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: August 25, 1999
(Date of Earliest Event Reported)
MACE SECURITY INTERNATIONAL, INC.
(Exact name of Registrant as Specified in its Charter)
Delaware
(State of Incorporation)
0-22810
(Commission File Number)
03-0311630
(IRS Employer Identification No.)
1000 Crawford Place, Suite 400, Mount Laurel, New Jersey 08054
(Address of Principal Executive Offices)
(856) 778-2300
(Registrant's Telephone Number)
Item 2. Acquisition of 50's Classic Car Wash of Lubbock, Inc. and CRCD, Inc.
On August 25, 1999, Mace Security International, Inc., a Delaware
corporation (the "Company" or "Registrant"), acquired all of the outstanding
stock of 50's Classic Car Wash of Lubbock, Inc. (50's Classic) and CRCD, Inc.
(collectively the "Companies") pursuant to the terms of a Stock Exchange
Agreement dated August 13, 1999, by and between the Registrant on one hand, and
Joe Crawford, Ron Clark, Robert Duggan, Jr., and First National Bank or Abilene,
as Trustee of the Wayne B. Ramsey, Jr., and Mira Marie Ramsey Family Trust No. 2
(the "Sellers") on the other hand. . Pursuant to the terms and conditions of
the Agreement, the Registrant purchased all of the outstanding shares of stock
of the Sellers who are in the business of operating a car wash company at 2808
50th Street, in Lubbock, Texas. Sellers are not affiliated with the Registrant
nor with any of the Registrant's subsidiaries. The description of the
acquisition transaction set forth herein is qualified in its entirety by
reference to the Agreement which is incorporated as Exhibit 2.1.
At Closing, the Company delivered to Sellers shares of the Company's
common stock having a value of $819,364, each share being valued at $8.9375 per
share. No cash was paid to the shareholders for the acquisition of the shares
of the Companies. The acquisition is to be accounted for using the "pooling of
interests" method of accounting.
At the closing, the Registrant assumed approximately $616,703.47 of
outstanding indebtedness of the Companies. The acquisition includes all of the
assets and liabilities, including the real estate, to operate the car wash
facility. The Registrant intends to continue to use the acquired assets in the
business of operating a car wash in Lubbock, Texas.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of business acquired.
Independent Auditor's Report
Combined Balance Sheets as of December 31, 1998 and 1997
Combined Statements of Income for the Two Years Ended December 31, 1998
and 1997
Combined Statements of Common Stock and Equity for the Two Years Ended
December 31, 1998 and 1997
Combined Statements of Cash Flows for the Two Years Ended December 31,
1998 and 1997
Notes to Combined Financial Statements
Combined Balance Sheets as of June 30, 1999 and June 30, 1998 (Unaudited)
Combined Statements of Income for the Six Months Ended June 30, 1999
and 1998 (Unaudited)
Combined Statements of Common Stock and Equity for the Six Months
Ended June 30, 1999 and 1998 (Unaudited)
Combined Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998 (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 Stock Exchange Agreement dated as of August 13, 1999, by and between Joe
Crawford, Ron Clark, Robert Duggan, Jr., and First National Bank of
Abilene, as Trustee of the Wayne V. Ramsey, Jr., and Mira Marie Ramsey
Family Trust No. 2 on the one hand, and Mace Security International, Inc.
on the other hand.
*99 Press Release dated August 31, 1999.
23.1 Consent of D. Williams & Co., P.C.
- ------------------------------------------------------------------------------
* Incorporated by reference
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 5, 1999 MACE SECURITY INTERNATIONAL, INC.
By:/s/ Gregory M. Krzemien
-----------------------
Gregory M. Krzemien
Chief Financial Officer and Treasurer
50'S CLASSIC CAR WASH
AND CRCD, INC.
Table of Contents
Page
number
------
Independent Auditors' Report 1
Combined Balance Sheets 2
Combined Statements of Income 4
Combined Statements of Common Stock and Equity 5
Combined Statements of Cash Flows 6
Notes to Combined Financial Statements 8
* * * * * * * * * * * * * * *
The Board of Directors
50's Classic Car Wash
and CRCD, Inc.
Independent Auditors' Report
We have audited the accompanying combined balance sheets of 50's Classic Car
Wash and CRCD, Inc. (Companies) as of December 31, 1998 and 1997 and the related
combined statements of income, common stock and equity, and cash flows for the
years then ended. The combined financial statements include the financial
statements of 50's Classic Car Wash and CRCD, Inc., which are related through
common ownership and management. These combined financial statements are the
responsibility of the Companies' management. Our responsibility is to express
an opinion on these combined 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the Companies as of
December 31, 1998 and 1997, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ D. Williams & Co., P.C.
September 14, 1999
50'S CLASSIC CAR WASH
AND CRCD, INC.
