================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2001 COMMISSION FILE NO. 0-22810
MACE SECURITY INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
03-0311630
(I.R.S. Employer Identification No.)
1000 Crawford Place, Suite 400, Mount Laurel, NJ 08054
(Address of Principal Executive Offices)
Registrant's Telephone No., including area code: (856) 778-2300
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
----
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock:
As of May 8, 2001, there were 25,436,427 Shares of Registrant's Common Stock,
par value $.01 per share, outstanding.
================================================================================
Mace Security International, Inc.
Form 10-Q
Quarter Ended March 31, 2001
Contents
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets - March 31, 2001 (Unaudited)
and December 31, 2000 2
Consolidated Statements of Operations for the three
months ended March 31, 2001 and 2000 (Restated) (Unaudited) 4
Consolidated Statement of Stockholders' Equity
for the three months ended March 31, 2001 (Unaudited) 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 2001 and 2000 (Restated) (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II - OTHER INFORMATION
Item 5 - Other Information 19
Item 6 - Exhibits and Reports on Form 8-K 19
1
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Mace Security International, Inc.
Consolidated Balance Sheets
March 31, December 31,
ASSETS 2001 2000
------------- --------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 5,405,457 $ 4,838,023
Accounts receivable, less allowance for doubtful
accounts of $265,202 and $260,825 in 2001 and 2000,
respectively 873,354 737,547
Inventory 2,161,946 2,256,477
Deferred income taxes 116,728 118,575
Prepaid expenses and other current assets 2,772,446 2,699,996
------------- --------------
Total current assets 11,329,931 10,650,618
Property and equipment:
Land 33,094,907 32,597,872
Buildings and leasehold improvements 36,541,607 36,739,752
Machinery and equipment 8,425,955 8,223,801
Furniture and fixtures 421,736 257,549
------------- --------------
Total property and equipment 78,484,205 77,818,974
Accumulated depreciation and amortization (5,873,863) (5,423,330)
------------- --------------
72,610,342 72,395,644
Excess of cost over net assets of acquired businesses, net of
accumulated amortization of $1,362,523 and $1,143,239 in
2001 and 2000, respectively 20,760,974 20,881,085
Other intangible assets, net of accumulated amortization
of $1,271,926 and $1,223,702 in 2001 and 2000, respectively 1,096,708 1,142,485
Other assets 212,694 1,061,596
------------- --------------
Total assets $ 106,010,649 $ 106,131,428
============= ==============
See accompanying notes.
2
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000
------------- -------------
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 6,330,917 $ 6,264,630
Current portion of capital lease obligations 134,191 57,633
Accounts payable 2,687,419 2,821,752
Income taxes payable 160,223 190,127
Deferred revenue 179,358 315,743
Accrued expenses and other current liabilities 1,998,903 2,003,370
------------- -------------
Total current liabilities 11,491,011 11,653,255
Deferred income taxes 414,530 272,473
Long-term debt, net of current portion 29,620,836 30,094,300
Capital lease obligations, net of current portion 341,396 268,455
Other liabilities 890,625 965,625
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 10,000,000
Issued and outstanding shares - none - -
Common stock, $.01 par value:
Authorized shares - 100,000,000
Issued and outstanding shares of 25,491,344 and
25,480,590 in 2001 and 2000, respectively 254,913 254,806
Additional paid-in capital 69,978,008 69,905,062
Accumulated deficit (6,980,670) (7,282,548)
------------- -------------
Total stockholders' equity 63,252,251 62,877,320
------------- -------------
Total liabilities and stockholders' equity $ 106,010,649 $ 106,131,428
============= =============
See accompanying notes.
3
Mace Security International, Inc.
