or
proceeding, may be indemnified if the Board of Directors determines such
director or officer acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interest of the Company. The
Amended and Restated Articles of Incorporation, Amended and Restated Bylaws and
the Florida Business Corporation Act further provide that such indemnification
is not exclusive of any other rights to which such individual may be entitled
under the Amended and Restated Articles of Incorporation, the Amended and
Restated Bylaws, any agreement, vote of shareholders or disinterested directors
or otherwise.
It is anticipated that the Company's Board of Directors and executive
officers will enter into indemnification agreements with the Company. The
agreements follow the indemnification and expense advancement provisions of
Florida's Business Corporation Act. In addition, the indemnitee under the
agreements is entitled to indemnification against all expenses actually and
reasonably incurred by him or on his behalf in connection with serving as a
witness in any proceeding (as defined in the agreement) by virtue of his or her
status with the Company. The agreements also provide a procedural mechanism
under which the indemnitee can claim and obtain indemnification, including a
procedure for the Board or independent counsel to determine entitlement to
indemnification under specific situations. In the event the indemnitee does not
receive the indemnification to which he would otherwise be entitled under the
terms of the agreement, the indemnitee is entitled to seek a judicial
determination. In the event the indemnitee seeks a judicial adjudication to
enforce his or her rights under, or to recover damages for breach of, the
agreement, the indemnitee is entitled to recover from the Company his or her
reasonable legal fees and other expenses in connection with the legal
proceeding, subject to proration in the event the amount of the aware is less
than the amount of indemnification sought.
The Company and the Underwriters have agreed to indemnify each other
(including officers and directors) against certain liabilities arising under the
Securities Act. See "Underwriting."
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Insofar as indemnification for liabilities arising under the Securities Act
may be permitted for directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
BENEFICIAL OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information concerning stock
ownership of all persons known by the Company to own beneficially five percent
or more of the outstanding shares of Common Stock, each director and all
officers and directors as a group as of the date of this Prospectus, and as
adjusted to reflect the sale of the 1,640,000 shares of Common Stock included in
the Securities offered hereby.
PERCENTAGE OF
OUTSTANDING STOCK
(1)
-------------------
NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE OF BEFORE AFTER
OWNER OR IDENTITY OF GROUP(3) BENEFICIAL OWNERSHIP(1)(2) OFFERING OFFERING
------------------------------ -------------------------- -------- --------
Robert H. Gentry, III(3)............................... 1,652,000 70% 41.3%
Marguerite Siefert(3).................................. 354,000 15 8.9
Jennifer Rideout(3).................................... 354,000 15 8.9
Stanley G. Miller(4)................................... -0- -- --
William H. Burns, Jr.(4)............................... -0- -- --
Lawrence S. Goldfarb(4)................................ -0- -- --
All Directors and Officers as a group (8 persons)(5)... 2,360,000 100% 59%
- ---------------
(1) As used herein, the term beneficial ownership with respect to a security is
defined by Rule 13d-3 under the Securities Exchange Act of 1934 as
consisting of sole or shared voting power (including the power to dispose or
direct the disposition of) with respect to the security through any
contract, arrangement, understanding, relationship or otherwise, including a
right to acquire such power(s) during the next 60 days. Unless otherwise
noted, beneficial ownership consists of sole ownership, voting and
investment rights.
(2) Gives effect to the 23,600-for-one stock split to be effected prior to
consummation of this Offering.
(3) Unless otherwise noted, addresses are c/o Automotive One Parts Stores, Inc.,
701 West Church Street, Orlando, Florida 32802.
(4) Messrs. Miller, Burns and Goldfarb are director candidates.
(5) Includes the director candidates.
CERTAIN TRANSACTIONS
In April 1996, Mr. Gentry borrowed $500,000 from Barnett Bank, N. A., which
is secured by Mr. Gentry's residence. In turn, Mr. Gentry loaned those funds to
the Company for operations, evidenced by a promissory note made by the Company
in favor of Mr. Gentry that duplicates the terms of the Barnett Bank loan. The
Barnett Bank note has a term of thirty years and bears interest at 7 1/2% per
annum. The monthly payments are $3,410.88. The Company will repay the Barnett
Bank loan from the net proceeds of this Offering and will reimburse Mr. Gentry
out-of-pocket costs and interest payments he made in connection with the Barnett
Bank loan whereupon Mr. Gentry's note will be canceled.
S & G Automotive Warehouse, Inc., a supplier of merchandise to the Company,
is owned by Lawrence Goldfarb, a nominated director of the Company. During 1995
and 1996, the Company paid to S & G Automotive Warehouse, Inc. $223,038 and
$254,738, respectively, for merchandise.
During 1996, Lawrence Goldfarb, a nominated director, loaned the Company an
aggregate of $95,000 at an interest rate of 10% per annum. The outstanding
principal balance of those loans were consolidated into one note and currently
totals $95,000. The note accrues interest at 10% per annum and is payable upon
the earlier of the closing of this Offering or August 1, 1997. The Company
anticipates repaying that obligation from the proceeds of this Offering.
During 1995 and 1996, the Company made advances to and borrowed money from
officers, shareholders and family members from time to time. The Company owed
$67,000 to these individuals at December 31, 1996. In addition, these
individuals owed the Company $70,384 at December 31, 1996.
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DESCRIPTION OF SECURITIES
The following summary description relating to the capital stock and
Warrants does not purport to be complete and is qualified in its entirety by
reference to the Amended and Restated Articles and ByLaws of the Company, and
the Warrant Agreement, which are filed as exhibits to the Registration Statement
of which this Prospectus forms a part.
GENERAL
As of the date of this Prospectus, the outstanding capital stock of the
Company consisted of 100 shares of Common Stock held by three shareholders of
record. Immediately prior to the consummation of this Offering the Company will
complete a recapitalization (the "Recapitalization") pursuant to which all
outstanding shares of Common Stock will be split 23,600-for-one and exchanged
simultaneously on a one-for-one basis for shares of the Company's newly
authorized Common Stock.
The Company's Board of Directors and shareholders have approved the Amended
and Restated Articles of Incorporation and the Amended and Restated Bylaws
("Bylaws") to become effective on the Effective Date of this Offering, and the
following discussions describe the provisions of the Company's capital stock,
Amended Articles and Bylaws that will be in effect after this offering. The
following summary description relating to the capital stock does not purport to
be complete and is qualified in its entirety by reference to the Amended
Articles and Bylaws of the Company which are filed as exhibits to the
Registration Statement of which this Prospectus forms a part. Upon consummation
of the Offering, the authorized capital stock of the Company will consist of
20,000,000 shares of common stock, $.01 par value ("Common Stock"), and
5,000,000 shares of "blank check" preferred stock, $.01 par value ("Preferred
Stock"). Upon the closing of this Offering, there will be 4,000,000 shares of
Common Stock outstanding and no shares of Preferred Stock outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share. The holders
of Common Stock are entitled to receive ratably such dividends, if any, as may
be declared by the Board of Directors out of legally available funds. Shares of
Common Stock are not redeemable and have not preemptive, conversion or similar
rights. The outstanding shares of Common Stock issuable hereby will be, when and
if issued, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority without further action by the
stockholders to issue up to 5,000,000 shares of Preferred Stock in one or more
series. The Board of Directors is authorized to establish from time to time the
number of shares to be included in and the designation of, any such series, to
determine or alter the rights, preferences, privileges and restrictions, there
of without further action by the shareholders. The Board of Directors of the
Company has not designated any new series of Preferred Stock. Satisfaction of
any divided preferences of outstanding Preferred Stock, if any, would reduce the
amount of funds available for the payment of dividends on Common Stock. Also,
the holders of Preferred Stock, if any, would normally be entitled to receive a
preference payment in the event of any liquidation or other dissolution or
winding up of the Company before any payment is made to the holders of Common
Stock. In addition, any outstanding shares of Preferred Stock having conversion
rights would potentially increase the number of shares of Common Stock
outstanding.