Combined Balance Sheets
December 31, 1998 and 1997
Assets
------
1998 1997
--------- -------
Current assets:
Cash and cash equivalents $ 8,772 10,560
Accounts receivable 2,728 4,785
Prepaid expenses 7,599 6,174
Inventories 7,804 13,105
-------- -------
26,903 34,624
-------- -------
Property, plant and equipment:
Plant and equipment 742,945 706,525
Less: accumulated depreciation 138,849 98,211
-------- -------
604,096 608,314
Land 95,000 95,000
-------- -------
699,096 703,314
-------- -------
Other assets:
Deposits 50 50
-------- -------
$726,049 737,988
======== =======
The accompanying notes are an integral part of these financial statements.
2
Liabilities, Common Stock and Equity
------------------------------------
1998 1997
--------- --------
Current liabilities:
Accounts payable $ 6,046 7,949
Current maturities of notes payable 43,050 39,456
Accrued expenses 9,699 17,226
-------- -------
58,795 64,631
-------- -------
Long-term liabilities:
Notes payable 583,886 619,649
-------- -------
642,681 684,280
-------- -------
Stockholders' Equity:
Common Stock 2,000 2,000
Additional paid-in capital 78,000 78,000
Retained earnings (deficit) 3,368 (26,292)
-------- -------
83,368 53,708
-------- -------
$726,049 737,988
======== =======
3
50'S CLASSIC CAR WASH
AND CRCD, INC.
Combined Statements of Income
Years ended December 31, 1998 and 1997
1998 1997
---------- --------
Operating revenues:
Car wash and detail $705,191 628,494
Other services
Fuel 50,219 84,537
Merchandise 24,120 22,148
-------- -------
779,530 735,179
-------- -------
Cost of sales:
Car wash and detail 336,255 306,988
Other services
Fuel 44,989 74,006
Merchandise 15,046 15,401
-------- -------
396,290 396,395
-------- -------
383,240 338,784
-------- -------
Operating expense:
Depreciation 40,638 39,308
Sales, general and administrative 210,416 193,891
-------- -------
251,054 233,199
-------- -------
Operating income 132,186 105,585
-------- -------
Other revenue and (expense):
Interest expense (60,917) (69,181)
Other income 5,391 1,104
-------- -------
(55,526) (68,077)
-------- -------
Net income $ 76,660 37,508
======== =======
The accompanying notes are an integral part of these financial statements.
4
50'S CLASSIC CAR WASH
AND CRCD, INC.
Combined Statements of Changes in Stockholders' Equity
Years ended December 31, 1998 and 1997
Additional Retained
Common Paid-in Earnings
Stock Capital (Deficit) Total
------- ---------- --------- --------
Balance at January 1, 1997 $2,000 78,000 (53,800) 26,200
Net income - - 37,508 37,508
Distribution - - (10,000) (10,000)
------- ---------- ------- -------
Balance at December 31, 1997 2,000 78,000 (26,292) 53,708
Net income - - 76,660 76,660
Distribution - - (47,000) (47,000)
------- ---------- ------- -------
Balance at December 31, 1998 $2,000 78,000 3,368 83,368
======= ========== ======= =======
The accompanying notes are an integral part of these financial statements.
5
50'S CLASSIC CAR WASH
AND CRCD, INC.
Combined Statements of Cash Flows
Years ended December 31, 1998 and 1997
1998 1997
---------- -------
Cash Flows from Operating Activities:
Net income (loss) $ 76,660 37,508
-------- ------
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation 40,638 39,308
Changes in assets and liabilities:
Decrease in accounts receivable 2,057 3,622
Decrease in inventory 5,301 2,428
(Increase) in prepaid expenses (1,425) (2,671)
(Decrease) in accounts payable (1,903) (1,664)
Increase (decrease) in accrued expenses (7,527) 5,493
-------- ------
Total adjustments 37,141 46,516
-------- ------
Net cash provided by operating
activities 113,801 84,024
-------- ------
Cash Flows from Investing Activities:
Purchase of property, plant and equipment (36,420) (3,661)
-------- ------
Net cash (used) by investing activties (36,420) (3,661)
-------- ------
The accompanying notes are an integral part of these financial statements.
6
1998 1997
---------- --------
Cash Flows from Financing Activities:
Shareholder distribution (47,000) (10,000)
Proceeds from short-term debt 10,000 10,000
Repayments of short-term debt (5,000) (45,126)
Repayment of long-term debt (37,169) (27,390)
-------- -------
Net cash (used) by financing activities (79,169) (72,516)
-------- -------
Net increase (decrease) in cash and cash equivalents (1,788) 7,847
Cash and cash equivalents at beginning of year 10,560 2,713
-------- -------
Cash and cash equivalents at end of year $ 8,772 10,560
======== =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 60,766 69,181
======== =======
7
50'S CLASSIC CAR WASH
AND CRCD, INC.
Notes to Combined Financial Statements
December 31, 1998 and 1997
(1) Summary of Significant Accounting Policies
------------------------------------------
Nature of Operations
--------------------
The accompanying combined financial statements include the accounts of 50's
Classic Car Wash and CRCD, Inc. These Companies are related through common
ownership and management. Management believes that the presentation of
combined financial statements for the Companies is appropriate based upon
the agreement to sell substantially all of the Companies assets as
discussed in Note 6. All significant intercompany balances and
transactions have been eliminated in combination.