Consolidated Statements of Income
(Unaudited)
Three Months Ended
March 31,
---------------------------
2001 2000
------------- ------------
(Restated)
Revenues:
Car wash and detailing services $ 10,614,432 $ 9,280,718
Lube and other automotive services 1,205,680 1,182,953
Fuel and merchandise sales 948,814 1,267,082
Operating agreements 60,000 29,481
------------- ------------
12,828,926 11,760,234
Cost of revenues:
Car wash and detailing services 7,325,904 6,257,480
Lube and other automotive services 898,498 884,074
Fuel and merchandise sales 855,884 1,083,723
------------- ------------
9,080,286 8,225,277
Selling, general and administrative expenses 1,837,847 1,652,170
Depreciation and amortization 675,084 562,849
------------- ------------
Operating income 1,235,709 1,319,938
Interest expense, net (818,581) (712,954)
Other income 62,750 84,128
------------- ------------
Income from continuing operations before income taxes 479,878 691,112
Income tax expense 178,000 221,000
------------- ------------
Income from continuing operations 301,878 470,112
Loss from discontinued operations,
net of $89,000 applicable income tax benefit - (189,645)
------------- ------------
Net income $ 301,878 $ 280,467
============= ============
Basic income (loss) per share
From continuing operations $ 0.01 $ 0.02
From discontinued operations - (0.01)
------------- ------------
Total $ 0.01 $ 0.01
============= ============
Weighted average number of shares outstanding 25,485,313 23,175,411
============= ============
Diluted income (loss) per share
From continuing operations $ 0.01 $ 0.02
From discontinued operations - (0.01)
------------- ------------
Total $ 0.01 $ 0.01
============= ============
Weighted average number of shares outstanding 25,485,836 24,778,754
============= ============
See accompanying notes.
4
Mace Security International, Inc.
Consolidated Statement of Stockholders' Equity
(Unaudited)
Number of Par Value Additional
Common of Common Paid-in Accumulated
Shares Stock Capital Deficit Total
---------- ----------- ------------- ------------- ------------
Balance at December 31, 2000..... 25,480,590 $ 254,806 $ 69,905,062 $ (7,282,548) $ 62,877,320
Common stock issued in purchase
acquisitions.................... 12,804 128 74,872 75,000
Shares purchased and retired..... (2,050) (21) (1,926) (1,947)
Net income....................... 301,878 301,878
---------- ----------- ------------- ------------- ------------
Balance at March 31, 2001........ 25,491,344 $ 254,913 $ 69,978,008 $ (6,980,670) $ 63,252,251
========== =========== ============= ============= ============
See accompanying notes.
5
Mace Security International, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
-------------------------
2001 2000
----------- -----------
(Restated)
Operating activities
Income from continuing operations $ 301,878 $ 470,112
Discontinued operations, net of income tax - (189,645)
----------- -----------
Net income 301,878 280,467
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 675,084 562,849
Provision for losses on receivables - 12,361
Deferred income taxes 143,904 98,169
Non-cash expenses of discontinued operations - 14,235
Changes in operating assets and liabilities:
Accounts receivable (71,520) 162,790
Inventory 35,512 (232,685)
Accounts payable (181,778) (439,391)
Deferred revenue (136,385) (191,610)
Accrued expenses 672 (209,976)
Income taxes (29,904) 17,360
Prepaid expenses and other assets 43,176 1,342,267
----------- -----------
Net cash provided by operating activities 780,639 1,416,836
Investing activities
Purchase of property and equipment (247,346) (284,024)
Proceeds from sale of property and equipment 466,049 -
Payments for intangibles (2,447) (249,928)
Deposits and other prepaid costs on future acquisitions (6,836) (101,438)
----------- -----------
Net cash provided by (used in) investing activities 209,420 (635,390)
Financing activities
Proceeds from revolving line of credit, long term debt and
capital lease obligations - 950,000
Payments on revolving line of credit, long-term debt
and capital lease obligations (420,678) (790,653)
Proceeds from issuance of common stock, net of offering costs - 57,778
Payments to purchase stock (1,947) -
Net payments on note payable to shareholder - (2,927)
----------- -----------
Net cash (used in) provided by financing activities (422,625) 214,198
----------- -----------
Net increase in cash and cash equivalents 567,434 995,644
Cash and cash equivalents at beginning of period 4,838,023 2,320,804
----------- -----------
Cash and cash equivalents at end of period $ 5,405,457 $ 3,316,448
=========== ===========
See accompanying notes.
