SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 1, 1999
(Date of Earliest Event Reported)
MACE SECURITY INTERNATIONAL, INC.
(Exact name of Registrant as Specified in its Charter)
Delaware
(State of Incorporation)
0-22810
(Commission File Number)
03-0311630
(IRS Employer Identification No.)
160 Benmont Avenue, Bennington, Vermont 05201
(Address of Principal Executive Offices)
(802) 447-1503
(Registrant's Telephone Number)
Item 2. Acquisition of Stephen B. Properties, Inc.
On July 1, 1999, Mace Security International, Inc., a Delaware
corporation (the "Company" or "Registrant"), through a wholly owned subsidiary,
acquired all of the car wash related assets of Stephen Bulboff and Stephen B.
Properties, Inc. (Shammy Shine) pursuant to the terms of a Real Estate and Asset
Purchase Agreement dated March 8, 1999 (collectively the "Agreement"), by and
between the Registrant, and Stephen Bulboff and Stephen B. Properties, Inc. (the
"Sellers"). Pursuant to the terms and conditions of the Agreement, the
Registrant purchased all of the assets of the Sellers used in the business of
operating 10 full service car washes in Pennsylvania, Delaware and New Jersey.
The Registrant will use the acquired assets in connection with the operating of
the 10 car washes formerly owned by the Sellers. Sellers are not affiliated with
the Registrant nor with any of the Registrant's subsidiaries. The description of
the acquisition transaction set forth herein is qualified in its entirety by
reference to the Agreement which is incorporated as Exhibit 2.1.
At Closing under the Agreement, the Company paid to Sellers an
aggregate purchase price of 1,060,000 unregistered shares of the Company's
common stock, par value $.01 per share plus cash of $1,900,000 from working
capital. The acquisition is accounted for using the "purchase" method of
accounting.
Additionally, on the date of closing the Stock Purchase Agreement, the
Registrant assumed the leases for the real estate with respect to three of the
car wash locations operated by Shammy Shine. The description of these lease
assignments set forth herein in its entirety by reference to the lease
assignment and assumption agreement, which is incorporated as exhibit 2.2.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Independent Accountant's Report
Combined Balance Sheets as of December 31, 1998 and 1997
Combined Statements of Income for the Years Ended December 31, 1998 and
1997
Combined Statements of Retained (Deficit) and Owners' (Deficit) for the
Years Ended December 31, 1998 and 1997
Combined Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997
Notes to Combined Financial Statements
Combined Balance Sheet as of June 30, 1999 (Unaudited)
Combined Statement of Income for the Six Months Ended
June 30, 1999 (Unaudited)
Combined Statements of Retained (Deficit) and Owners' (Deficit) for the
Six Months Ended June 30, 1999 (Unaudited)
Combined Statement of Cash Flows for the Six Months
Ended June 30, 1999 (Unaudited)
Selected Notes to Combined Financial Statements (Unaudited)
(b) Pro Forma Financial Information
Pro Forma Consolidated Statement of Operations for the Year Ended
December 31, 1998 (Unaudited)
Pro Forma Consolidated Statement of Operations for the Six Months Ended
June 30, 1999 (Unaudited)
Pro Forma Consolidated Balance Sheet as of June 30, 1999 (Unaudited)
(c) Exhibits
*2.1 The Real Estate and Asset Purchase Agreement dated as of March 8,
1999, among Stephen B. Properties, Inc., Stephen Bulboff, and
American Wash Services, Inc.
*2.2 Lease Assignment and Assumption Agreement Regarding Soft Cloth Shammy
Shine dated July 1, 1999 among Mace Wash, Inc., a wholly-owned
subsidiary of Mace Security International, Inc., Soft Cloth Shammy
Shine, Inc. and American Wash Services, Inc.
*99 Press Release dated July 7, 1999.
23.1 Consent of Burton Segal & Company
* Incorporated by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 13, 1999 MACE SECURITY INTERNATIONAL, INC.
By:/s/ Gregory M. Krzemien
-----------------------
Gregory M. Krzemien
Chief Financial Officer and Treasurer
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
INDEX TO EXHIBITS
DECEMBER 31, 1998 AND 1997
--------------------------
EXHIBITS
- --------
INDEPENDENT ACCOUNTANT'S REPORT .......................................1
COMBINED BALANCE SHEETS ...........................................2 - 3
COMBINED STATEMENTS OF INCOME FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997 .......................................4
COMBINED STATEMENTS OF RETAINED (DEFICIT) AND OWNERS'
(DEFICIT) ........................................................5
COMBINED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997 .......................................6
NOTES TO THE FINANCIAL STATEMENTS ................................7 - 12
June 20, 1999
Stockholders and Board of Directors
Stephen B. Properties, Inc. and
Stephen Bulboff Real Estate
10 Cresthaven Court
Sewell, New Jersey 08080
We have audited the accompanying combined balance sheets of Stephen B.