50's Classic Car Wash owns and operates a car wash in Lubbock, Texas and
CRCD, Inc. owns land, buildings and equipment which is leased to 50's
Classic Car Wash. The car wash provides a range of services which include
full service car wash, gasoline sales and a custom detail shop.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents for purposes of the statement of cash flows are
as follows:
1998 1997
------- ------
Cash in bank and on hand $8,772 10,560
====== ======
Inventories
-----------
Inventories consist of fuel, soap, car wash chemicals and merchandise.
Fuel is stated at lower cost (first in - first out) or market. All other
inventory is stated at an estimated value based on sales. Inventories by
major categories are as follows:
continued
8
50'S CLASSIC CAR WASH
AND CRCD, INC.
Notes to Combined Financial Statements
1998 1997
------- ------
Gasoline $4,358 8,531
Concessions 471 300
Merchandise 950 2,080
Soap and car wash chemicals 2,025 2,194
------ ------
$7,804 13,105
====== ======
Property, Plant and Equipment and Related Depreciation
------------------------------------------------------
Plant and equipment are stated at cost less accumulated depreciation. The
straight-line method is used to calculate depreciation with the estimated
useful lives as follows:
Buildings 40 years
Furniture, fixtures and equipment 10 - 15 years
A summary of property, plant and equipment follows:
1998 1997
--------- -------
Buildings $180,857 171,330
Furniture, fixtures and equipment 562,088 535,195
-------- -------
$742,945 706,525
======== =======
Maintenance, repairs and minor renewals are charged to operations during
the year incurred. Major renewals and betterments are charged to the
property accounts. Upon the sale or retirement of property, plant and
equipment, the cost thereof and the accumulated depreciation are removed
from the accounts. Gains or losses on the sale or retirement of property,
plant and equipment are credited or charged to operations.
Common Stock and Equity
-----------------------
Each of the Companies has 1,000,000 shares of common stock authorized with
a par value of $1 per share and carries voting rights of one vote per
share. At December 31, 1998 and 1997 the shares issued and outstanding are
as follows:
1998 1997
------------------------------------
# shares Value # shares Value
-------- ------- -------- -------
50's Classic Car Wash 1,000 $1,000 1,000 $1,000
CRCD, Inc. 1,000 1,000 1,000 1,000
----- ------ ----- ------
2,000 $2,000 2,000 $2,000
===== ====== ===== ======
continued
9
50'S CLASSIC CAR WASH
AND CRCD, INC.
Notes to Combined Financial Statements
(2) Accounts Receivable
-------------------
Accounts receivable are stated at estimated net realized value. 50's
Classic Car Wash extends credit to various businesses in the Lubbock area
and accounts receivable related to this were $2,728 and $4,785 at December
31, 1998 and 1997, respectively.
The Companies sell fuel to customers utilizing cash and credit card
transactions. The Companies purchase substantially all of their fuel from
Benton Oil Company, a petroleum marketer. The Companies also process all
credit card transactions through Benton Oil Company. The credit card
receipts are netted against fuel purchases at the end of each period
creating either a receivable or payable on the Companies accounts.
(3) Notes Payable
-------------
A schedule of notes payable is as follows:
1998 1997
--------- -------
First National Bank of Abilene for
CRCD, Inc. Note has an interest rate
of 8.75% and is collateralized by
equipment and inventory. Due in
monthly payments of $7,900 for
principal and interest through
June 2008. $621,936 659,105
First National Bank of Abilene for
50's Classic Car Wash readvancing line
of credit. Interest is charged at 8.75%
and is payable monthly. Line of credit
is collateralized by equipment and
inventory. 5,000 -
-------- -------
626,936 659,105
Less current portion 43,050 39,456
-------- -------
$583,886 619,649
======== =======
continued
10
50'S CLASSIC CAR WASH
AND CRCD, INC.
Notes to Combined Financial Statements
The aggregate contractual maturities of long-term debt for the five
subsequent years ending December 31, 2003 are as follows:
2000 $ 46,972
2001 51,252
2002 55,920
2003 61,014
2004 and thereafter 368,728
--------
$583,886
========
(4) Federal income taxes
--------------------
The Companies are taxed as S Corporations under the Internal Revenue Code
and applicable state statutes. Under an S Corporation election, the income
of the corporation flows through to the stockholders to be taxed at the
individual level rather than the corporate level. Accordingly, the
Companies will have no tax liability (with limited exceptions) as long as
the S Corporation election is in effect.
(5) Commitments
-----------
On August 25, 1999, Joe Crawford, Ron Clark, Robert Duggan, Jr. and First
National Bank as trustee of the Wayne B. Ramsey, Jr. and Mira Marie Ramsey
Family Trust entered into an agreement to sell all of the outstanding stock
of the Companies' assets to Mace Security International, Inc. for $819,369
of Mace Security stock.