WARRANTS
Redeemable Common Stock Purchase Warrants. Each Warrant offered hereby
entitles the holder thereof to purchase one share of Common Stock at a price of
$9.00 per share (assuming an initial offering price of $6.00 per share) (the
"Exercise Price"), subject to adjustment for a period of four years commencing
on the first anniversary of the effective date of this offering (the "Effective
Date"). Each Warrant is redeemable, in whole or in part, by the Company at a
price of $.125 per Warrant, commencing one year after
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the Effective Date and prior to their expiration, provided that the average
closing bid price (as defined) of the Company's Common Stock for the twenty
consecutive trading days ending on the third day prior to the date on which the
notice of redemption is given, shall have exceeded $10.50 per share. Pursuant to
applicable federal and state securities laws, in the event a current prospectus
is not available, the Warrants may not be exercised by the holders thereof and
the Company will be precluded from redeeming the Warrants. There can be no
assurance that the Company will not be prevented by financial or other
considerations from maintaining a current prospectus. Any Warrant holder that
does not exercise prior to the redemption date, as set forth in the Company's
notice of redemption, will forfeit the right to purchase the Common Stock
underlying the Warrants, and after the redemption date or upon conclusion of the
exercise period any outstanding Warrants will become void and be of no further
force or effect, unless extended by the Board of Directors of the Company. See
"Underwriting" for the terms of the Warrants issuable pursuant to the
Underwriters' Warrants.
The number of shares of Common Stock that may be purchased is subject to
adjustment upon the occurrence of certain events including a dividend
distribution to the Company's shareholders or a subdivision, combination or
reclassification of the outstanding Common Stock. Further, the Warrant exercise
price is subject to adjustment in the event the Company issues additional stock
or rights to acquire stock at a price per share that is less than the current
market price per share of Common Stock on the record date established for the
issuance of additional stock or rights to acquire stock. The term "current
market price" is defined as the average of the daily closing prices for the
twenty consecutive trading days ending three days prior to the record date.
However, the Warrant exercise price will not be adjusted in the case of the
issuance or exercise of options pursuant to the Company's stock option plans,
the issuance of the Underwriters' Warrants or any other options or warrants
outstanding as of the date of this Offering. The Warrant exercise price is also
subject to adjustment in the event of a consolidation or merger where a
distribution by the Company is made to its shareholders of the Company's assets
or evidences of indebtedness (other than cash or stock dividends) or pursuant to
certain subscription rights or other rights to acquire Common Stock. The
Warrants are also subject to price adjustment upon the occurrence of certain
events including subdivisions or combinations of the Common Stock.
The Company may at any time, and from time to time, extend the exercise
period of the Warrants, provided that written notice of such extension is given
to the Warrant holders prior to the expiration date then in effect. Also, the
Company may reduce the exercise price of the Warrants for limited periods or
through the end of the exercise period if deemed appropriate by the Board of
Directors of the Company, in addition to the adjustments to the exercise price
arising from certain events as discussed above. Any extension of the terms
and/or reduction of the exercise price of the Warrants will be subject to
compliance with Rule 13e-4 under the Exchange Act including the filing of a
Schedule 13E-4. Notice of any extension of the exercise period and/or reduction
of the exercise price will be given to the Warrant holders. The Company does not
presently contemplate any extension of the exercise period nor does it
contemplate any reduction in the exercise price of the Warrants.
The Warrants are to be issued pursuant to the terms and conditions of a
Warrant Agreement between the Company and American Stock Transfer & Trust
Company.
Non-Public Warrants. The Company issued to a consulting company a warrant
for the purchase of 42,000 shares of Common Stock, exercisable at $.25 per share
commencing on the Effective Date until August 27, 2002. The Company granted
certain piggy-back registration rights in connection with any secondary
offering, subject to the consent of the underwriter of the offering, if any.
The Company has agreed to issue to Argent Securities, Inc., for certain
consulting services, a warrant for 100,000 shares of the Company's Common Stock,
exercisable at $6.00 per share for a period of four years commencing one year
from the Effective Date. The Company also granted certain piggy-back
registration rights in connection with a secondary offering, subject to the
consent of the underwriter for such offering, if any.
REGISTRATION RIGHTS
For a description of the registration rights contained in the Underwriters'
Warrants, see "Underwriting".
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ANTI-TAKEOVER EFFECTS OF FLORIDA LAW, CHARTER PROVISIONS, UNISSUED STOCK
Florida has enacted legislation that may deter or frustrate takeovers of
Florida corporations. Certain provisions of Florida law, the Company's Amended
Articles and Bylaws, may deter or frustrate a takeover attempt of the Company
that a shareholder might consider in its best interest, including attempts that
might result in a premium over the market price for the shares held by
shareholders. The Company is subject to several anti-takeover provisions under
Florida law that apply to a public corporation organized under Florida law,
unless the corporation has elected to opt out of such provisions in its articles
or bylaws. The Company is subject to the "affiliated transactions" and
"control-share acquisition" provisions of the Florida Business Corporation Act
(the "FBCA"). These provisions require, subject to certain exceptions, that an
"affiliate transaction" be approved by the holders of two-thirds of the voting
shares other than those beneficially owned by an "interested shareholder" or by
a majority of disinterested directors. Additionally, voting rights are conferred
on "control shares" acquired in specified control share acquisitions generally
only to the extent conferred by resolution approval by the shareholders,
excluding holders of shares defined as "interested shares."
In addition, certain provisions of the Company's Amended Articles or Bylaws
provide that (i) commencing with the consummation of this offering, any action
required or permitted to be taken by the shareholders of the Company may be
effected only at an annual or special meeting of shareholders, and not be
written consent of the shareholders, (ii) any meeting of shareholders may be
called only by the Chairman of the Board, or upon the affirmative vote of at
least a majority of the members of the Board of Directors or upon the written
demand of the holders of not less than 50% of the votes entitled to be cast at a
special meeting, and (iii) an advance notice procedure must be followed for the
nomination of directors and for other shareholder proposals to be considered at
annual meetings of shareholders. In general, notice of intent to nominate a
director or to raise business at such meetings must be received by the Company
not less than 60 nor more than 90 days before the meeting, and must contain
certain information concerning the person to be nominated or the matters to be
brought before the meeting and concerning the shareholder submitting the
proposal. The affirmative vote of at least a majority of the directors or the
holders of at least 66 2/3% of the voting power of the Company's voting stock is
required to alter, amend or repeal, or adopt any provision inconsistent with,
the provisions described in this paragraph.
The directors of the Company are subject to the "general standards for
directors" provisions set forth in the FBCA. These provisions provide that in
discharging his or her duties and determining what is in the best interests of
the Company, a director may consider such factors as the director deems
relevant, including the long-term prospects and interests of the Company and its
shareholders and the social, economic, legal or other effects of any proposed
action on the employees, suppliers or customers of the Company, the community in
which the Company operates and the economy in general. Consequently, in
connection with any proposed action, the Board of Directors is empowered to
consider interests of other constituencies in addition to the Company's
shareholders, and directors who take into account these other factors may make
decisions which are less beneficial to some, or a majority, of the shareholders
than if the law did not permit consideration of such other factors. The Board of
Directors is divided into three classes, with the directors of each class to be
elected for staggered terms of three years and to serve until their successors
are duly elected and qualified or until their earlier resignation, death or
removal from office.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The Company's Articles of Incorporation provide that shareholders
seeking to bring business before an annual meeting of shareholders, or to
nominate candidates for election as directors at an annual or special meeting of
shareholders, must provide timely notice thereof in writing. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company not less than 120 days nor more than
180 days prior to the first anniversary of the date of the Company's notice of
annual meeting for the previous year's annual meeting. However, if no annual
meeting was held in the previous year or the date of the annual meeting has been
changed to be more than 30 calendar days earlier than the date contemplated by
the previous year's notice of annual meeting, such notice by the shareholder
must be delivered or received not later than the close of business on the fifty
day following the date on which notice of the date of the annual meeting is
given to shareholders or made public, whichever first occurs. The Company's
Amended Articles
33
35
also specify certain requirements for a shareholder's notice to be in proper
written form. These provisions may preclude shareholders from bringing matters
before the shareholders at an annual or special meeting or from making
nominations for directors at an annual or special meeting.