Properties, Inc. and Stephen Bulboff Real Estate as of December 31, 1998 and
1997, and the related combined statements of earnings, stockholders' (owners')
(deficit) and cash flows for the years ended December 31, 1998 and 1997. These
financial statements are the responsibility of Stephen B. Properties, Inc. and
Stephen Bulboff Real Estate 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 in 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 combined financial position of Stephen B. Properties,
Inc. and Stephen Bulboff Real Estate as of December 31, 1998 and 1997, and their
cash flows for the years ended December 31, 1998 and 1997 in conformity with
generally accepted accounting principles.
/s/ Burton Segal & Company
Burton Segal & Co.
Certified Public Accountants
1
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
COMBINED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
--------------------------
ASSETS
------
CURRENT ASSETS: 1998 1997
- --------------- ---- ----
Cash in Bank $ 37,965 $ 33,077
Inventory 13,488 13,311
Prepaid Expenses 27,871 28,343
Loans - Car Care Inc. 53,206 0
----------- -----------
TOTAL CURRENT ASSETS 132,530 74,731
----------- -----------
PROPERTY AND EQUIPMENT:
- ----------------------
Equipment and Buildings 3,727,705 3,694,863
Less: Accumulated Depreciation (2,544,162) (2,443,790)
----------- -----------
TOTAL PROPERTY AND EQUIPMENT 1,183,543 1,251,073
----------- -----------
OTHER ASSETS:
- ------------
Loans - Shareholder 75,127 17,933
----------- -----------
TOTAL ASSETS $ 1,391,200 $ 1,343,737
=========== ===========
See Notes to Financial Statements.
2
LIABILITIES AND SHAREHOLDERS' (OWNERS') (DEFICIT)
-------------------------------------------------
CURRENT LIABILITIES: 1998 1997
- -------------------- ----------- ------------
Accounts Payable $ 46,538 $ 127,630
Sales Taxes Payable 6,235 4,969
Accrued Expenses 15,458 13,316
Current Portion - Mortgages and Notes Payable 2,276,073 35,575
----------- -----------
TOTAL CURRENT LIABILITIES 2,344,304 181,490
----------- -----------
LONG-TERM LIABILITIES:
- ----------------------
Mortgages and Notes Payable 0 2,276,072
----------- -----------
TOTAL LIABILITIES 2,344,304 2,457,562
- ----------------- ----------- -----------
SHAREHOLDERS' (OWNERS') (DEFICIT)
- ---------------------------------
Common Stock - Without Par Value - Authorized and
Issued 1,000 Shares 12,000 12,000
Retained (Deficit) (72,954) (216,047)
Owners' (Deficit) (892,150) (909,778)
----------- -----------
TOTAL SHAREHOLDERS' (OWNERS') (DEFICIT) (953,104) (1,113,825)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' (OWNERS')
- ---------------------------------------------
DEFICIT $1,391,200 $ 1,343,737
------- =========== ===========
See Notes to Financial Statements.
3
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
% of % of
1998 Sales 1997 Sales
---- ----- ---- -----
NET SALES $1,288,250 100.0% $1,068,672 100.0%
- ---------
COST OF SALES 503,113 39.1 482,553 45.1
- ------------- ----------------------------------------
GROSS PROFIT 785,137 60.9 586,119 54.9
- ------------ ----------------------------------------
ADMINISTRATIVE EXPENSES 296,660 23.0 286,122 26.7
- ----------------------- ----------------------------------------
INCOME BEFORE INTEREST, TAXES
- -----------------------------
AND DEPRECIATION 488,477 37.9 299,997 28.2
----------------
Interest Expense (210,877) (16.4) (210,704) (19.7)
Depreciation Expense (100,372) (7.8) (98,317) (9.2)
Corporate Income Taxes 0 0.0 0
----------------------------------------
NET INCOME (LOSS) $ 177,228 13.7% $ (9,024) (.02)%
- ----------------- ========================================
See Notes to Financial Statements.
4
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
COMBINED STATEMENTS OF RETAINED (DEFICIT) AND OWNERS' (DEFICIT)
DECEMBER 31, 1998 AND 1997
--------------------------
1998 1997
---- ----
BALANCE JANUARY 1 $(1,125,825) $(1,111,800)
- -----------------
NET INCOME (LOSS) 177,228 (9,024)
WITHDRAWALS (16,507) (5,001)
------------ -----------
BALANCE DECEMBER 31 $ (965,104) $(1,125,825)
- ------------------- ============ ===========
See Notes to Financial Statements.