11
50'S CLASSIC CAR WASH
AND CRCD, INC.
Combined Balance Sheets
June 30, 1999 and 1998
(Unaudited)
Assets
------
1999 1998
----------------- -----------------
Current assets:
Cash and cash equivalents $ 11,194 32,919
Accounts receivable 1,755 4,193
Prepaid expenses - 849
Inventories 11,717 12,427
-------- -------
24,666 50,388
-------- -------
Property, plant and equipment:
Plant and equipment 742,945 716,637
Less: accumulated depreciation 160,121 118,183
-------- -------
582,824 598,454
Land 95,000 95,000
-------- -------
677,824 693,454
-------- -------
Other assets:
Deposits 50 50
-------- -------
$702,540 743,892
======== =======
12
Liabilities, Common Stock and Equity
------------------------------------
1999 1998
----------------- ----------------
Current liabilities:
Accounts payable $ 16,955 3,982
Current maturities of notes payable 41,214 37,773
Accrued expenses 15,378 17,745
-------- -------
73,547 59,500
-------- -------
Long-term liabilities:
Notes payable 567,124 601,751
-------- -------
640,671 661,251
-------- -------
Stockholders' Equity:
Common Stock 2,000 2,000
Additional paid-in capital 78,000 78,000
Retained earnings (deficit) (18,131) 2,641
-------- -------
61,869 82,641
-------- -------
$702,540 743,892
======== =======
13
50'S CLASSIC CAR WASH
AND CRCD, INC.
Combined Statements of Income
Six months ended June 30, 1999 and 1998
(Unaudited)
1999 1998
----------------- -----------------
Operating revenues:
Car wash and detail $359,931 370,833
Other services
Fuel 24,369 28,244
Merchandise 12,610 12,603
-------- -------
396,910 411,680
-------- -------
Cost of sales:
Car wash and detail 183,247 172,620
Other services
Fuel 21,421 25,738
Merchandise 6,797 6,825
-------- -------
211,465 205,183
-------- -------
185,445 206,497
-------- -------
Operating expense:
Depreciation 21,272 19,972
Sales, general and administrative 123,751 101,064
-------- -------
145,023 121,036
-------- -------
Operating income 40,422 85,461
-------- -------
Other revenue and (expense):
Interest expense (27,028) (31,018)
Other income 3,165 4,490
-------- -------
(23,863) (26,528)
-------- -------
Net income $ 16,559 58,933
======== =======
14
50'S CLASSIC CAR WASH
AND CRCD, INC.
Combined Statements of Changes in Stockholders' Equity
Six months ended June 30, 1999 and 1998
(Unaudited)
Additional Retained
Common Paid-in Earnings
Stock Capital (Deficit) Total
-------------- ------------ ------------- --------------
Balance at January 1, 1998 $2,000 78,000 (26,292) 53,708
Net income - - 58,933 58,933
Distribution - - (30,000) (30,000)
------ ------ ------- -------
Balance at June 30, 1998 2,000 78,000 2,641 82,641
====== ====== ======= =======
Balance at January 1, 1999 $2,000 78,000 3,368 83,368
Net income - - 16,559 16,559
Distribution - - (38,058) (38,058)
------ ------ ------- -------
Balance at June 30, 1999 $2,000 78,000 (18,131) 61,869
====== ====== ======= =======
15
50'S CLASSIC CAR WASH
AND CRCD, INC.
Combined Statements of Cash Flows
Six months ended June 30, 1999 and 1998
(Unaudited)
1999 1998
----------------- ----------------
Cash Flows from Operating Activities:
Net income $16,559 58,933
------- -------
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 21,272 19,972
Changes in assets and liabilities:
Decrease in accounts receivable 973 592
(Increase) decrease in inventory (3,913) 678
Decrease in prepaid expenses 7,599 5,325
Increase (decrease) in accounts payable 10,909 (3,967)
Increase in accrued expenses 5,679 519
------- -------
Total adjustments 42,519 23,119
------- -------
Net cash provided by operating
activities 59,078 82,052
------- -------
Cash Flows from Investing Activities:
Purchase of property, plant and equipment - (10,112)
------- -------
Net cash (used) by investing activties - (10,112)
------- -------
16
1999 1998
----------------- ----------------
Cash Flows from Financing Activities:
Shareholder distribution (38,058) (30,000)
Repayments of short-term debt (5,000) -
Repayment of long-term debt (13,598) (19,581)
-------- -------
Net cash (used) by financing activities (56,656) (49,581)
Net increase in cash and cash equivalents 2,422 22,359
Cash and cash equivalents at beginning of year 8,772 10,560
-------- -------
Cash and cash equivalents at end of period $ 11,194 32,919
======== =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 27,355 30,849
======== =======
17
50'S CLASSIC CAR WASH
AND CRCD, INC.