6
Mace Security International, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements include the
accounts of Mace Security International, Inc. and its wholly owned subsidiaries
(the "Company"). All significant intercompany accounts and transactions have
been eliminated in consolidation. These consolidated financial statements
reflect all adjustments (consisting of normal recurring accruals), which in the
opinion of management, are necessary for a fair presentation of results of
operations for the interim periods presented. The results of operations for the
three month period ended March 31, 2001 are not necessarily indicators of the
operating results for the full year. The Company has restated previous financial
information for the three months ended March 31, 2000 to reflect the
discontinuance of Innovative Control Systems, Inc. ("ICS") on June 2, 2000.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These interim financial statements should be
read in conjunction with the audited financial statements and notes contained in
the Company's Annual Report on Form 10-KSB, as amended, for the year ended
December 31, 2000.
2. Significant Accounting Policies
In June 1998, SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities" was issued. Subsequent to this statement, SFAS No. 137 was issued,
which amended the effective date of SFAS No. 133 to be all fiscal quarters of
all fiscal years beginning after June 15, 2000. In June 2000, SFAS 138 was
issued, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of SFAS 133". SFAS 133, as amended by SFAS 138,
requires that all derivative instruments be recorded on the balance sheet at
their respective fair values. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on the designation of the hedge transaction. The Company adopted SFAS
133, as amended by SFAS 138, in the first quarter of fiscal year 2001. Based on
the Company's minimal use of derivatives at the current time, the adoption of
this standard did not have a significant impact on earnings or financial
position of the Company as of March 31, 2001.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101), which
addresses certain criteria for revenue recognition. SAB 101 outlines the
criteria that must be met to recognize revenue and provides guidance for
disclosures related to revenue recognition policies. The Company implemented
the applicable provisions of SAB 101 in the first quarter of fiscal year 2001.
Management believes the Company's revenue recognition policies comply with the
guidance contained in the SAB, and therefore, the Company's results of
operations were not materially affected.
In May 2000, The Emerging Issues Task Force reached consensus opinions on Issue
00-14, "Accounting for Certain Sales Incentives (Issue 00-14)". Issue 00-14
pertains to the recognition, measurement, and income statement classification of
certain sales incentives, including discounts, coupons, rebates, and free
products or services received by the customer. The issue requires certain
incentives to be classified as a reduction of revenue. Management believes the
Company's revenue recording policies comply with the guidance contained in Issue
00-14, and therefore, the Company's results of operations were not materially
affected.
3. Business Combinations
Since April 1, 1999, the Company has acquired 62 car care facilities and five
truck wash facilities through the acquisition of 17 separate businesses
including: 43 full service facilities, one self service facility, 11 exterior
only facilities and one lube center in Pennsylvania, New Jersey, Delaware,
Texas, Florida and Arizona; six facilities were subsequently divested. The five
full service truck wash facilities are located in Arizona, Indiana, Ohio and
Texas.
Of the 17 car and truck wash acquisitions completed through September 30, 2000,
15 were accounted for using the purchase method of accounting. Accordingly,
assets acquired and liabilities assumed have been recorded at their estimated
fair values at the dates of acquisition and their results of operations are
included in the accompanying consolidated statements of operations since the
date of acquisition. The excess of purchase price over the estimated fair
market value of identifiable net assets acquired is being amortized on a
straight-line basis over twenty-five years from the date of acquisition. The
purchase price allocations are based on preliminary estimates as of the
acquisition dates and are finalized within one year from the date of
acquisition.
On March 24, 2000, the Company, through a wholly owned subsidiary, acquired all
of the truck wash related assets of Red Baron
7
Truck Washes, Inc. ("Red Baron") with a total of five operating locations in
Arizona, Indiana, Ohio and Texas. Consideration consisted of 568,421 registered
shares of common stock of the Company and the issuance of a secured $1 million
promissory note to the seller. The transaction has been accounted for using the
purchase method of accounting.
On June 5, 2000, the Company, through a wholly owned subsidiary, acquired
certain assets of Sparsupco, Inc. (the "Beneva Car Wash"). Consideration
consisted of 130,712 shares of common stock of the Company and $20,000 of cash.