Certain Effects of Authorized but Unissued Stock. Upon consummation of
this Offering, the Company will be authorized to issue additional Common Stock
and up to five million shares of preferred stock in one or more series, having
terms fixed by the Board of Directors without shareholder approval, including
voting, dividend or liquidation rights that could be greater than or senior to
the rights of holders of Common Stock. The existence of authorized but unissued
and unreserved shares of Common Stock and Preferred Stock may enable the Board
of Directors to issue shares of persons friendly to current management which
would render more difficult or discourage an attempt to obtain control of the
Company by means of proxy contest, tender offer, merger or otherwise, and
thereby protect the continuity of the Company's management. Issuance of shares
of Common Stock or Preferred Stock could also be used as an anti-takeover
device. The Company has no current intentions or plans to issue any such shares
of Common Stock or Preferred Stock. See "Description of Capital Stock."
LIMITED LIABILITY AND INDEMNIFICATION
Under the FBCA, a director is not personally liable for monetary damages to
the corporation or any other person for any statement, vote, decision, or
failure to act unless (i) the director breached or failed to perform his duties
as a director and (ii) a director's breach of, or failure to perform, those
duties constitutes (1) a violation of the criminal law, unless the director had
reasonable cause to believe his conduct was lawful or had no reasonable cause to
believe his conduct was unlawful, (2) a transaction from which the director
derived an improper personal benefit, either directly or indirectly, (3) a
circumstance under which an unlawful distribution is made, (4) in a derivative
proceeding, conscious disregard for the best interest of the corporation or
willful misconduct, or (5) in a non-derivative proceeding, recklessness or an
act or omission which was committed in bad faith or with malicious purpose or in
a manner exhibiting wanton and willful disregard of human rights, safety, or
property. A corporation may purchase and maintain insurance on behalf of any
director or officer against any liability asserted against him and incurred by
him in his capacity or arising out of his status as a director, whether or not
the corporation would have the power to indemnify him against such liability
under the FBCA.
The Amended Articles of the Company provide that the Company shall, to the
fullest extent permitted by applicable law, as amended from time to time,
indemnify all directors of the Company, as well as any officers or employees of
the Company to whom the Company has agreed to grant indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
TRANSFER AND WARRANT AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock and the warrant agent
for the Warrants is American Stock Transfer & Trust Company, 40 Wall Street, New
York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this Offering, the Company will have 4,000,000 shares
of Common Stock outstanding (4,246,000 shares, if the Underwriters'
over-allotment option is exercised in full), of which 1,640,000 shares offered
hereby (1,886,000 shares, if the underwriters' over-allotment option is
exercised in full) will be freely tradable without restriction or further
registration under the Securities Act. The remaining 2,360,000 shares are deemed
to be "restricted securities," as that term is defined under Rule 144, in that
such shares were issued and sold by the Company in private transactions not
involving a public offering and, as such, may only be sold pursuant to an
effective registration under the Securities Act, in compliance with the
exemption provisions of Rule 144 or pursuant to another exemption under the
Securities Act. The
34
36
shareholders holding the 2,360,000 shares of restricted Common Stock will be
eligible to sell such shares under Rule 144 as of the date of this Prospectus,
subject to certain volume and other limitations. However, those shareholders
have agreed not to sell those shares for a period of six months from the
Effective Date, without the prior consent of the Representative. Sales of such
shares in the public market, or the availability of such shares for sale, could
adversely affect the market price for the Common Stock. The Representative may,
in its sole discretion and at any time without notice, release all or any
portion of the securities subject to the lock-up agreements.
In general, under Rule 144, subject to the satisfaction of certain other
conditions, a person, including an affiliate of the Company (or person whose
shares are aggregated with an affiliate), who has owned restricted shares of
Common Stock beneficially for at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of 1% of
the then outstanding shares of Common Stock (approximately 40,000 shares based
on the number of shares expected to be outstanding after this Offering) or, if
the Common Stock is quoted on NASDAQ, the average weekly trading volume during
the four calendar weeks preceding the sale. Sales under Rule 144 are also
subject to certain requirements as to the manner and notice of sale and the
availability of public information concerning the Company. A person who has not
been an affiliate of the Company for at least three months immediately preceding
the sale and who has beneficially owned shares of Common Stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
No prediction can be made as to the effect, if any, that public sales of
shares of Common Stock or the availability of such securities for sale will have
on the market prices of such securities prevailing from time to time.
Nevertheless, the possibility that substantial amounts of Common Stock may be
sold in the public market may adversely affect prevailing market prices for
these securities and could impair the Company's ability in the future to raise
additional capital through the sale of its equity securities.
35
37
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to the Underwriters, severally and not jointly, and
the Underwriters have severally and not jointly agreed to purchase from the
Company, on a "firm commitment" basis, if any are purchased, the number of
Securities (exclusive of Securities issuable upon exercise of the underwriters'
over-allotment option) set forth opposite their respective names below:
SHARES OF
UNDERWRITERS COMMON STOCK WARRANTS
- ------------ ------------ ---------
Argent Securities, Inc. ....................................
--------- ---------
Total............................................. 1,640,000 1,640,000
========= =========
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Securities offered hereby are
subject to approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all shares
of Securities offered hereby (other than those covered by the over-allotment
option described below) if any such shares are purchased.
The Underwriters, for whom Argent Securities, Inc. is acting as
Representative (the "Representative"), propose to offer the Securities directly
to the public at the public offering price set forth on the cover page of this
Prospectus and may allow certain dealers who are National Association of
Securities Dealers, Inc. ("NASD") members to offer a part of the Securities at a
price which represents a concession not in excess of $ per share and
$ per Warrant. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share and $ per
Warrant to certain other dealers. Commencement of the initial public offering,
the offering price and other selling terms may be changed by the Representative.
Prior to this Offering, there has not been any public market for the Common
Stock or the Warrants. The initial public offering prices of the shares of
Common Stock and the Warrants and the exercise price and other terms of the
Warrants were determined by negotiations between the Company and the
Representative and do not necessarily relate to the assets, book value or
results of operations of the Company or any other established criteria of value.
The Company has granted to the Underwriters an option, exercisable for 45
days from the date of this Prospectus, to purchase up to an aggregate of 246,000
additional shares of Common Stock and/or up to 246,000 additional Warrants at
the public offering price set forth on the cover page of this Prospectus, less
the underwriting discounts and commissions. The Representative may exercise such
option solely for the purpose of covering over-allotments, if any, in connection
with the sale of the Securities offered hereby. To the extent such option is
exercised, each Underwriter will be obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares as the
number of shares set forth opposite such Underwriter's name in the preceding
table bearing the total number of shares in such table.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
the Registration Statement, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be provided to officers, directors or persons controlling the Company, the
Company has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy and is therefore
unenforceable.
The Company has agreed to pay certain blue sky legal fees of the
Underwriters and to pay to the Underwriters at the closing of the Offering a
non-accountable expense allowance of 3% of the aggregate offering price of the
shares of Common Stock and Warrants offered hereby (including any shares of
Common Stock and Warrants purchased pursuant to the Underwriters' over-allotment
option), of which $27,500 has been paid on account.
36
38
Certain shareholders who beneficially hold an aggregate of 2,360,000 shares
of Common Stock, have agreed that for a twelve month period following the date
of this Prospectus, they will not, without the prior written consent of the
Representative offer, sell, contract to sell, or otherwise dispose of any shares
of Common Stock of the Company or any securities convertible into, or
exercisable or exchangeable for Common Stock of the Company.
The Company has agreed to sell to the Representative or its designees, for
$10.00, common stock purchase warrants (the "Underwriters' Warrants")
exercisable for 164,000 shares of Common Stock and 164,000 Warrants at a
purchase price of 155% of the initial public offering prices for these
Securities. The Underwriters' Warrants may not be sold, transferred, assigned or
hypothecated, except to officers and directors of the Underwriters, for a period
of six months after the Effective Date, and is exercisable for four years
commencing one year from the Effective Date (or until the close of business five
years after the Effective Date) (the "Exercise Term"). During the Exercise Term,
the holders of the Underwriters' Warrants are given, at nominal cost, the
opportunity to profit from a rise in the market price of the Company's Common
Stock. To the extent that the Underwriters' Warrants are exercised, dilution of
the interests of the Company's stockholders will occur. Further, the terms on
which the Company will be able to obtain additional equity capital may be
adversely affected since the holders of the Underwriters' Warrants can be
expected to exercise it any time when the Company would, in all likelihood, be
able to obtain any needed capital on terms more favorable to the Company than
those provided in the Underwriters' Warrants. Any profit realized by the
Underwriters on the sale of the shares of Common Stock underlying the
Underwriters' Warrants may be deemed additional underwriting compensation. The
Company has also agreed to pay the Representative a non-accountable expense
allowance equal to 3% of the gross proceeds from the sale of the Securities
offered hereby of which $27,500 has been prepaid by the Company.