5
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
OPERATING ACTIVITIES: 1998 1997
- --------------------- ---- ----
Net Income (Loss) $ 177,228 $ (9,024)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
Depreciation 100,372 98,317
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(Increase) Decrease in:
Inventory (177) 2,000
Prepaid Expenses 472 (1,200)
Increase (Decrease) in:
Accounts Payable (81,092) 91,113
Sales Taxes Payable 1,266 (72)
Accrued Expenses 2,142 150
---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 200,211 181,284
---------- ---------
INVESTING ACTIVITIES:
- ---------------------
Purchase of Property and Equipment (32,842) 0
---------- ---------
FINANCING ACTIVITIES:
- ---------------------
Loans Shareholder (57,194) (116,076)
Loans - Car Care Inc. (53,206) 0
Repayment of Mortgage (35,574) (47,354)
Capital Withdrawals (16,507) (5,001)
---------- ---------
NET CASH (USED IN) FINANCING ACTIVITIES (162,481) (168,431)
- --------------------------------------- ---------- ----------
NET INCREASE IN CASH 4,888 12,853
- --------------------
CASH BEGINNING 33,077 20,224
- --------------
CASH END $ 37,965 $ 33,077
- -------- ========== ==========
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year for Interest $ 210,877 $ 210,704
---------- ----------
See Notes to Financial Statements.
6
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
NOTE 1 - DESCRIPTION OF BUSINESS
- --------------------------------
Stephen B. Properties, Inc. ("Company") was formed on April 1, 1988 and
Stephen B. Bulboff is the sole owner of the outstanding capital stock of the
Company.
The Company is in the business of operating (9) nine full service and
self-service car wash facilities at the following locations, 601 W. Girard
Avenue, Philadelphia, Pennsylvania, Route 41, Deptford, New Jersey, 327 Burnt
Mill Road, Voorhees, New Jersey, 325 N. White Horse Pike, Magnolia, New
Jersey, 2322 Island Avenue, Philadelphia, Pennsylvania, 230 MacDade Boulevard,
Yeadon, Pennsylvania, New Freedom Road, Sicklerville, New Jersey, 2575 Mt.
Ephraim Avenue, Camden, New Jersey, and 240 N. DuPont Highway, Smyrna,
Delaware. The Magnolia location is operated under the name of Soft Cloth
Shammy Shine, while the other (8) eight are operated under the name of Shammy
Shine. In addition, in March 1999, a car wash facility began operations at
4043 Germantown Avenue, Philadelphia, Pennsylvania.
Stephen Bulboff Real Estate owns the Camden, Island Avenue, Deptford and
Magnolia facilities.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Principles of Combination - The financial statements include the accounts of
Stephen B. Properties, Inc. and Stephen Bulboff Real Estate. Significant
inter-company transactions and balances have been eliminated.
Property and Improvements - Property and Improvements are carried at cost.
Depreciation is computed using the straight-line method. When assets are
retired or otherwise disposed of, the cost and related accumulated
depreciation is removed from the accounts and any resulting gain or loss is
recognized in income for the period. The cost of maintenance and repairs is
charged to income as incurred; significant renewals and betterments are
capitalized. Deductions are made for retirements resulting from renewals or
betterments.
Inventories - Ending inventories consists of supplies and are stated at cost.
7
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Cash - The Company maintains its cash balances at financial institutions.
These balances are insured by the Federal Deposit Insurance Corporation up to
$100,000.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
The Company leases its premises at the Girard Avenue, Smyrna and Yeadon
locations. The aggregate annual rental was $51,435 and $37,882 for 1998 and
1997, respectively. Also, the Company has an option to purchase the Girard
Avenue location for $175,000 any time during the lease term.
The leases along with the accompanying options expire in 2001, 2014 and 2001.
Future minimum payments by year under the aforementioned leases are as
follows:
1999 $50,850
2000 52,170
2001 49,118
2002 20,247
2003 21,057
8
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
NOTE 4 - MORTGAGE PAYABLE
- -------------------------
Allied Commercial Credit Corporation holds a mortgage on real estate owned by
Stephen B. Properties, Inc. These properties are the sites on which the
Sicklerville and Voorhees car washes are operated. As of December 31, 1998 and
1997 the balance on this mortgage was $1,133.018. In addition, Allied
Commercial Credit Corporation holds a mortgage on the real estate located in
Deptford and Magnolia, which is the site of the Deptford and Magnolia car
washes. As of December 31, 1998 and 1997, the mortgage balance was $753,474
and $766,703, respectively. As of December 31, 1998, the Company is in default
of Allied Commercial Credit Corporation Mortgages. However, the Company has
entered into a settlement agreement dated May 28, 1999, which requires full
payment of this obligation contemporaneously with the execution of the
Company's Asset Purchase Agreement with American Wash Services, Inc. (see
Subsequent Events - Note 7). The Airport location is also owned by Stephen
Bulboff and this site is encumbered by a mortgage in the amount of $58,397
(1998) and $60,090 (1997), which is payable monthly in installments of
$737.20.
Stephen Bulboff owns the Camden location, however, there is a mortgage on this
property. This mortgage bears interest at the rate of ten percent (10%). As of
December 31, 1998 and 1997, the balance is $51,107 and $66,484, respectively.
In addition, Stephen Bulboff is obligated under a Note with Fleet Credit
Corporation for equipment at the Island Avenue location. The balance of the
Note is $190,076 (1998) and $195,352 (1997).
Also, Stephen Bulboff et al incurred a $90,000 obligation on August 1, 1992,
secured by the Yeadon location under a mortgage to Jamison/Pappis/Fabiani. The
mortgage bears interest at the rate of six percent (6%). All payments that
were made represent interest expense.