The Beneva Car Wash is located in Sarasota, Florida. The transaction has been
accounted for using the purchase method of accounting.
On July 10, 2000, the Company, through a wholly owned subsidiary, completed the
acquisition of substantially all the assets of Superstar Kyrene, a full service
car wash in the Phoenix, Arizona area, in exchange for 56,521 unregistered
shares of common stock of the Company, cash consideration of approximately
$824,000 and the assumption of approximately $926,000 of debt. The transaction
has been accounted for using the purchase method of accounting.
On July 26, 2000, the Company acquired, through a wholly owned subsidiary,
substantially all of the assets of Blue Planet Car Wash ("Blue Planet"), a full
service car wash in the Dallas, Texas area, in exchange for 250,008 unregistered
shares of common stock, and the assumption of approximately $1,554,000 of debt.
This transaction has been accounted for using the purchase method of accounting.
4. Operating Agreements
During the three months ended March 31, 2000, the Company managed one car wash
location under an operating agreement, under which the Company was entitled to
all profits generated from the operation of the location. Operating agreements
generally arise from pending acquisitions that will be closed pending completion
of certain conditions. The pretax result earned under the operating agreement
is presented in the accompanying statements of operations as revenue from
operating agreements net of all operating expenses. No locations were operated
under operating agreements during the three months ended March 31, 2001.
The results of operations subject to operating agreements in the three months
ended March 31, 2000 were as follows:
Three Months
Ended
March 31, 2000
----------------
Revenues (In Thousands)
Car wash and detailing services $ 191
Lube and other automotive services -
Fuel and merchandise sales 18
----------------
209
Cost of revenues
Car wash and detailing services 196
Lube and other automotive services -
Fuel and merchandise sales 11
----------------
207
Selling, general, and administrative expenses 13
Depreciation and amortization -
----------------
Operating loss $ (11)
================
In addition to the above results, the Company is currently being paid $20,000
per month, which started in February 2000, under a Management Agreement which
allows Mark Sport, Inc., an entity controlled by Jon E. Goodrich, a director of
the Company, to operate the Company's Security Products Division.
5. Discontinued Operations
On May 4, 2000, the Board of Directors of the Company approved a plan to sell
its computer products and services subsidiary, ICS. Accordingly, the operating
results of ICS have been segregated from continuing operations and reported on a
comprehensive basis as a separate line item on the consolidated statement of
operations entitled "Discontinued Operations". On June 2, 2000, the Company
sold ICS in exchange for the return of 450,000 shares of common stock of the
Company and $295,500 of future goods and services from ICS. Revenues and loss
from discontinued operations related to the discontinued ICS operations for the
three months ended March 31, 2000 were $358,233 and $189,645, respectively.
6. Commitments and Contingencies
As disclosed in the Company's 1994 Form 10-KSB, on January 25, 1994 a suit was
filed by Carmeta Gentles on her own behalf
8
and as a personal representative of the estate of Robert Gentles in Ontario
Court (General Division), Ontario, Canada, claiming intentional or negligent
manufacture and distribution of the Mark V Mace(R) brand defense spray unit and
that its contents contributed to the suffering and death of Robert Gentles while
in the Kingston Penitentiary in October 1993. The Company was added as a third
party defendant on February 8, 1995. The plaintiff seeks five million dollars in
damages. The Company forwarded this suit to its insurance carrier for defense.
Based on discussions with the Company's counsel and insurance carrier, the
Company does not anticipate that this claim will result in the payment of
damages in excess of the Company's insurance coverage.
On December 13, 1999, the Company was named as a defendant in a suit filed in
the state of New York by Janeen Johnson et. al. The litigation concerns a claim
that a self-defense spray manufactured by the Company and used by a law
enforcement officer contributed to the suffering and death of Christopher
Johnson. The Company forwarded the suit to its insurance carrier for defense.
The Company does not anticipate that this claim will result in the payment of
damages in excess of the Company's insurance coverage.