Notes to Combined Financial Statements
June 30, 1999 and 1998
(1) Summary of Significant Accounting Policies
------------------------------------------
Nature of Operations
--------------------
The accompanying combined financial statements include the accounts of 50's
Classic Car Wash and CRCD, Inc. These Companies are related through common
ownership and management. Management believes that the presentation of
combined financial statements for the Companies is appropriate based upon
the agreement to sell substantially all of the Companies assets as
discussed in Note 6. All significant intercompany balances and
transactions have been eliminated in combination.
50's Classic Car Wash owns and operates a car wash in Lubbock, Texas and
CRCD, Inc. owns land, buildings and equipment which is leased to 50's
Classic Car Wash. The car wash provides a range of services which include
full service car wash, gasoline sales and a custom detail shop.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents for purposes of the statement of cash flows are
as follows:
1999 1998
-------- ------
Cash in bank and on hand $11,194 32,919
======= ======
Inventories
-----------
Inventories consist of fuel, soap, car wash chemicals and merchandise.
Fuel is stated at lower cost (first in - first out) or market. All other
inventory is stated at an estimated value based on sales. Inventories by
major categories are as follows:
continued
18
50'S CLASSIC CAR WASH
AND CRCD, INC.
Notes to Combined Financial Statements
1999 1998
-------- ------
Gasoline $ 6,923 6,198
Concessions 1,406 1,068
Merchandise 55 1,982
Soap and car wash chemicals 3,333 3,179
------- ------
$11,717 12,427
======= ======
Property, Plant and Equipment and Related Depreciation
------------------------------------------------------
Plant and equipment are stated at cost less accumulated depreciation. The
straight-line method is used to calculate depreciation with the estimated
useful lives as follows:
Buildings 40 years
Furniture, fixtures and equipment 10 - 15 years
A summary of property, plant and equipment follows:
1999 1998
--------- -------
Buildings $180,857 171,330
Furniture, fixtures and equipment 562,088 545,307
-------- -------
$742,945 716,637
======== =======
Maintenance, repairs and minor renewals are charged to operations during
the year incurred. Major renewals and betterments are charged to the
property accounts. Upon the sale or retirement of property, plant and
equipment, the cost thereof and the accumulated depreciation are removed
from the accounts. Gains or losses on the sale or retirement of property,
plant and equipment are credited or charged to operations.
Common Stock and Equity
-----------------------
Each of the Companies has 1,000,000 shares of common stock authorized with
a par value of $1 per share and carries voting rights of one vote per
share. At June 30, 1999 and 1998 the shares issued and outstanding are as
follows:
1999 1998
------------------------------------
# shares Value # shares Value
-------- ------- -------- -------
50's Classic Car Wash 1,000 $1,000 1,000 $1,000
CRCD, Inc. 1,000 1,000 1,000 1,000
----- ------ ----- ------
2,000 $2,000 2,000 $2,000
===== ====== ===== ======
continued
19
50'S CLASSIC CAR WASH
AND CRCD, INC.
Notes to Combined Financial Statements
(2) Accounts Receivable
-------------------
Accounts receivable are stated at estimated net realized value. 50's
Classic Car Wash extends credit to various businesses in the Lubbock area
and accounts receivable related to this were $1,755 and $4,193 at June 30,
1999 and 1998, respectively.
The Companies sell fuel to customers utilizing cash and credit card
transactions. The Companies purchase substantially all of their fuel from
Benton Oil Company, a petroleum marketer. The Companies also process all
credit card transactions through Benton Oil Company. The credit card
receipts are netted against fuel purchases at the end of each period
creating either a receivable or payable on the Companies accounts.
(3) Notes Payable
-------------
A schedule of notes payable at June 30, 1999 and 1998 is as follows:
1999 1998
--------- -------
First National Bank of Abilene for
CRCD, Inc. Note has an interest rate
of 8.75% and is collateralized by
equipment and inventory. Due in
monthly payments of $7,900 for
principal and interest through
June 2008. $608,338 639,524
Less current portion 41,214 37,773
-------- -------
$567,124 601,751
======== =======
The aggregate contractual maturities of long-term debt for the five
subsequent years ending June 30, 2004 are as follows:
2001 $ 49,065
2002 53,535
2003 58,412
2004 63,733
2005 and thereafter 342,379
--------
$567,124
========
continued
20
50'S CLASSIC CAR WASH
AND CRCD, INC.
Notes to Combined Financial Statements
(4) Federal income taxes
--------------------
The Companies are taxed as S Corporations under the Internal Revenue Code
and applicable state statutes. Under an S Corporation election, the income
of the corporation flows through to the stockholders to be taxed at the
individual level rather than the corporate level. Accordingly, the
Companies will have no tax liability (with limited exceptions) as long as
the S Corporation election is in effect.
(5) Commitments
-----------
On August 25, 1999, Joe Crawford, Ron Clark, Robert Duggan, Jr. and First
National Bank as trustee of the Wayne B. Ramsey, Jr. and Mira Marie Ramsey
Family Trust entered into an agreement to sell all of the stock of the
Companies to Mace Securities International, Inc. for $819,369 of Mace
Securities Stock.