9
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
NOTE 5 - INCOME TAXES
- ---------------------
The Company files its corporate income tax returns on June 30, fiscal year.
The last federal income tax return filed was for the fiscal year June 30,
1998. Pursuant to that return the Company has available net operating loss
carry-forwards of $283,407. The net operating losses principally expires in
varying amounts to 2016.
There are no corporate income tax provisions for the years ending December 31,
1998 and 1997. The Company utilized net operating loss carryforwards in 1998
while in 1997 the Company was in a loss position.
The utilization of the net operating loss in 1998 is estimated to have reduced
the available net operating loss carryforward to approximately $180,000 at
December 31, 1998.
A reconciliation between the statutory federal income tax rate (34%) and the
effective income tax expense for the two (2) year period ended December 31,
1998 follows:
1998 1997
---- ----
Statutory Federal Income Tax Rate 34% 0%
Utilization of Net Operating Loss
Carryforwards (34%) 0%
---- ----
Effective Rate 0% 0%
==== ====
10
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
NOTE 6 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Stephen B. Properties, Inc. and Stephen B. Bulboff et al own the Voorhees,
Sicklerville, Deptford, Magnolia, Camden and Island Avenue facilities. The
Girard Avenue, Smyrna, Delaware and Yeadon facilities are leased by Stephen B.
Bulboff et al from third parties.
The lease between Stephen B. Properties, Inc. and Stephen B. Bulboff et al are
on a month to month basis without formal agreement. Related party rent
expense was $130,797 and $130,847 for 1998 and 1997, respectively. Equipment
rentals was $24,328 and $28,609 for 1998 and 1997, respectively. These
amounts have been eliminated in these financial statements.
During 1998, the Company performed car wash services for Hanna Acceptance
Delaware Corporation (a company owned 100% by Stephen B. Bulboff) who in turn
entered into an agreement with Continental Airlines for those services. The
Company recorded sales in the amount of $65,000 for this activity.
NOTE 7 - SUBSEQUENT EVENTS
- --------------------------
On March 8, 1999, Stephen B. Properties, Inc. and Stephen B. Bulboff entered
into a Real Estate and Asset Purchase Agreement with American Wash Services,
Inc. (Purchase). Under the terms of the agreement Purchaser will acquire all
of the operating assets of the business (whether owned Corporately or
Individually) for 1,060,000 shares of its common stock. In addition, the
Purchaser agreed to pay, but not assume, each liability securing the operating
assets of the business limited to $1.9 million. This transaction was
partially consummated on July 1, 1999.
The $1.9 million was used to satisfy the Allied Commercial Credit Corporation
Mortgages.
11
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
At the settlement, on July 1, 1999, the Purchaser escrowed 860,000 shares
until Stephen B. Bulboff completes post closing items which include the
satisfaction of all of the obligations securing the operating assets of the
business, the payment of operating expenses of the business incurred to June
1, 1999, and the landlords consent to assignment of certain leases. As of the
opinion date of these financial statements all of the post closing items have
not been completed.
12
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
JUNE 30, 1999
-------------
EXHIBITS
- --------
COMBINED BALANCE SHEET..................................................2-3
COMBINED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED
JUNE 30, 1999........................................................4
COMBINED STATEMENT OF RETAINED (DEFICIT) AND OWNERS'
(DEFICIT)............................................................5
COMBINED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED
JUNE 30, 1999........................................................6
NOTES TO THE FINANCIAL STATEMENTS.......................................7-8
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
COMBINED BALANCE SHEET
JUNE 30, 1999
-------------
ASSETS
------
June 30,
CURRENT ASSETS: 1999
- --------------- ----
Cash in Bank $48,313
Inventory 14,962
Prepaid Expenses 8,338
Loans - Car Care Inc. 95,647
--------------
TOTAL CURRENT ASSETS 167,260
--------------
PROPERTY AND EQUIPMENT:
- -----------------------
Equipment and Buildings 3,727,705
Less: Accumulated Depreciation 2,595,524
--------------
TOTAL PROPERTY AND EQUIPMENT 1,133,181
--------------
OTHER ASSETS:
- -------------
Loans - Shareholder 0
--------------
TOTAL ASSETS $1,299,441
- ------------ ==============
See Notes to Financial Statements.
2
LIABILITIES AND SHAREHOLDERS' (OWNERS') (DEFICIT)
-------------------------------------------------
June 30,
CURRENT LIABILITIES: 1999
- -------------------- ----
Accounts Payable $59,510
Sales Taxes Payable 6,823
Accrued Expenses 2,725
Current Portion - Mortgages and Notes Payable 2,141,796
--------------
TOTAL CURRENT LIABILITIES 2,210,854
--------------
LONG-TERM LIABILITIES:
- ----------------------
Mortgages and Notes Payable 0
--------------
TOTAL LIABILITIES 2,210,854
- ----------------- --------------
SHAREHOLDERS' (OWNERS') (DEFICIT)
- ---------------------------------
Common Stock - Without Par Value - Authorized and
Issued 1,000 Shares
Retained (Deficit) 12,000
Owners' (Deficit) (923,413)
--------------
TOTAL SHAREHOLDERS' (OWNERS') (DEFICIT) (911,413)
--------------
TOTAL LIABILITIES AND SHAREHOLDERS' (OWNERS')
- ---------------------------------------------
DEFICIT $1,299,441
------- ==============
See Notes to Financial Statements.