The Underwriters have been given certain "piggyback" and demand
registration rights with respect to the Common Stock underlying the
Underwriters' Warrants for a period of four years commencing one year from the
date of this Prospectus (or until the close of business five years after the
Effective Date). The exercise of any of such registration rights by the
Underwriters may result in dilution to the interest of the Company's
shareholders, hinder efforts by the Company to arrange future financing of the
Company and/or have an adverse effect on the market price of the Securities.
In connection with this Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock and
Warrants. Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such persons may bid
for or purchase Common Stock or Warrants for the purpose of stabilizing their
respective market prices. The Underwriters also may create a short position for
the account of the Underwriters by selling more shares of Common Stock or
Warrants in connection with the Offering than they are committed to purchase
from the Company, and in such case may purchase shares of Common Stock or
Warrants in the open market following completion of the Offering to cover all or
a portion of such short position. The Underwriters may also cover all or a
portion of such short position by exercising the Over-Allotment Option. In
addition, the Representative, on behalf of the Underwriters, may impose "penalty
bids" under contractual arrangements with the Underwriters whereby it may
reclaim from an Underwriter (or dealer participating in the Offering) for the
account of other Underwriters, the selling concession with respect to shares of
Common Stock and Warrants that are distributed in the Offering but subsequently
purchased for the account of the Underwriters in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the Common Stock and Warrants at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph is required, and, if they are undertaken they may be discontinued at
any time.
The Company has agreed with the Representative that the Company will pay to
the Underwriters a warrant solicitation fee (the "Warrant Solicitation Fee")
equal to 5% of the exercise price of the Warrants which are exercised pursuant
to a solicitation of exercise of the warrants or in connection with a redemption
and to the extent not inconsistent with the guidelines of the NASD and the rules
and regulations of the Commission (including NASD Notice to Members 81-38). Such
Warrant Solicitation Fee will be paid to the
37
39
Underwriters if (a) the market price of the Common Stock on the date that any
Warrant is exercised is greater than the exercise price of the Warrant; (b) the
exercise of such Warrant was solicited by the Underwriters; (c) prior specific
written approval for exercise is received from the customer if the Warrant is
held in a discretionary account: (d) disclosure of this compensation agreement
is made prior to or upon the exercise of such Warrant; (e) solicitation of the
exercise is not in violation of Regulation M of the Exchange Act; (f) the
Underwriters provided bona fide services in exchange for the Warrant
Solicitation Fee; and (g) the Underwriters have been specifically designated in
writing by the holders of the Warrants as the broker. Unless granted an
exemption by the Commission from Regulation M under the Exchange Act, the
Underwriters will be prohibited from engaging in any market making activities or
solicited brokerage activities with respect to the Securities for the period
from five business days prior to any solicitation by the Underwriters of the
exercise of any Warrant until the termination of such solicitation activity by
the Underwriters. The foregoing 5-day restriction period is reduced to one day
where the security has an average daily trading volume of $100,000 and the
public float for the issuer's equity securities is at least $25 million; and,
there is no restrictive period where the average daily trading volume of the
security is $1 million and the public float for the issuer's equity securities
is at least $150 million. As a result, the Underwriters may be unable to
continue to provide a market for the Securities during certain periods while the
Warrants are exercisable.
The Company has agreed that, for a period of five years following the
completion of this Offering, it will use its best efforts to cause the election
to its Board of Directors two designees of the Representative, provided that
such designees are reasonably acceptable to and approved by the Company.
The underwriting agreement provides the Representative with a preferential
right to underwrite and manage future public offerings by the Company of its
securities, if any, for a period of two years from the Effective Date.
The foregoing includes a summary of certain provisions of the Underwriting
Agreement which has been filed as an exhibit to the Registration Statement.
LEGAL MATTERS
The validity of the Securities being offered hereby will be passed upon for
the Company by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., Orlando,
Florida. Certain matters are being passed upon for the Underwriters by Johnson &
Montgomery, Atlanta, Georgia.
EXPERTS
The financial statements of the Company at December 31, 1996, and for each
of the two years in the period ended December 31, 1996, appearing in this
Prospectus and in the Registration Statement, have been audited by Grant
Thornton LLP, independent certified public accountants, as set forth in their
report thereon (which includes an explanatory paragraph for a going concern
uncertainty) appearing elsewhere herein and in the Registration Statement, and
is included herein in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is not presently a reporting company and does not file reports
or other information with the SEC. Upon effectiveness of the Registration
Statement filed with the SEC in connection with this Offering, the Company will
become a reporting company. Further, the Company will register its securities
under the Securities Exchange Act of 1934 ("Exchange Act"). Accordingly, upon
effectiveness of its Exchange Act registration, the Company will be subject to
the additional report requirements of the Exchange Act and in accordance
therewith will file reports, proxy statements and other information with the
SEC. In addition, after the effective date of this Offering, the Company intends
to furnish its shareholders with annual reports containing audited financial
statements and interim reports, in each case as it may determine to furnish or
as may be required by law. The year end of the Company is December 31 of each
year.
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40
The Company has filed with the Washington, D. C. Office of the SEC a
Registration Statement on Form SB-2 (with all amendments, exhibits and
schedules, thereto, the "Registration Statement") under the Securities Act of
which this Prospectus forms a part. This Prospectus does not contain all of the
information set forth in the Registration Statement, as permitted by the rules
and regulations of the SEC. For further information with respect to the Company
and the Securities offered hereby, reference is hereby made to such Registration
Statement. Statements contained in this Prospectus concerning the provisions or
contents of any contract or other document referred to herein are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
Copies of the Registration Statement may be inspected without charge at the
SEC's principal office at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549; and at the following Regional Offices of the Commission, except that
copies of the exhibits may not be available at certain of the Regional Offices:
Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and New York Regional Office, 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of all or any part of such material may be obtained from
the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 upon
payment of certain fees prescribed by the SEC. The SEC maintains a worldwide web
site on the Internet at http://www.sec.gov that contains reports and other
information concerning the Company filed electronically with the SEC.
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41
AUTOMOTIVE ONE PARTS STORES, INC.
FINANCIAL STATEMENTS INDEX
PAGE
----
Report of Independent Certified Public Accountants.......... F-2
Balance Sheet............................................... F-3
Statements of Operations.................................... F-4
Statement of Shareholders' Equity........................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
F-1
42
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Automotive One Parts Stores, Inc.
We have audited the accompanying balance sheet of Automotive One Parts
Stores, Inc. as of December 31, 1996, and the related statements of operations,
shareholders' equity, and cash flows for each of the two years in the period
ended December 31, 1996. 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 Automotive One Parts Stores,
Inc. as of December 31, 1996 and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $1,037,968 during the year ended December 31,
1996 and, as of that date, the Company had a working capital deficiency of
approximately $1,847,000. Management currently does not believe that the 1997
operations will be able to generate sufficient cash flow in order to satisfy
obligations maturing July 31, 1997 totaling approximately $5,500,000 at May 15,
1997. These factors, among others as discussed in Note C to the financial
statements, raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regards to these matters, including an
initial public offering which is in process, are also described in Note C. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
GRANT THORNTON LLP
Tampa, Florida
May 14, 1997
The foregoing auditor's report is in the form which will be signed upon
consummation of the transaction described in paragraph 2 of Note A to the
financial statements.
Grant Thornton LLP
Tampa, Florida
May 14, 1997
F-2
43
AUTOMOTIVE ONE PARTS STORES, INC.