21
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
AND THE SIX MONTHS ENDED JUNE 30, 1999
The following unaudited pro forma consolidated statements of operations for the
year ended December 31, 1998 and the six months ended June 30, 1999 give effect
to (i) the acquisition on May 17, 1999 of all the outstanding stock of Colonial
Full Service Car Wash, Inc. ("Colonial") by Mace Security International, Inc.
(the "Registrant" or "Mace") for total consideration paid by Mace of
approximately $15.1 million; (ii) the acquisition of substantially all of the
assets of Genie Car Wash, Inc. of Austin, Genie Car Care Center, Inc., and Genie
Car Service Center, Inc. (collectively, "Genie") from Genie and Cornett Limited
Partnership (collectively with Genie, the "Sellers") for total consideration of
approximately $11,750,000; (iii) the acquisition of the stock of American Wash
Services, Inc. ("AWS") from Louis D. Paolino, Jr. and Red Mountain Holdings,
Ltd. for total consideration of approximately $8,153,000; (iv) the acquisition
of substantially all of the assets of Stephen Bulboff and Stephen B. Properties,
Inc. ("Bulboff") for total consideration of approximately $3,744,000; (v) the
acquisition of the stock of Innovative Control Systems, Inc. ("ICS") for total
consideration of approximately $5 million; and (vi) the acquisition of the stock
of 50's Classic Car Wash of Lubbock, Inc. and CRCD, Inc. (collectively "50's
Classic") for total consideration of approximately $820,000. The ICS and 50's
Classic business combinations were accounted for using the pooling of interests
method, and as a result, no material pro forma adjustments were deemed necessary
to reflect the results of operations on a consolidated basis for this business
combination.
The following unaudited pro forma consolidated statement of operations for the
year ended December 31, 1998 and the six months ended June 30, 1999 gives effect
to the aforementioned transactions as if the transactions had occurred on
January 1, 1998. The following unaudited pro forma financial data may not be
indicative of what the results of operations or financial position of Mace
Security International, Inc. would have been, had the transactions to which such
data gives effect had been completed on the date assumed, nor are such data
necessarily indicative of the results of operations or financial position of
Mace Security International, Inc. that may exist in the future. The following
unaudited pro forma information should be read in conjunction with the notes
thereto, the other pro forma financial statements and notes thereto, and the
consolidated financial statements and notes of Mace Security International, Inc.
as of December 31, 1998 and for each of the three years in the period then ended
and the historical financial statements of 50's Classic 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
Mace Security Service Car Genie
International, Inc. Wash, Inc. Car Wash
------------------ ----------- ------------
Net sales .................... $ 2,404 $ 10,697 $ 6,553
Cost of sales ................ 1,230 9,248 4,708
Selling, general and
administrative .............. 1,719 955 1,914
------------ ------------ ------------
Operating (loss) income . (545) 494 (69)
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)
Income tax expense ........... (4) (19) --
------------ ------------ ------------
Net (loss) income ............ $ (286) $ -- $ (58)
============ ============ ============
Net (loss) income per common
share: $ (0.04)
============
Weighted average number of
common shares outstanding 6,987,127
=============
American Stephen Bulboff Innovative 50's Car Wash of
Wash and Stephen B. Control Lubbock, Inc. Pro Forma Pro Forma
Services,Inc. Properties, Inc. Systems, Inc. and CRCD, Inc. Adjustments Consolidated
------------ ------------- ------------- ------------- ------------ -----------
Net sales .................... $ 645 $ 1,288 $ 2,029 $ 780 $ -- $ 24,396
Cost of sales ................ 453 603 1,206 437 (297) (1) 17,576
79 (2)
(32) (7)
(59) (8)
Selling, general and
administrative .............. 126 297 944 210 (569) (4) 5,236
(360) (5)
------------ ------------ ------------ ------------ ------------ ------------
Operating (loss) income . 66 388 (121) 133 1,238 1,584
Other income (expense):
Interest income ......... -- -- -- -- -- 142
Interest expense, net ... -- (211) (30) (61) (380) (6) (1,305)
Other income ............ -- -- -- 5 -- 285
------------ ------------ ------------ ------------ ------------ ------------
(Loss) income from operations
before income tax expense ... 66 177 (151) 77 858 706
Income tax expense ........... (16) -- -- -- -- (39)
------------ ------------ ------------ ------------ ------------ ------------
Net (loss) income ............ $ 50 $ 177 $ (151) $ 77 $ 858 $ 667
============ ============ ============ ============ ============ ============
Net (loss) income per common
share: $ 0.06
============
Weighted average number of
common shares outstanding 11,155,220 (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)
Mace Security Colonial Full American
International, Service Car Genie Wash
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 per common share.......................... $ (0.16)
=============
Weighted average number of
common shares outstanding ..................... 7,454,292
=============
Stephen Bulboff
and Stephen B. Innovative 50's Car Wash of
Properties, Control Lubbock, Inc. Pro Forma Pro Forma
Inc. Systems, Inc. and CRCD, Inc. Adjustments Consolidated
------------- ------------ -------------- ------------ ------------
Net sales ......................................... $ 799 $ 1,613 $ 397 $ -- $ 14,837
Cost of sales ..................................... 409 970 233 (119)(1) 9,920
48(2)
(62)(7)
(31)(8)
Selling, general and
administrative .................................. 217 521 124 (232)(4) 4,045
(195)(5)
Restructuring and change
in control charges ............................... -- -- -- 1,519
------------ ------------ ------------ ------------ ------------
Operating (loss) income .................... 173 122 40 591 (647)
Other income (expense):
Interest expense, net ......................... (157) (21) (27) (144)(6) (566)
Other income (expense) ........................ -- (13) 4 -- 3
------------ ------------ ------------ ------------ ------------
(Loss) income
before income tax expense ..................... 16 88 17 447 (1,210)
Income tax expense (benefit) ...................... -- -- -- -- (350)
------------ ------------ ------------ ------------ ------------
Net (loss) income ................................. $ 16 $ 88 $ 17 $ 447 $ (860)
============ ============ ============ ============ ============
Net loss per common share.......................... $ (0.08)
============
Weighted average number of
common shares outstanding ..................... 10,587,849(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, 1,060,000, 603,721 and 91,677 shares,
respectively, of unregistered shares of common stock to affect the
acquisition of Colonial, Genie, AWS, Bulboff, ICS and 50's Classic were
assumed to be outstanding from January 1, 1998 by Mace.