3
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------
Six Months
Ended June 30,
1999
----
NET SALES $799,247
- ---------
COST OF SALES 357,639
- ------------- --------------
GROSS PROFIT 441,608
- ------------
ADMINISTRATIVE EXPENSES 217,398
- ----------------------- --------------
224,210
INCOME BEFORE INTEREST, TAXES
- ------------------------------
AND DEPRECIATION
----------------
Interest Expense 156,974
Depreciation Expense 51,362
Corporate Income Taxes 0
--------------
NET INCOME (LOSS) $15,874
- ----------------- ==============
See Notes to Financial Statements.
4
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
COMBINED STATEMENT OF RETAINED (DEFICIT) AND OWNERS' (DEFICIT)
JUNE 30, 1999
-------------
1999
----
BALANCE JANUARY 1 $(965,104)
- -----------------
NET INCOME FOR SIX MONTHS 15,874
CAPITAL CONTRIBUTIONS 25,817
--------------
BALANCE JUNE 30 $(923,413)
- --------------- ==============
See Notes to Financial Statements.
5
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
COMBINED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------
OPERATING ACTIVITIES: Six Months
- --------------------- Ended June 30,
1999
----
Net Income $15,874
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation 51,362
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(Increase) Decrease in:
Inventory (1,474)
Prepaid Expenses 19,533
Increase (Decrease) in:
Accounts Payable 12,972
Sales Taxes Payable 588
Accrued Expenses (12,733)
--------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 86,122
--------------
INVESTING ACTIVITIES:
- ---------------------
Purchase of Property and Equipment 0
--------------
FINANCING ACTIVITIES:
- ---------------------
Loans Shareholder 75,127
Loans - Car Care Inc. (42,441)
Repayment of Mortgage (134,277)
Capital Contributions 25,817
--------------
NET CASH (USED IN) FINANCING ACTIVITIES (75,774)
--------------
NET INCREASE IN CASH 10,348
- --------------------
CASH BEGINNING 37,965
- -------------- --------------
CASH END $48,313
- -------- ==============
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year for Interest $156,974
--------------
See Notes to Financial Statements.
6
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1999
-------------
NOTE 1 - DESCRIPTION OF BUSINESS
- --------------------------------
Stephen B. Properties, Inc. ("Company") was formed on April 1, 1988 and
Stephen B. Bulboff is the sole owner of the outstanding capital stock of the
Company.
The Company is in the business of operating (9) nine full service and
self-service car wash facilities at the following locations, 601 W. Girard
Avenue, Philadelphia, Pennsylvania, Route 41, Deptford, New Jersey, 327 Burnt
Mill Road, Voorhees, New Jersey, 325 N. White Horse Pike, Magnolia, New
Jersey, 2322 Island Avenue, Philadelphia, Pennsylvania, 230 MacDade Boulevard,
Yeadon, Pennsylvania, New Freedom Road, Sicklerville, New Jersey, 2575 Mt.
Ephraim Avenue, Camden, New Jersey, and 240 N. DuPont Highway, Smyrna,
Delaware. The Magnolia location is operated under the name of Soft Cloth
Shammy Shine, while the other (8) eight are operated under the name of Shammy
Shine. In addition, in March 1999, a car wash facility began operations at
4043 Germantown Avenue, Philadelphia, Pennsylvania.
Stephen Bulboff Real Estate owns the Camden, Island Avenue, Deptford and
Magnolia facilities.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Principles of Combination - The financial statements include the accounts of
Stephen B. Properties, Inc. and Stephen Bulboff Real Estate. Significant
inter-company transactions and balances have been eliminated.
Property and Improvements - Property and Improvements are carried at cost.
Depreciation is computed using the straight-line method. When assets are
retired or otherwise disposed of, the cost and related accumulated
depreciation is removed from the accounts and any resulting gain or loss is
recognized in income for the period. The cost of maintenance and repairs is
charged to income as incurred; significant renewals and betterments are
capitalized. Deductions are made for retirements resulting from renewals or
betterments.
Inventories - Ending inventories consists of supplies and are stated at cost.
7
STEPHEN B. PROPERTIES, INC. AND
STEPHEN BULBOFF REAL ESTATE
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1999
-------------
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Cash - The Company maintains its cash balances at financial institutions.
These balances are insured by the Federal Deposit Insurance Corporation up to
$100,000.