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... $ 32,124
Receivables
Trade accounts, less allowance for doubtful accounts of
$210,000............................................... 686,431
Note from vendor.......................................... 180,000
Employee and officer advances............................. 74,444
Inventories................................................. 5,575,768
Prepaid expenses............................................ 910
----------
Total current assets.............................. 6,549,677
PROPERTY AND EQUIPMENT, net................................. 3,352,443
OTHER ASSETS................................................ 49,349
----------
Total assets...................................... $9,951,469
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt........................ $5,501,621
Checks written in excess of cash............................ 62,509
Accounts payable............................................ 2,356,045
Accrued expenses............................................ 267,557
Interest payable............................................ 209,139
----------
Total current liabilities......................... 8,396,871
LONG-TERM DEBT, less current portion........................ 1,174,621
COMMITMENTS AND CONTINGENCIES............................... --
SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par value, 5,000,000 shares
authorized, none issued and outstanding................... --
Common stock, $0.01 par value, 20,000,000 shares authorized,
2,360,000 issued and outstanding.......................... 23,600
Additional paid-in capital.................................. 434,932
Accumulated deficit......................................... (78,555)
----------
Total shareholders' equity........................ 379,977
----------
Total liabilities and shareholders' equity........ $9,951,469
==========
The accompanying notes are an integral part of this statement.
F-3
44
AUTOMOTIVE ONE PARTS STORES, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
1995 1996
----------- -----------
Net sales................................................... $11,691,338 $12,094,341
Cost of goods sold.......................................... 7,689,551 8,075,176
----------- -----------
Gross profit.............................................. 4,001,787 4,019,165
Selling, general and administrative expenses................ 3,986,570 4,463,849
----------- -----------
Earnings (loss) from operations........................... 15,217 (444,684)
Other income (expense)
Rental income............................................. 165,245 191,804
Interest expense.......................................... (495,174) (785,088)
----------- -----------
Net loss.......................................... $ (314,712) $(1,037,968)
=========== ===========
Pro forma information
Historical net loss....................................... $ (314,712) $(1,037,968)
Income tax expense (benefit).............................. -- --
----------- -----------
Pro forma net loss........................................ $ (314,712) $(1,037,968)
=========== ===========
Pro forma net loss per common share....................... $ (0.13) $ (0.44)
=========== ===========
Weighted average common shares outstanding................ 2,360,000 2,360,000
=========== ===========
The accompanying notes are an integral part of these statements.
F-4
45
AUTOMOTIVE ONE PARTS STORES, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996
RETAINED
ADDITIONAL EARNINGS
COMMON PAID-IN (ACCUMULATED
STOCK CAPITAL DEFICIT) TOTAL
------- ---------- ------------ -----------
Balance at January 1, 1995........................ $23,600 $238,406 $ 1,274,125 $ 1,536,131
Contributed capital -- contribution of
inventory....................................... -- 196,526 -- 196,526
Net loss.......................................... -- -- (314,712) (314,712)
------- -------- ----------- -----------
Balance at December 31, 1995...................... 23,600 434,932 959,413 1,417,945
Net loss.......................................... -- -- (1,037,968) (1,037,968)
------- -------- ----------- -----------
Balance at December 31, 1996...................... $23,600 $434,932 $ (78,555) $ 379,977
======= ======== =========== ===========
The accompanying notes are an integral part of this statement.
F-5
46
AUTOMOTIVE ONE PARTS STORES, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
1995 1996
----------- -----------
Increase (decrease) in cash
Cash flows from operating activities:
Net loss.................................................. $ (314,712) $(1,037,968)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization.......................... 173,318 181,410
Interest expense added to principal.................... -- 231,684
Changes in assets and liabilities:
Trade accounts receivable............................ (118,047) 25,762
Employee and officer advances receivable............. (22,483) (51,961)
Inventories.......................................... (1,275,368) (646,563)
Other assets......................................... (33,710) 14,490
Accounts payable..................................... (1,887,386) 1,339,526
Accrued expenses..................................... (274,002) 102,547
Interest payable..................................... (10,668) 161,885
----------- -----------
Net cash provided by (used in) operating
activities...................................... (3,763,058) 320,812
----------- -----------
Cash flows from investing activities -- acquisition of
property and equipment.................................... (198,264) (248,186)
----------- -----------
Cash flows from financing activities:
Net change in checks written in excess of cash............ 106,375 (43,866)
Proceeds from long-term debt.............................. 5,662,992 368,377
Repayments of long-term debt.............................. (1,922,943) (411,047)
----------- -----------
Net cash provided by (used in) financing
activities...................................... 3,846,424 (86,536)
----------- -----------
Net decrease in cash........................................ (114,898) (13,910)
Cash, beginning of year..................................... 160,932 46,034
----------- -----------
Cash, end of year........................................... $ 46,034 $ 32,124
=========== ===========
Supplemental cash flow information:
Cash paid for interest.................................... $ 505,842 $ 391,519
=========== ===========
Non-cash financing activities:
During 1996, approximately $232,000 of interest payable was added to the
principal of the note payable.
During 1995, approximately $197,000 of inventory was contributed by a
related party to the Company.
The accompanying notes are an integral part of these statements.
F-6
47
AUTOMOTIVE ONE PARTS STORES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
NOTE A -- DESCRIPTION OF ORGANIZATION AND BUSINESS
BUSINESS
Automotive One Parts Stores, Inc. (the "Company") was incorporated in
Florida in November 1978. The Company is a specialty supplier and retailer of
automotive replacement parts, tools, supplies, equipment and accessories to both
professional installers and, do-it-yourself customers throughout the Central
Florida area.
In connection with the planned initial public offering, the Board of
Directors plans to increase the Company's Common Stock authorized from 100
shares of $1.00 par value to 20,000,000 shares of $0.01 par value Common Stock.
The Company's increase in the issued and outstanding Common Stock will be
effected through a stock split whereby each share of common stock will be
exchanged for 23,600 shares of new Common Stock. All share and per share data
presented herein have been retroactively restated for all periods in
contemplation of this planned transaction.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES IN FINANCIAL STATEMENTS
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. There were no cash
equivalents at December 31, 1996.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is principally
determined by the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT, NET
Property and equipment are recorded at cost less accumulated depreciation
and amortization. Depreciation and amortization are provided for using the
straight-line or declining balance methods over the estimated service lives of
the assets. Accelerated methods are used for tax purposes.
Expenditures for additions, major renewals or betterments are capitalized
and expenditures for repairs and maintenance are charged to earnings as
incurred.
DEFERRED OFFERING COSTS
Deferred offering costs, which are included in other assets at December 31,
1996, amounted to approximately $31,000. These costs consist of legal and
accounting fees and other direct costs attributable to the Company's planned
initial public offering. These costs are being deferred until the proceeds from
the offering have been received, at which time they will be charged against the
gross proceeds. If the offering is not successful, the costs will be charged to
earnings.
F-7
48
AUTOMOTIVE ONE PARTS STORES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
ADVERTISING
The Company expenses its share of all advertising costs as such costs are
incurred. The portion of advertising expenditures which are to be recovered from
vendors and other cooperative programs are recorded as receivables. The Company
does not defer any portion of its share of advertising costs. During the years
ended December 31, 1995 and 1996 the Company incurred advertising costs of
approximately $73,000 and $76,000, respectively.
INCOME TAXES
The Company is taxed as an S Corporation under the provisions of the
Internal Revenue Code. As such, the Company's taxable income is includable in
the individual income tax returns of its stockholders for federal and state
income tax purposes. Accordingly, no provisions for federal and state income
taxes have been recorded in the accompanying historical financial statements.
In conjunction with the completion of the initial public offering, the
Company will terminate its S Corporation election and become subject to
corporate income taxes from that date forward (See Note I).
CONCENTRATION OF RISK
The Company grants credit to customers who meet pre-established credit
requirements. The Company does not require collateral when trade credit is
granted to customers. Credit losses are provided for in the financial statements
and have consistently been within management's expectations.
Currently, the Company purchases most of its inventory from one vendor. A
sufficient number of other suppliers and/or manufacturers could supply the same
inventory. A disruption of this vendor relationship, or a material reduction in
any of the terms of purchase, advertising, incentive or other programs, would
likely materially, adversely affect the Company's business.