(4) To eliminate intercompany administrative charges of $569,000 related
directly to cost sharing arrangements provided by Genie's prior parent,
which were terminated as a result of the purchase transaction. Such
administrative services were absorbed by excess capacity of the Company and
the Company has not hired additional employees to perform these
administrative services.
(5) To reflect the elimination of intercompany rental expense of $360,000 from
Genie's prior parent terminated as a result of the purchase transaction.
(6) To record additional interest expense of $380,000 resulting from a $4.75
million promissory note issued to Genie's prior parent to consummate the
acquisition of Genie.
(7) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of AWS
had been completed on January 1, 1998, net of historical depreciation and
amortization expense of AWS.
(8) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of
Bulboff had been completed on January 1, 1998, net of historical
depreciation and amortization expense of Bulboff.
The Unaudited Pro Forma Consolidated Statement of Operations for the Six Months
Ended June 30, 1999 has been adjusted to reflect the following:
(1) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of
Colonial had been completed on January 1, 1999, net of historical
depreciation and amortization expense of Colonial.
(2) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of Genie
had been completed on January 1, 1999, net of historical depreciation and
amortization expense of Colonial.
(3) For purpose of determining pro forma earnings per share, the weighted
effect of the issuance of 1,251,000, 533,333, 628,362, 1,060,000, 603,721
and 91,677 shares, respectively, of unregistered shares of common stock to
affect the acquisition of Colonial, Genie, AWS, Bulboff, ICS and 50's
Classic were assumed to be outstanding from January 1, 1999 by Mace.
(4) To eliminate intercompany administrative charges of $232,000 related
directly to cost sharing arrangements provided by Genie's prior parent,
which were terminated as a result of the purchase transaction. Such
administrative services were absorbed by excess capacity of the Company and
the Company has not hired additional employees to perform these
administrative services.
(5) To reflect the elimination of intercompany rental expense of $195,000 from
Genie's prior parent terminated as a result of the purchase transaction.
(6) To record additional interest expense of $144,000 resulting from a $4.75
million promissory note issued to Genie's prior parent to consummate the
acquisition of Genie.
(7) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of AWS
had been completed on January 1, 1999, net of historical depreciation and
amortization expense of AWS.
(8) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of
Bulboff had been completed on January 1, 1999, net of historical
depreciation and amortization expense of Bulboff.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(Dollars in thousands)
American Stephen Bulboff Innovative 50's Car Wash of
Mace Security Wash and Stephen B. Control Lubbock, Inc. and
International, Inc. Services, Inc. Properties, Inc. Systems, Inc. CRCO, Inc.