NOTE 3 - SUBSEQUENT EVENTS
- --------------------------
On March 8, 1999, Stephen B. Properties, Inc. and Stephen B. Bulboff entered
into a Real Estate and Asset Purchase Agreement with American Wash Services,
Inc. (Purchase). Under the terms of the agreement Purchaser will acquire all
of the operating assets of the business (whether owned Corporately or
Individually) for 1,060,000 shares of its common stock. In addition, the
Purchaser agreed to pay, but not assume, each liability securing the operating
assets of the business limited to $1.9 million. This transaction was
partially consummated on July 1, 1999.
The $1.9 million was used to satisfy the Allied Commercial Credit Corporation
Mortgages.
At the settlement, on July 1, 1999, the Purchaser escrowed 860,000 shares
until Stephen B. Bulboff completes post closing items which include the
satisfaction of all of the obligations securing the operating assets of the
business, the payment of operating expenses of the business incurred to
June 1, 1999, and the landlords consent to assignment of certain leases. As of
the opinion date of these financial statements all of the post closing items
have not been completed.
8
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
AND THE SIX MONTHS ENDED JUNE 30, 1999
The following unaudited pro forma consolidated statements of operations for the
year ended December 31, 1998 and the six months ended June 30, 1999 give effect
to (i) the acquisition on May 17, 1999 of all the outstanding stock of Colonial
Full Service Car Wash, Inc. ("Colonial") by Mace Security International, Inc.
(the "Registrant" or "Mace") for total consideration paid by Mace of
approximately $15.1 million; (ii) the acquisition of substantially all of the
assets of Genie Car Wash, Inc. of Austin, Genie Car Care Center, Inc., and Genie
Car Service Center, Inc. (collectively, "Genie") from Genie and Cornett Limited
Partnership (collectively with Genie, the "Sellers") for total consideration of
approximately $11,750,000; (iii) the acquisition of the stock of American Wash
Services, Inc. ("AWS") from Louis D. Paolino, Jr. and Red Mountain Holdings,
Ltd. for total consideration of approximately $8,153,000; and (iv) the
acquisition of substantially all of the assets of Stephen Bulboff and Stephen B.
Properties, Inc. ("Bulboff") for total consideration of approximately
$3,744,000.
The following unaudited pro forma consolidated statement of operations for the
year ended December 31, 1998 and the six months ended June 30, 1999 gives effect
to the aforementioned transactions as if the transactions had occurred on
January 1, 1998. The following unaudited pro forma financial data may not be
indicative of what the results of operations or financial position of Mace
Security International, Inc. would have been, had the transactions to which such
data gives effect had been completed on the date assumed, nor are such data
necessarily indicative of the results of operations or financial position of
Mace Security International, Inc. that may exist in the future. The following
unaudited pro forma information should be read in conjunction with the notes
thereto, the other pro forma financial statements and notes thereto, and the
consolidated financial statements and notes of Mace Security International, Inc.
as of December 31, 1998 and for each of the three years in the period then ended
and the historical financial statements of Bulboff appearing elsewhere in this
filing.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
(Dollars in thousands, except shares and per share data)
Colonial Full American
Mace Security Service Car Genie Wash
International, Inc. Wash, Inc. Car Wash Services, Inc.
------------------- ------------- ------------ --------------
Net sales $ 2,404 $ 10,697 $ 6,553 $ 645
Cost of sales 1,230 9,248 4,708 453
Selling, general and administrative 1,719 955 1,914 126
------------------- ------------- ------------ --------------
Operating (loss) income (545) 494 (69) 66
Other income (expense):
Interest income 137 - 5 -
Interest expense, net (95) (528) - -
Other income 221 53 6 -
------------------- ------------- ------------ --------------
(Loss) income from operations before
income tax expense (282) 19 (58) 66
Income tax expense (4) (19) - (16)
------------------- ------------- ------------ --------------
Net (loss) income $ (286) $ - $ (58) $ 50
=================== ============= ============ ==============
Net loss per common share: $ (0.04)
===================
Weighted average number of
common shares outstanding 6,987,127
===================
Stephen Bulboff
and Stephen B. Pro Forma Pro Forma
Properties, Inc. Adjustments Consolidated
---------------- --------------- ---------------
Net sales $ 1,288 $ - $ 21,587
Cost of sales 603 (297) (1) 15,933
79 (2)
(32) (7)
(59) (8)
Selling, general and administrative 297 (569) (4) 4,082
(360) (5)
---------------- --------------- ---------------
Operating (loss) income 388 1,238 1,572
Other income (expense):
Interest income - - 142
Interest expense, net (211) (380) (6) (1,214)
Other income - - 280
---------------- --------------- ---------------
(Loss) income from operations before
income tax expense 177 858 780
Income tax expense - - (39)
---------------- --------------- ---------------
Net (loss) income $ 177 $ 858 $ 741
================ =============== ===============
Net loss per common share: $ 0.07
===============
Weighted average number of
common shares outstanding 10,459,822 (3)
===============
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999
(Dollars in thousands, except shares and per share data)
Colonial Full American
Mace Security Service Car Genie Wash
International, Inc. Wash, Inc. Car Wash Services, Inc.