IMPAIRMENT OF LONG-LIVED ASSETS
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed Of ("SFAS"). Under SFAS No. 121, impairment
losses on long-lived assets are recognized when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amounts. The impairment loss is equal
to the difference between the carrying amount of the long-lived asset and the
estimated fair value of such asset. SFAS No. 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. The adoption of SFAS
No. 121 by the Company did not result in an impairment loss. The Company did not
incur an impairment loss during the year ended December 31, 1996.
STOCK BASED COMPENSATION
Effective January 1, 1996 the Company adopted SFAS No. 123, Accounting for
Stock Based Compensation. As it relates to stock options granted to employees,
SFAS No. 123 permits companies who have not done so already to, either adopt the
accounting method promulgated by Accounting Principles Board Opinion No. 25 (APB
No. 25), Accounting for Stock Issued to Employees to measure compensation, or to
adopt the fair value base method prescribed by SFAS No. 123. If APB No. 25's
method is followed, pro forma disclosures are required as if SFAS No. 123
accounting recognition method was adopted. SFAS No. 123 pertains to stock
options granted after December 31, 1995. Management has determined not to adopt
SFAS No. 123's accounting recognition provisions related to stock options
granted to employees and accordingly, will continue following APB No. 25's
accounting provisions. All other provisions of SFAS No. 123 have been
F-8
49
AUTOMOTIVE ONE PARTS STORES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
implemented effective January 1, 1996. The implementation of SFAS No. 123 did
not have a material effect on the Company's financial statements.
NEW ACCOUNTING PRONOUNCEMENT
SFAS No. 128, Earnings Per Share, will be effective for the Company's
financial statements issued after December 15, 1997. Early adoption of the new
standard is not permitted. The new standard eliminates primary and fully diluted
earnings per share and requires presentation of basic and diluted earnings per
share together with disclosure of how the per share amounts were computed. The
adoption of this new standard is not expected to have a material impact on the
disclosure of earnings per share in the financial statements.
NOTE C -- REALIZATION OF ASSETS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. Continuation of the Company as a going concern
contemplates the realization of assets and settlement of liabilities and
commitments in the normal course of business. However, the Company had a net
loss of $1,037,968 for the year ended December 31, 1996 and a working capital
deficiency of $1,847,194 at December 31,1996. In addition, the Company was in
default under the terms of its indebtedness to APS, Inc. ("APS") and Autoparts
Finance Company, Inc. ("AFCO"), an affiliate of APS, at December 31, 1996. In
February 1997, the Company entered into a Loan Modification Agreement with APS
and AFCO whereby the maturity date on such indebtedness was extended to not
later than July 31, 1997, (See Note E). The Company is not currently able to
generate sufficient cash flows from its existing operations to repay the amounts
due to APS and AFCO by the maturity date of such indebtedness. These factors,
among others, raise substantial doubt about the ability of the Company to
continue as a going concern.
Management recognizes that the Company must generate additional financial
resources and reduce operating costs to continue its operations as follows:
- The Company is in the process of completing an initial public offering
of its Common Stock in order to generate sufficient proceeds to repay
APS and AFCO and to finance the acquisition of additional auto parts
stores.
- The Company is evaluating its current network of store locations in
order to determine the most advantageous number and location of its
stores in order to effectively and efficiently serve the central
Florida market, its primary service area. To date the Company has
identified four existing stores that can be merged into two store
locations.
- The Company has begun to institute certain cost containment measures
in order to reduce its current level of selling, general and
administrative expenses. Management cannot presently determine the
financial impact of these cost containment measures, however, it
believes such cost containment measures will not have an impact on the
services provided to its customers.
If the Company is not successful in completing its planned initial public
offering or is unable to obtain alternative financing in order to repay APS and
AFCO, APS and AFCO could foreclose on substantially all the assets of the
Company.
In view of the matters described in the preceding paragraphs,
recoverability of a substantial portion of the recorded asset amounts shown in
the accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to generate
sufficient proceeds from its planned initial public offering to repay its
obligations to APS and AFCO, and to succeed in its future operations. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset and liability amounts that
might be necessary should the Company be unable to continue in existence.
F-9
50
AUTOMOTIVE ONE PARTS STORES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1996:
LIFE
(YEARS)
-------
Land........................................................ $1,613,123
Buildings................................................... 2,808,295 40
Vehicles.................................................... 1,067,303 3-5
Equipment................................................... 825,535 5
Computer equipment.......................................... 243,291 2
Furniture and fixtures...................................... 39,151 5-7
----------
6,596,698
Less: accumulated depreciation and amortization............. 3,244,255
----------
$3,352,443
==========
NOTE E -- LONG-TERM DEBT
Long-term debt at December 31, 1996, consists of the following:
MORTGAGE LOANS
Various notes payable; maturing between December 1997 and
March 2010, varying interest rates ranging from 7.00% to
12.95% per annum, due in monthly installments of $19,461
including interest; collateralized by real property......... $1,129,418
Adjustable rate note payable to AFCO, interest at the prime
rate plus 2.00% per annum (10.25% at December 31, 1996)
principal and interest due and payable not later than July
31, 1997; collateralized by real property, inventory,
equipment, and all other assets of the Company.............. 2,465,467
Note payable to APS; 10.00% interest per annum, principal
and interest due and payable not later than July 31, 1997;
collateralized by real property, inventory, equipment, and
all other assets of the Company............................. 2,666,679
VEHICLE LOANS
7.25% to 11.00% notes payable to banks; due in monthly
installments of $5,436 including interest through October
1999; collateralized by vehicles............................ 112,859
INVENTORY LOANS
9.00% note payable to a vendor; payable in monthly
installments of $5,612, including interest through February
1, 1998; collateralized by inventory........................ 74,322
UNSECURED LOANS
7.50% unsecured demand note payable to an individual; due in
monthly installments of $500 plus accrued interest, through
August 2002................................................. 34,000
10.00% to 12.00% unsecured demand notes payable to
individuals; principal due on demand with quarterly payments
of accrued interest......................................... 126,497
F-10
51
RELATED PARTY LOANS
12.00% unsecured demand note payable to an individual; with
interest in the amount of $650 due in monthly
installments................................................ 65,000
Non-interest bearing demand notes payable to an officer..... 2,000
----------
Total long-term debt.............................. 6,676,242
Less current portion.............................. 5,501,621
----------
$1,174,621
==========
Aggregate maturities of long-term obligations are as follows for the years
ending December 31,
1997........................................................ $5,501,621
1998........................................................ 148,343
1999........................................................ 112,597
2000........................................................ 108,000
2001........................................................ 118,509
Thereafter.................................................. 687,172
----------
$6,676,242
==========
The note payable to APS ("APS Note") matured on October 24, 1996 and had
not been repaid by the Company as of December 31, 1996. In addition, the Company
ceased making scheduled payments on the adjustable rate note due to AFCO ("AFCO
Note") during the year ended December 31, 1996. As a result of these conditions,
the Company was in default of these obligations along with its trade accounts
payable balance due to APS of approximately $1,333,000 at December 31, 1996. As
a result of the default on its indebtedness to APS and AFCO, the Company
incurred an additional default interest charge on such indebtedness totaling
approximately $113,000 at December 31, 1996.
On February 20, 1997, the Company entered into a Loan Modification
Agreement with APS and AFCO. Under the terms of this agreement, the APS Note and
AFCO Note will continue to accrue interest at their specific contractual
interest rates, however, no payments of principal and interest will be required
until the maturity date. The maturity date is the earlier of the date the
Company receives proceeds from its planned initial public offering of shares of
its Common Stock, or July 31, 1997. In addition, from the date of the Loan
Modification Agreement and the maturity date, the Company is required to pay APS
before the close of business on Monday of each week an amount equal to the
preceding week's purchases of merchandise from APS.