Although the Company is not aware of any substantiated claim of permanent
personal injury from its products, the Company is aware of reports of incidents
in which, among other things, defense sprays: have been mischievously or
improperly used, in some cases by minors; have not been instantly effective; or
have been ineffective against enraged or intoxicated individuals. Incidents of
this type, or others, could give rise to product liability or other claims, or
to claims that past or future advertising, packaging or other practices should
be, or should have been, modified, or that regulation of products of this nature
should be extended or changed.
The Company is subject to federal and state environmental regulations, including
rules relating to air and water pollution and the storage and disposal of oil,
other chemicals and waste. The Company believes that it complies with all
applicable laws relating to its business.
Certain of the Company's executive officers have entered into employment
agreements whereby they will be entitled to immediate vesting provisions of
issued options should the officer be terminated upon a change in control of the
Company. Additionally, the employment agreement of the Company's Chief Executive
Officer, Louis D. Paolino, Jr., entitles Mr. Paolino to receive a fee of
$7,000,000 upon termination of employment under certain conditions including
upon termination as a result of a change in control.
The Company is a party to various other legal proceedings related to its normal
business activities. In the opinion of the Company's management, none of these
proceedings are material in relation to the Company's results of operations,
liquidity, cash flows or financial condition.
7. Business Segments Information
The Company currently operates in the Car Care segment, supplying complete car
care services (including wash, detailing, lube, and minor repairs), fuel, and
merchandise sales and receives revenues under a Management Agreement related to
the Company's previously operated Security Products segment. In the first
quarter of 2000, the Company entered into a Management Agreement with Mark
Sport, Inc., a Vermont corporation. Mark Sport, Inc. is controlled by Jon E.
Goodrich, a director of the Company. The Management Agreement entitles Mark
Sport, Inc. to operate the Company's Safety and Security Products Division and
receive all profits or losses for a seven-month term beginning January 1, 2000.
The Agreement was extended for two six month periods through July 31, 2001, as
provided for in the original Management Agreement. In exchange, Mark Sport, Inc.
pays the Company $20,000 per month beginning February 2000 and continuing
through the term of the Management Agreement as extended. Additionally, Mark
Sport, Inc. must pay the Company an amount equal to the amortization and
depreciation on the assets of the division at the end of the term of the
Agreement. During the term of the Agreement, Mark Sport, Inc. must operate the
division in substantially the same manner as it has been operated prior to the
Management Agreement.
Additionally, during 1999 and through June 2, 2000, the Company operated in the
computer hardware and software products and services segment through its
subsidiary, ICS. ICS was sold on June 2, 2000 and accordingly has been
classified as discontinued operations.
9
Financial information regarding the Car Care and Security Products segments is
as follows:
Car Security
Care Products
------------ ------------
(In Thousands)
Three months ended March 31, 2001
Revenues from external customers $ 12,769 $ 60
Intersegment revenues - -
Segment income $ 264 $ 38
Segment assets $ 102,567 $ 3,444
Three months ended March 31, 2000
Revenues from external customers $ 11,720 $ 40
Intersegment revenues - -
Segment income $ 443 $ 27
8. Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from those estimates. Such estimates
include the Company's estimates of reserves such as the allowance for doubtful
accounts receivable and inventory valuation allowances.
9. Income Taxes
The Company recorded a tax expense of $178,000 for the three months ended March
31, 2001. Tax expense reflects the recording of income taxes at an effective
rate of 37%. The effective rate differs from the federal statutory rate
primarily due to state and local income taxes, non-deductible costs related to
acquired intangibles, and the use of net operating loss carryforwards.
10. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Ended
-------------------------------
3/31/01 3/31/00
------------- ------------
Numerator:
Income from continuing operations............ $ 301,878 $ 470,112
Loss from discontinued operations............ - (189,645)
------------- ------------
Net income................................... $ 301,878 $ 280,467
============= ============
Denominator:
Denominator for basic income (loss)
per share - weighted average shares........ 25,485,313 23,175,411
Dilutive effect of options and warrants...... 523 1,603,343
------------- ------------
Denominator for diluted income (loss)
per share - weighted average shares........ 25,485,836 24,778,754
============= ============
Basic income (loss) per share:
From continuing operations................... $ 0.01 $ 0.02
From discontinued operations................. - (0.01)
------------- ------------
Total........................................ $ 0.01 $ 0.01
============= ============
Diluted income (loss) per share:
From continuing operations................... $ 0.01 $ 0.02
From discontinued operations................. - (0.01)
------------- ------------
Total........................................ $ 0.01 $ 0.01
============= ============
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Factors Influencing Future Results and Accuracy of Forward Looking Statements
This report includes forward looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended ("Forward Looking Statements"). All statements
other than statements of historical fact included in this section, are Forward
Looking Statements. Although the Company believes that the expectations
reflected in such Forward Looking Statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Generally,
these statements relate to business plans or strategies, projected or
anticipated benefits or other consequences of such plans or strategies, number
of acquisitions and projected or anticipated benefits from acquisitions made by
or to be made by the Company, or projections involving anticipated revenues,
earnings, levels of capital expenditures or other aspects of operating results.
All phases of the Company's operations are subject to a number of uncertainties,
risks and other influences, many of which are outside the control of the Company
and any one of which, or a combination of which, could materially affect the
results of the Company's operations and whether Forward Looking Statements made
by the Company ultimately prove to be accurate. Such important factors
("Important Factors") that could cause actual results to differ materially from
the Company's expectations are disclosed in this section and elsewhere in this
report. All subsequent written and oral Forward Looking Statements attributable
to the Company or persons acting on its behalf are expressly qualified in their
entirety by the Important Factors described below that could cause actual
results to differ from the Company's expectations. The Forward Looking
Statements made herein are only made as of the date of this filing and the
Company undertakes no obligation to publicly update such Forward Looking
Statements to reflect subsequent events or circumstances.
We need to raise additional capital. At March 31, 2001, we had
negative working capital of approximately $161,000. Additional capital will be
needed if acquisitions of car washes or other businesses continue to be made.
Our capital requirements also include working capital for daily operations and
significant capital for equipment purchases. To the extent that we lack cash to
meet our future capital needs, we will be required to raise additional funds
through bank borrowings and additional equity and/or debt financing, which may
result in significant increases in leverage and interest expense and/or
substantial dilution. If we are unable to raise additional capital, we will need
to reduce substantially the scale of our operations and to curtail our business
plan.
We have a history of losses, we have working capital deficits and we
may incur continuing charges. We have reported net losses and working capital
deficits in prior fiscal years and we have expended substantial funds for
acquisitions and equipment. In connection with financing acquisitions and
business growth, we anticipate that we will continue to incur significant debt
and interest charges. Several of our debt agreements, as amended, contain
certain affirmative and negative covenants and require the maintenance of
certain levels of earnings before interest, taxes, depreciation, and
amortization to debt service. If our operating earnings are not sufficient to
maintain the required ratios, we would be in default of our loan agreements. In
addition, we will recognize goodwill amortization charges in connection with our
acquisitions that are accounted for under the "purchase" method of accounting.
The amount of goodwill recognized is the amount by which the purchase price of a
business exceeds the fair market value of the assets acquired. Goodwill is
amortized over a period not to exceed 25 years depending on the business
acquired, resulting in an annual non-cash charge to our earnings during that
period. As we continue to acquire additional businesses, our financial position
and results of operations may fluctuate significantly from period to period.
Our business plan poses risks for us. Our business objective is to
develop and grow a full service, integrated car care business through some
acquisitions and through the internal development of our car wash facilities. We
have repositioned our company from a company involved primarily in the
production of consumer defense products to a company that provides car wash and
car care services. This strategy involves a number of risks, including:
Risks associated with growth;
Risks associated with acquisitions;
Risks associated with the recruitment and development of management
and operating personnel; and
Risks associated with lack of experience in the car care service
industries.
If we are unable to manage one or more of these associated risks effectively, we
may not fully realize our business plan.
We have a limited operating history regarding our car wash and car
care service businesses. Since July 1999, our main business has been the
acquisition and operation of car wash and car care service facilities, which now
accounts for substantially all of our revenues. Because of our relatively
limited operating history with respect to these businesses, we cannot assure you
that we will be able to operate them successfully.