------------------- -------------- ----------- ----------------
Net sales $ 4,087 $ 4,050 $ 2,748 $ 1,143
Cost of sales 2,516 3,239 2,004 713
Selling, general and administrative 1,569 741 870 430
Restructuring and change in control charges 1,519 - - -
------------------- -------------- ----------- ----------------
Operating (loss) income (1,517) 70 (126) -
Other income (expense):
Interest expense, net (27) (191) 1 -
Other income (expense) (16) 23 5 -
------------------- -------------- ----------- ----------------
(Loss) income
before income tax expense (1,560) (98) (120) -
Income tax expense (benefit) (350) - - -
------------------- -------------- ----------- ----------------
Net (loss) income $ (1,210) $ (98)$ (120)$ -
=================== ============== =========== ================
Net loss income per common share $ (0.16)
===================
Weighted average number of
common shares outstanding 7,454,292
===================
Stephen Bulboff
and Stephen B. Pro Forma Pro Forma
Properties, Inc. Adjustments Consolidated
---------------- ----------- ------------
Net sales $ 799 $ - $ 12,827
Cost of sales 409 (119)(1) 8,717
48 (2)
(62)(7)
(31)(8)
Selling, general and administrative 217 (232)(4) 3,400
(195)(5)
Restructuring and change in control charges - 1,519
---------------- ----------- ------------
Operating (loss) income 173 591 (809)
Other income (expense):
Interest expense, net (157) (144)(6) (518)
Other income (expense) - - 12
---------------- ----------- ------------
(Loss) income
before income tax expense 16 447 (1,315)
Income tax expense (benefit) - - (350)
---------------- ----------- ------------
Net (loss) income $ 16 $ 447 $ (965)
================ =========== ============
Net loss income per common share $ (0.09)
============
Weighted average number of
common shares outstanding 10,496,172 (3)
============
Notes to Unaudited Pro Forma Consolidated Statement of Operations Adjustments
The Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended
December 31, 1998 has been adjusted to reflect the following:
(1) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of
Colonial had been completed on January 1, 1998, net of historical
depreciation and amortization expense of Colonial.
(2) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of Genie
had been completed on January 1, 1998, net of historical depreciation and
amortization expense of Genie.
(3) For purpose of determining pro forma earnings per share, the issuance of
1,251,000, 533,333, 628,362, and 1,060,000 shares, respectively, of
unregistered shares of common stock to effect the acquisition of Colonial,
Genie, AWS, and Bulboff were issued to be outstanding from January 1, 1998
by Mace.
(4) To eliminate intercompany administrative charges of $569,000 related
directly to cost sharing arrangements provided by Genie's prior parent,
which were terminated as a result of the purchase transaction. Such
administrative services were absorbed by excess capacity of the Company and
the Company has not hired additional employees to perform these
administrative services.
(5) To reflect the elimination of intercompany rental expense of $360,000 from
Genie's prior parent terminated as a result of the purchase transaction.
(6) To record additional interest expense of $380,000 resulting from a $4.75
million promissory note issued to Genie's prior parent to consummate the
acquisition of Genie.
(7) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of AWS
had been completed on January 1, 1998, net of historical depreciation and
amortization expense of AWS.
(8) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of
Bulboff had been completed on January 1, 1998, net of historical
depreciation and amortization expense of Bulboff.
The Unaudited Pro Forma Consolidated Statement of Operations for the Six Months
Ended June 30, 1999 has been adjusted to reflect the following:
(1) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of
Colonial had been completed on January 1, 1999, net of historical
depreciation and amortization expense of Colonial.
(2) To adjust depreciation and amortization expense for the change in the basis
of property and
equipment and intangible assets as if the purchase of Genie had been
completed on January 1, 1999, net of historical depreciation and
amortization expense of Colonial.
(3) For purpose of determining pro forma earnings per share, the weighted
affect of the issuance of 1,251,000, 533,333, 628,362, and 1,060,000
shares, respectively, of unregistered shares of common stock to effect the
acquisition of Colonial, Genie, AWS, and Bulboff were issued to be
outstanding from January 1, 1999 by Mace.
(4) To eliminate intercompany administrative charges of $232,000 related
directly to cost sharing arrangements provided by Genie's prior parent,
which were terminated as a result of the purchase transaction. Such
administrative services were absorbed by excess capacity of the Company and
the Company has not hired additional employees to perform these
administrative services.
(5) To reflect the elimination of intercompany rental expense of $195,000 from
Genie's prior parent terminated as a result of the purchase transaction.
(6) To record additional interest expense of $144,000 resulting from a $4.75
million promissory note issued to Genie's prior parent to consummate the
acquisition of Genie.
(7) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of AWS
had been completed on January 1, 1999, net of historical depreciation and
amortization expense of AWS.