The Company's compliance with the financial covenants under the terms of
the original loan agreements with APS and AFCO were waived under the terms of
the Loan Modification Agreement. The Loan Modification Agreement contains
certain financial and other covenants that, among other things, require the
Company to: 1) make timely payments to APS for its merchandise purchases; 2)
file a Registration Statement with the Securities and Exchange Commission in
connection with the Company's planned initial public offering by May 31, 1997
and 3) complete its planned initial public offering by July 31, 1997. Failure to
comply with the covenants included in the Loan Modification Agreement would
cause the Company to be in default under the terms of such agreement. Should
such default occur APS and AFCO could foreclose on the Company's assets
collateralizing the APS Note and AFCO Note. As long as the Company complies with
the terms of the Loan Modification Agreement and repays by the maturity date,
the outstanding principal and accrued and unpaid interest amounts due under the
APS Note and AFCO Note, along with certain amounts due APS for merchandise
purchases, the default interest charge due to APS and AFCO will be waived. As of
May 14, 1997, the Company was in compliance with the terms of the Loan
Modification Agreement. The
F-11
52
AUTOMOTIVE ONE PARTS STORES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
APS Note and AFCO Note balances are included in the current portion of long-term
debt as of December 31, 1996.
Management believes, based in part on discussions with representatives of
APS and AFCO, that APS and AFCO will not require repayment in full of the
Company's outstanding indebtedness, including any accrued and unpaid interest,
on July 31, 1997, as long as the Company continues to proceed with its planned
initial public offering and is in compliance with the remainder of the covenants
included in the Loan Modification Agreement dated February 20, 1997 and remains
in compliance with such other covenants until the initial public offering is
completed. However, no assurances can be given that APS and AFCO will not
require repayment of such indebtedness on July 31, 1997.
NOTE F -- SHAREHOLDERS' EQUITY
PREFERRED STOCK
The Board of Directors is authorized, without further shareholder action,
to divide any or all shares of the authorized Preferred Stock into series and to
fix and determine the designation, preferences, privileges, options or other
special rights, and qualifications, limitations, or restrictions thereon, of any
series so established, including voting powers, dividend rights, liquidation
preferences, redemption rights, and conversion privileges. In May 1997, the
Board has authorized 5,000,000 shares of $0.01 par value preferred stock. No
shares of Preferred Stock have been issued and there are no plans, agreements or
understandings for the issuance of any shares of Preferred Stock.
COMMON STOCK
In connection with its planned public offering, the Company plans to effect
a stock split (See Note A).
In August 1996, in conjunction with a consulting arrangement with a
consulting company, the Company granted the consulting company a warrant to
purchase 42,000 shares of its Common Stock at an exercise price of $0.25 a
share, exercisable upon the completion of the Company's planned initial public
offering. The fair value of the warrants, which approximates $25,000, was based
on the agreed upon value of the contracted services to be rendered by this
consulting company in connection with the Company's planned initial public
offering.
STOCK OPTION PLAN
In May 1997, the Company established a 1997 Employee Stock Option Plan (the
"Plan") under which 500,000 shares of Common Stock have been reserved for
issuance upon exercise of stock options. The Plan is designed to serve as an
incentive for retaining qualified and competent employees. The Company's Board
of Directors, or a committee thereof (the "Committee"), will administer and
interpret the Plan and will be authorized to grant options thereunder to all
eligible employees of the Company, including officers and directors (whether or
not employees) of the Company and consultants.
The Plan provides for the granting of both incentive stock options and
non-qualified stock options. Options will be granted under the Plan on such
terms and at such prices as determined by the Committee, except that the per
share exercise price of incentive stock options cannot be less than the fair
market value of the Common Stock on the date of grant and the per share exercise
price of non-qualified stock options will not be less than par value on the date
of grant. Each option will be exercisable after the period or periods specified
in the option agreement, but no option can be exercised until six months after
the date of grant or after the expiration of 10 years from the date of grant.
Options granted under the Plan will not be transferable other than by will or by
the laws of descent and distribution.
F-12
53
AUTOMOTIVE ONE PARTS STORES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Plan contains anti-dilution provisions authorizing appropriate
adjustments in certain circumstances. Shares of Common Stock subject to options
which expire without being exercised or which are canceled as a result of
cessation of employment are available for further grants. The Company has not
granted options under the Plan.
NOTE G -- COMMITMENTS AND CONTINGENCIES
PURCHASE COMMITMENTS
In 1995, the Company entered into a product purchase agreement with APS, a
national distributor of replacement auto parts. Under the terms of this
agreement, the Company agreed, for a fifteen-year period commencing on January
1, 1995, to purchase 75% of the resale merchandise inventory from APS, less
certain exceptions and not perform a bulk transfer of assets nor transfer its
leasehold interests in properties where it conducts business without giving APS
a 45-day written notice and giving APS the right of first refusal. In February
1997, in connection with the modification of the Company's loan agreements (see
Note E) with APS and AFCO in February 1997; the Company and APS amended the
product purchase agreement. Under the terms of this amended agreement, the term
of the agreement was reduced from fifteen years to five years. In addition, the
period required to provide APS with written notice of the Company's intent to
bulk transfer its assets and/or transfer its leasehold interests was reduced
from 45 days to 20 days. Purchases under the agreement with APS aggregated
approximately $4.5 million in both 1995 and 1996.
The Company has a $180,000 agreement with APS for the reimbursement of
costs incurred by the Company to refurbish certain of its store locations. Such
costs were incurred by the Company in connection with the execution of the
product purchase agreement with APS.
LEASES
The Company leases two of its stores under month-to-month leases. All other
facilities are owned by the Company. The Company also leases an insignificant
amount of equipment.
LITIGATION
The Company is engaged in certain lawsuits as a plaintiff and defendant,
arising from the ordinary course of business. In the opinion of management, the
ultimate outcome of these lawsuits should not have a material impact on the
Company's financial position.
NOTE H -- RELATED PARTY TRANSACTIONS
The Company makes advances to and borrows money from officers, shareholders
and family members from time to time. As discussed in Note E above, the Company
owed $67,000 to these individuals at December 31, 1996. In addition, these
individuals owed the Company $70,384 at December 31, 1996.
During the year ended December 31, 1995 the son of the principal
shareholder of the Company contributed inventory to the Company that had a
carrying value (cost) to the son of $196,526, which also approximated the fair
value of such inventory.
Subsequent to December 31, 1996, the principal shareholder of the Company
loaned $500,000 to the Company for operations. The loan plus out-of-pocket costs
and interest payments made by such individual are to be repaid from the proceeds
of the Company's planned initial public offering.
At December 31, 1996 the company had outstanding indebtedness to a director
candidate of $95,000 at an interest rate of 10.0% per annum. The Company plans
to repay such indebtedness, including any accrued and unpaid interest from the
proceeds of the Company's planned initial public offering.
F-13
54
AUTOMOTIVE ONE PARTS STORES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE I -- PRO FORMA INFORMATION
PRO FORMA INCOME TAXES
In conjunction with the completion of its planned initial public offering,
the Company will terminate its S Corporation election and become subject to
corporate income taxes from that date forward.
The statements of operations for all periods presented reflect the pro
forma effect on income taxes (benefits) as if the Company's losses had been
subjected to federal and state income taxes as a C Corporation.
In the determination whether to recognize any tax benefits from the
Company's operating losses on a pro forma basis, management considered the
Company's history of net operating losses. During the two years ended December
31, 1996, the Company incurred a cumulative net loss of $1,352,680. Management
believes using the more likely than not criteria established by SFAS No. 109,
Accounting for Income Taxes, that no tax benefits should be recognized for any
reported period.
Reconciliation of the federal statutory income tax rate of 34% to the
effective income tax rate reflected herein is as follows:
1995 1996
----- -----
Federal income tax (benefit) at statutory rates............. (34.0)% (34.0)%
State income taxes, net of Federal benefit.................. (3.3) (3.3)
Net operating losses, not currently utilizable.............. 37.3 37.3
----- -----
Income tax expense.......................................... -- --
===== =====
Since the Company's cumulative net operating losses have passed directly to
its S Corporation shareholders, the losses will not be available to the Company
upon conversion to C Corporation status.
At December 31, 1995 and 1996, there were differences between the bases for
the Company's assets and liabilities as reported for income tax return purposes
and as reported for financial statement purposes. The aggregate bases difference
at these dates are not material to the Company (principally accrued vacation,
depreciation and inventory).