11
We may not be able to manage growth. If we succeed in growing, growth
will place significant burdens on our management and on our operational and
other resources. We will need to attract, train, motivate, retain and supervise
our senior managers and other employees and develop a managerial infrastructure.
If we are unable to do this, we will not be able to realize our business
objectives.
Our stock price is volatile. Our common stock's market price has been
and is likely to continue to be highly volatile. Factors like fluctuations in
our quarterly revenues and operating results, our ongoing acquisition program,
market conditions and economic conditions generally may impact significantly our
common stock's market price. In addition, as we continue to acquire additional
car wash businesses, we may agree to issue common stock that will become
available generally for resale and may have an impact on our common stock's
market price.
The Company may get "delisted" from the Nasdaq National Market, which
would restrict liquidity of the stock. On April 19, 2001, the Company was
advised by Nasdaq that its common stock had failed to trade above one dollar for
thirty consecutive business days, and was therefore not in compliance with
Marketplace Rule 4450(a)(5) of the Nasdaq National Market. Nasdaq advised the
Company that it had until July 18, 2001, to maintain a bid price of at least one
dollar for ten consecutive business days or be delisted. The Company maintained
a minimum bid price of at least one dollar for ten consecutive business days
ending May 4, 2001. On May 11, 2001 the Company was advised by Nasdaq that it
was in compliance with Marketplace Rule 4450(a)(5) and was not subject to being
delisted.
If the Company's stock is delisted, the liquidity of its stock could be
impaired, not only in the number of shares of the Company's stock which could be
bought and sold, but also through delays in the timing of transactions, reduced
numbers of security analysts' and the news media's coverage of the Company and
lower prices for the Company's stock than might otherwise be obtained.
If the Company receives a delisting notice from Nasdaq, the Company's stock may
be traded over-the-counter, more commonly known as OTC. OTC transactions
involve risks in addition to those associated with transactions in securities
traded on the Nasdaq National Market. OTC companies may have limited product
lines, markets or financial resources. Many OTC stocks trade less frequently
and in smaller volumes than Nasdaq-listed stocks. The values of these stocks
may be more volatile than Nasdaq-listed stocks. If the Company's stock is
traded in the OTC market and a market maker sponsors the Company, the Company
may have the price of its stock electronically displayed on the OTC Bulletin
Board, or OTCBB. However, if the Company lacks sufficient market maker support
for display on the OTCBB, it must have its price published by the National
Quotations Bureau LLP in a paper publication known as the "Pink Sheets". The
marketability of the Company's stock will be even more limited if its price must
be published on the "Pink Sheets".
Risks of Acquisitions. Our strategy to grow in part through
acquisitions depends upon our ability to identify suitable acquisition
candidates, and to consummate acquisitions on financially favorable terms. This
strategy involves risks inherent in assessing acquisition candidates' values,
strengths, weaknesses, risks and profitability and risks related to the
financing, integration and operation of acquired businesses, including:
i. adverse short-term effects on our reported operating results;
ii. diversion of management's attention;
iii. dependence on hiring, training and retaining key personnel; and
iv. risks associated with unanticipated problems or latent
liabilities.
We cannot assure you that acquisition opportunities will be available, that we
will have access to the capital required to finance potential acquisitions, that
we will continue to acquire businesses, or that any acquired business will be
profitable.
We may not be able to integrate businesses we acquire and achieve
operating efficiencies. Our future growth and profitability depend substantially
on our ability to operate and integrate acquired businesses. Our strategy is to
achieve economies of scale and brand-name recognition in part through
acquisitions that increase our size. We cannot assure you that our efforts to
integrate acquired operations will be effective or that we will realize expected
results. Our failure to achieve any of these results could have a material
adverse effect on our business and results of operations.
We face potential liabilities associated with acquisitions of
businesses. The businesses we acquire may have liabilities that we do not
discover or may be unable to discover during our preacquisition investigations,
including liabilities arising from environmental contamination or prior owners'
non-compliance with environmental laws or other regulatory requirements, and for
which we, as a successor owner or operator, may be responsible.