(8) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of
Bulboff had been completed on January 1, 1999, net of historical
depreciation and amortization expense of Bulboff.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(Dollars in thousands)
American Stephen Bulboff
Mace Security Wash and Stephen B. Pro Forma Pro Forma
International, Inc. Services, Inc. Properties, Inc. Adjustments Consolidated
------------------- -------------- ---------------- ----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,061 $ 70 $ 48 $ (4,688) (1) $ 1,491
Accounts receivable, net 1,099 2 -- 1,101
Inventories 1,790 36 15 1,841
Deferred income taxes 714 -- -- 714
Prepaid expenses and other 811 113 104 1,028
-------- -------- -------- -------- --------
Total current assets 10,475 221 167 (4,688) 6,175
Net assets of discontinued operations 245 -- -- 245
Property and equipment, net 21,247 3,888 1,132 2,312 (1) 31,106
2,527 (2)
Intangibles, net 5,457 -- -- 991 (1) 6,448
Other assets 1,770 1,424 -- -- 3,194
-------- -------- -------- -------- --------
Total Assets $ 39,194 $ 5,533 $ 1,299 $ 1,142 $ 47,168
======== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,243 $ 376 $ 60 $ -- $ 1,679
Accrued expenses 2,325 129 11 -- 2,465
Current portion of long term debt 10,066 161 2,140 (240) (2) 12,127
-------- -------- -------- -------- --------
Total current liabilities 13,634 666 2,214 (240) 16,271
Deferred income taxes 1,412 16 -- 1,428
Long term debt, less current portion 939 -- -- 939
Other long term liabilities -- -- 2,114 (1) 2,114
-------- -------- -------- -------- --------
Total liabilities 15,985 682 2,211 2,114 20,752
Commitments and contingencies
Stockholders' equity:
Common stock 96 -- 12 6 (1) 113
(1) (2)
Additional paid-in capital 28,549 4,800 -- (3,454) (1) 31,739
1,844 (2)
Treasury stock (52) -- -- -- (52)
(Accumulated deficit) retained earnings (5,384) 51 (924) (51) (1) (5,384)
924 (2)
-------- -------- -------- -------- --------
Total stockholders' equity 23,209 4,851 (912) (732) 26,416
-------- -------- -------- -------- --------
Total liabilities and
stockholders' equity $ 39,194 $ 5,533 $ 1,299 $ 1,142 $ 47,168
======== ======== ======== ======== ========
Notes to Unaudited Pro Forma Consolidated Balance Sheet Adjustments
The unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1999 has been
adjusted to reflect the following:
(1) On March 26, 1999, the Company entered into a merger agreement for the
pending acquisitions of all the outstanding stock of American Wash
Services, Inc. for total cash consideration to be paid by Mace Security
International, Inc. of $4,688,000 and the issuance of 628,362 unregistered
shares of Mace common stock. Additionally, Mace will issue to certain of
new management assignable warrants to purchase 1,570,000 shares of common
stock at a purchase price of $1.375 per share and warrants to purchase an
additional 250,000 shares of common stock at a purchase price of $2.50 per
share. The terms of the warrants are more fully described in the Merger
Agreement. The acquisition is anticipated to be accounted for under the
purchase method. Pursuant to the terms of the merger agreement, all
property, equipment, other assets and working capital will be acquired and
all liabilities will be assumed. The allocation of the purchase price is
preliminary. The actual allocation will be based on management's final
evaluation of such assets and liabilities. The excess of the purchase
price over the historic cost of net assets was allocated to goodwill;
however, this excess may ultimately be allocated to other specific tangible
and intangible assets. The final allocation of the purchase price and the
resulting effect on operations may differ significantly from the pro forma
amounts included herein. The preliminary allocation of the purchase price
is as follows:
Property and equipment...................................... $7,191,000
Current assests acquired.................................... 221,000
Other assets acquired....................................... 1,424,000
Other liabilities........................................... (682,000)
----------
$8,154,000
==========
(2) On July 1, 1999, the Company, through a wholly owned subsidiary, acquired
all of the car wash related assets of Stephen Bulboff and Stephen B.
Properties, Inc. ("Bulboff") pursuant to the terms of a Real Estate and
Asset Purchase Agreement dated March 8, 1999 for an aggregate purchase
price of 1,060,000 unregistered shares of the Company's common stock, par
value $.01 per share plus cash of $1,900,000 from working capital.
Pursuant to the terms and conditions of the Agreement, the Registrant
purchased all of the assets of the Sellers used in the business of
operating 10 full service car washes in Pennsylvania, Delaware and New
Jersey. The acquisition is anticipated to be accounted for using the
"purchase" method of accounting. The allocation of the purchase price is
preliminary. The actual allocation will be based on management's final
evaluation of such assets and liabilities. The excess of the purchase
price over the historic cost of net assets was allocated to goodwill;
however, this excess may ultimately be allocated to other specific tangible
and intangible assets. The final allocation of the purchase price and the
resulting effect on operations may differ significantly from the pro forma
amounts included herein. The preliminary allocation of the purchase price
is as follows:
Property and equipment...................................... $3,659,000
Current assests acquired.................................... 167,000
Other liabilities........................................... (82,000)
----------
$3,744,000
==========
EXHIBIT INDEX
Exhibit Description
No. -----------
- ---
23.1 Consent of Burton Segal & Company