PRO FORMA NET LOSS PER COMMON SHARE
Pro forma net loss per share is computed by dividing pro forma net loss by
the weighted average number of shares of common stock outstanding during the
period (see Note A). Pro forma net loss includes a pro forma provision for
income taxes assuming the Company had been subject to income taxes during the
period it was an S Corporation for income tax purposes. The warrant issued to
the consulting company is considered to be common stock equivalents. Pro forma
net loss per share does not include the assumed exercise of these warrant since
the inclusion would have been anti-dilutive.
The Company is contemplating an initial public offering of which
approximately $5.5 million of the total proceeds therefrom will be used to pay
down or retire debt. The supplementary pro forma loss per common share for 1996
as if this debt was retired January 1, 1996, would be $(.15) a share (assuming
3,295,590 weighted average common shares outstanding).
NOTE J -- FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1996, the carrying amount of cash, accounts receivable,
accounts payable and accrued expenses approximate fair value because of the
short-term maturities of these items.
The carrying amounts of current and long-term portions of debt approximate
fair market value since the interest rates on these instruments generally
approximate market interest rates.
F-14
55
======================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, OR ANY UNDERWRITER OR BROKER/DEALER. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION.
------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY....................
RISK FACTORS..........................
USE OF PROCEEDS.......................
DILUTION..............................
CAPITALIZATION........................
DIVIDEND POLICY.......................
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.......................
INDUSTRY OVERVIEW.....................
BUSINESS..............................
MANAGEMENT............................
BENEFICIAL OWNERSHIP OF PRINCIPAL
STOCKHOLDERS AND MANAGEMENT.........
CERTAIN TRANSACTIONS..................
DESCRIPTION OF SECURITIES.............
SHARES ELIGIBLE FOR FUTURE SALE.......
UNDERWRITING..........................
LEGAL MATTERS.........................
EXPERTS...............................
AVAILABLE INFORMATION.................
------------------
UNTIL 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
1,640,000 SHARES
OF COMMON STOCK
AND
1,640,000 REDEEMABLE
COMMON STOCK
PURCHASE WARRANTS
AUTOMOTIVE ONE PARTS
STORES, INC.
-------------------------
PROSPECTUS
-------------------------
ARGENT SECURITIES, INC.
, 1997
======================================================
56
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under the Florida Business Corporation Act to
indemnify its directors and officers to the extent provided in such statute. The
Registrant's Articles of Incorporation provide that the Registrant shall
indemnify its executive officers and directors to the fullest extent permitted
by law either now or hereafter. The Registrant is also entering into an
agreement with each of its directors and certain of its officers wherein it is
agreeing to indemnify each of them to the fullest extent permitted by law. In
general, Florida law permits a Florida corporation to indemnify its directors,
officers, employees and agents, and persons serving at the corporation's request
in such capacities for another enterprise against liabilities arising from
conduct that such persons reasonably believed to be in, or not opposed to, the
best interest of the corporation and, with respect to any criminal action or
proceeding, had not reasonable cause to believe their conduct was unlawful.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for (a) violations of the
criminal law, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful, (b)
deriving an improper personal benefit from a transaction, (c) voting for or
assenting to an unlawful distribution, and (d) willful misconduct or a conscious
disregard for the best interests of the Registrant in a proceeding by or in the
right of the Registrant to procure a judgment in its favor or in a proceeding by
or in the right of a shareholder. The statute does not affect a director's
responsibilities under any other law, such as the Federal securities laws or
state or Federal environmental laws.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought from the Registrant, nor is the Registrant aware of any threatened
litigation that may result in claims for indemnification from the Registrant by
any officer or director.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Registration fee............................................ 9,582
National Association of Securities Dealers, Inc............. 2,500*
NASDAQ listing fee.......................................... 10,000*
Boston Stock Exchange Listing Fee........................... 15,000*
Printing and engraving expenses............................. 65,000*
Accounting fees and expenses................................ 50,000*
Legal fees and expenses..................................... 150,000*
Blue sky fees and expenses.................................. 65,000*
Transfer agent and registrar fees........................... 7,500*
Underwriters' non-accountable expense allowance (assuming no
exercise of over-allotment option)........................ 301,350
Miscellaneous............................................... 20,068*
--------
Total............................................. $696,000
========
- ---------------
* Estimated expenses.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The Gentry family referenced in this registration statement received their
stock as founders shares.
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ITEM 27. EXHIBITS
The following exhibits are filed as part of this registration statement:
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
1.1 Form of Underwriting Agreement*
3.1 Form of Amended and Restated Articles of Incorporation
3.2 Form of Amended and Restated ByLaws
4.1 Form of Underwriters' Warrants*
4.2 Specimen of Common Stock Certificate*
4.3 Specimen of Redeemable Common Stock Purchase Warrant*
4.4 Form of Warrant Agreement between the Company and American
Stock Transfer & Trust Company*
5 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel,
P. A., Counsel for the Company*
10.1 1997 Stock Option Plan
10.2 Promissory Note in the principal amount of $2,450,000 in
favor of A. P. S., Inc.
10.3 Promissory Note in the principal amount of $2,500,000 in
favor of Autoparts Finance Company, Inc.
10.4 Loan Agreement between the Company, Autoparts Finance
Company, Inc., and A.P.S., Inc.
10.4.1 Loan Modification Agreement between the Company, A.P.S.,
Inc., and Autoparts Finance Company, Inc.
10.5 Amended and Restated Guaranty Agreement between Robert H.
Gentry, III and Janice Sue Gentry, his wife, A.P.S., Inc.
and Autoparts Finance Company, Inc.
10.6 Product Purchase Agreement, between A.P.S., Inc. and the
Company.
10.6.1 First Amendment to Product Purchase Agreement dated February
20, 1997 between A.P.S., Inc. and the Company.
10.7 Form of Indemnification Agreement between the Company and
Indemnitee.
10.8 Employment Agreement between the Company and Robert H.
Gentry, III.
23.1 Consent of Independent Certified Public Accountants.
23.2 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel,
P. A. (included in Exhibit 5).*
27 Financial Data Schedule (for SEC use only).
- ---------------
* To be filed by amendment.
ITEM 28. UNDERTAKINGS.
(a) The small business issuer will:
(1) file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered, (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
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58
(2) For determining liability under the Act, treat each post-effective
amendment as a new registration statement of the securities offered, and
the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) The small business issuer will provide to the underwriter at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(d) The small business issuer will:
(1) For determining any liability under the Act, treat the information
omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the small business issuer under Rule 424(b)(l) or (4) or 497(h)
under the Act as part of this registration statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form SB-2 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Orlando,
State of Florida, on May 15, 1997.
AUTOMOTIVE ONE PARTS STORES, INC.
By: /s/ ROBERT H. GENTRY, III
------------------------------------
Robert H. Gentry, III
President and Chief Executive
Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ ROBERT H. GENTRY, III Sole Director, President, and May 15, 1997
- ----------------------------------------------------- Chief Executive Officer
Robert H. Gentry, III
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EXHIBIT INDEX
Exhibit
Number Exhibit Description Page
- ------ ------------------- ----
3.1 Form of Amended and Restated Articles of Incorporation
3.2 Form of Amended and Restated Bylaws
10.1 1997 Stock Option Plan
10.2 Promissory Note in the principal amount of $2,450,000 in
favor of A.P.S., Inc.
10.3 Promissory Note in the principal amount of $2,500,000 in
favor of Autoparts Finance Company, Inc.
10.4 Loan Agreement between the Company, Autoparts Finance
Company, Inc., and A.P.S., Inc.
10.4.1 Loan Modification Agreement between the Company, A.P.S., Inc. and
Autoparts Finance Company, Inc.
10.5 Amended and Restated Guaranty Agreement between Robert H.
Gentry, III and Janice Sue Gentry, his wife, A.P.S., Inc. and
Autoparts Finance Company, Inc.
10.6 Product Purchase Agreement between A.P.S., Inc. and the Company.
10.6.1 First Amendment to Product Purchase Agreement dated February 20, 1997
between A.P.S., Inc. and the Company.
10.7 Form of Indemnification Agreement between the Company and
Indemnitee.
10.8 Employment Agreement between the Company and Robert H. Gentry, III.
23.1 Consent of Independent Certified Public Accountants
27 Financial Data Schedule (for SEC use only).