------------------ ------------- --------------- ------------ ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,061 $ 70 $ 48 $ 33 $ 11
Accounts receivable, net 1,099 2 - 281 2
Inventories 1,790 36 15 401 12
Deferred income taxes 714 - - - -
Prepaid expenses and other 811 113 104 69 -
-------- ----- ------ ------- -----
Total current assets 10,475 221 167 784 25
Net assets of discontinued operations 245 - - - -
Property and equipment, net 21,247 3,888 1,132 81 678
Intangibles, net 5,457 - - 126 -
Other assets 1,770 1,424 - - -
-------- ------- ------- ----- -----
Total Assets $ 39,194 $ 5,533 $ 1,299 $ 991 $ 703
======== ======= ======= ===== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,243 $ 376 $ 60 $ 326 $ 17
Accrued expenses 2,325 129 11 401 15
Current portion of long term debt 10,066 161 2,140 732 41
-------- ------- -------- ------- ------
Total current liabilities 13,634 666 2,211 1,459 73
Deferred income taxes 1,412 16 - - -
Long term debt, less current portion 939 - - 27 567
Other long term liabilities - - - -
-------- ------- ------- ------ -------
Total liabilities 15,985 682 2,211 1,486 640
Commitments and contingencies
Stockholders' equity:
Common stock 96 - 12 - 2
Additional paid-in capital 28,549 4,800 - 770 78
Treasury stock (52) - - - -
(Accumulated deficit) retained earnings (5,384) 51 (924) (1,265) (17)
------ ------- ------- ----- -----
Total stockholders' equity 23,209 4,851 (912) (495) 63
------ ------- ------- ----- -----
Total liabilities and
stockholders' equity $ 39,194 $ 5,533 $ 1,299 $ 991 $ 703
======== ======= ======= ===== =====
Pro Forma Pro Forma
Adjustments Consolidated
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ (4,688) (1) $ 1,535
Accounts receivable, net 1,384
Inventories 2,254
Deferred income taxes 714
Prepaid expenses and other 1,097
--------- --------
Total current assets (4,688) 6,984
Net assets of discontinued operations
Property and equipment, net 2,312 (1) 245
2,527 (2) 31,865
Intangibles, net 991 (1) 6,574
Other assets - 3,194
--------- --------
Total Assets $ 1,142 $ 48,862
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ - $ 2,022
Accrued expenses - 2,881
Current portion of long term debt (240) (2) 12,900
--------- --------
Total current liabilities (240) 17,803
Deferred income taxes 1,428
Long term debt, less current portion 1,533
Other long term liabilities 2,114 (1) 2,114
--------- --------
Total liabilities 2,114 22,878
Commitments and contingencies
Stockholders' equity:
Common stock 6 (1) 115
(1) (2)
Additional paid-in capital (3,454) (1) 32,587
1,844 (2)
Treasury stock - (52)
(Accumulated deficit) retained earnings (51) (1) (6,666)
Total stockholders' equity 924 (2)
--------- --------
Total liabilities and (732) 25,984
--------- --------
stockholders' equity $1,142 $48,862
========= =======
Notes to Unaudited Pro Forma Consolidated Balance Sheet Adjustments
The unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1999 has been
adjusted to reflect the following:
(1) On March 26, 1999, the Company entered into a merger agreement for the
pending acquisitions of all the outstanding stock of American Wash
Services, Inc. for total cash consideration to be paid by Mace Security
International, Inc. of $4,688,000 and the issuance of 628,362 unregistered
shares of Mace common stock. Additionally, Mace will issue to certain of
new management assignable warrants to purchase 1,570,000 shares of common
stock at a purchase price of $1.375 per share and warrants to purchase an
additional 250,000 shares of common stock at a purchase price of $2.50 per
share. The terms of the warrants are more fully described in the Merger
Agreement. The acquisition is anticipated to be accounted for under the
purchase method. Pursuant to the terms of the merger agreement, all
property, equipment, other assets and working capital will be acquired and
all liabilities will be assumed. The allocation of the purchase price is
preliminary. The actual allocation will be based on management's final
evaluation of such assets and liabilities. The excess of the purchase
price over the historic cost of net assets was allocated to goodwill;
however, this excess may ultimately be allocated to other specific tangible
and intangible assets. The final allocation of the purchase price and the
resulting effect on operations may differ significantly from the pro forma
amounts included herein. The preliminary allocation of the purchase price
is as follows:
Property and equipment................................................. $7,191,000
Current assets acquired................................................ 221,000
Other assets acquired.................................................. 1,424,000
Other liabilities...................................................... (682,000)
----------
$8,154,000
==========
(2) On July 1, 1999, the Company, through a wholly owned subsidiary, acquired
all of the car wash related assets of Stephen Bulboff and Stephen B.
Properties, Inc. ("Bulboff") pursuant to the terms of a Real Estate and
Asset Purchase Agreement dated March 8, 1999 for an aggregate purchase
price of 1,060,000 unregistered shares of the Company's common stock, par
value $.01 per share plus cash of $1,900,000 from working capital.
Pursuant to the terms and conditions of the Agreement, the Registrant
purchased all of the assets of the Sellers used in the business of
operating 10 full service car washes in Pennsylvania, Delaware and New
Jersey. The acquisition is anticipated to be accounted for using the
"purchase" method of accounting. The allocation of the purchase price is
preliminary. The actual allocation will be based on management's final
evaluation of such assets and liabilities. The excess of the purchase
price over the historic cost of net assets was allocated to goodwill;
however, this excess may ultimately be allocated to other specific tangible
and intangible assets. The final allocation of the purchase price and the
resulting effect on operations may differ
significantly from the pro forma amounts included herein. The preliminary
allocation of the purchase price is as follows:
Property and equipment.................................................................. $3,659,000
Current assets acquired................................................................. 167,000
Other liabilities....................................................................... (82,000)
----------
$3,744,000
==========
EXHIBIT INDEX
Exhibit Description
-----------
No.
- ---
23.1 Consent of D. Williams & Co., P.C.