12
We face risks associated with our consumer safety products. We face claims
of injury allegedly resulting from our defense sprays. We cannot assure you
that our insurance coverage will be sufficient to cover any judgments won
against us in these lawsuits. If our insurance coverage is exceeded, we will
have to pay the excess liability directly. We are also aware of several claims
that defense sprays used by law enforcement personnel resulted in deaths of
prisoners and of suspects in custody. While we no longer sell defense sprays to
law enforcement agencies, it is possible that the increasing use of defense
sprays by the public could, in the future, lead to additional product liability
claims.
Our car wash business may suffer under certain weather conditions.
Seasonal trends in some periods may affect our car wash business. In
particular, long periods of rain and cloudy weather can affect adversely our car
wash business as people typically do not wash their cars during such periods.
Additionally, extended periods of warm, dry weather may encourage customers to
wash their own cars which also can affect adversely our car wash business.
Consumer demand for our car wash services is unpredictable. Our financial
condition and results of operations will depend substantially on consumer demand
for car wash services. Our business depends on consumers choosing to employ
professional services to wash their cars rather than washing their cars
themselves or not washing their cars at all. We cannot assure you that consumer
demand for car wash services will increase as our business expands. Nor can we
assure you that consumer demand will maintain its current level.
We must maintain our car wash equipment. Although we undertake to keep our
car washing equipment in proper operating condition, the operating environment
found in car washes results in frequent mechanical problems. If we fail to
properly maintain the equipment, the car wash could become inoperable resulting
in a loss of revenue to us from the inoperable location.
Our car wash and car services face governmental regulation. We are
governed by federal, state and local laws and regulations, including
environmental regulations, that regulate the operation of our car wash centers
and other car services businesses. Car wash centers utilize cleaning agents and
waxes in the washing process that are then discharged in waste water along with
oils and fluids washed off of vehicles. Other car services, such as gasoline
and lubrication, use of a number of oil derivatives and other regulated
hazardous substances. As a result, we are governed by environmental laws and
regulations dealing with, among other things:
i. transportation, storage, presence, use, disposal and handling of
hazardous materials and hazardous wastes;
ii. discharge of stormwater; and
iii. underground storage tanks.
If any of the previously mentioned substances were found on our property,
however, including leased properties, or if we were found to be in violation of
applicable laws and regulations, we could be responsible for clean-up costs,
property damage and fines or other penalties, any one of which could have a
material adverse effect on our financial condition and results of operations.
We face significant competition. The extent and kind of competition that
we face varies. The car wash industry is highly competitive. Competition is
based primarily on location, facilities, customer service, available services
and rates. Because barriers to entry into the car wash industry are relatively
low, competition may be expected to continually arise from new sources not
currently competing with us. In this sector of our business we also face
competition from outside the car wash industry, such as gas stations and
convenience stores, that offer automated car wash services. In some cases,
these competitors may have significantly greater financial and operating
resources than we do. In our car service businesses, we face competition from a
number of sources, including regional and national chains, gasoline stations and
companies and automotive companies and specialty stores, both regional and
national.
Our operations are dependent substantially on the services of our executive
officers. If we lose one or more of our executive officers, the loss could
have a material adverse effect on our business and results of operations. We do
not maintain key-man life insurance policies on our executive officers.
Our Preferred Stock may affect the rights of the holders of our common
stock; it may also discourage another person to acquire control of Mace. Our
Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares
of Preferred Stock. No shares of Preferred Stock are currently outstanding. It
is not possible to state the precise effect of Preferred Stock upon the rights
of the holders of our common stock until the Board of Directors determines the
respective preferences, limitations and relative rights of the holders of one or
more series or classes of the Preferred Stock. However, such effect might
include: (i) reduction of the amount otherwise available for payment of
dividends on Common Stock, to the extent dividends are payable on any issued
shares of Preferred Stock, and restrictions on dividends on Common Stock if
dividends on the Preferred Stock are in arrears, (ii) dilution of the voting
power of the Common Stock to the extent that the Preferred Stock has voting
rights,
13
and (iii) the holders of Common Stock not being entitled to share in the
Company's assets upon liquidation until satisfaction of any liquidation
preference granted to the Preferred Stock.
The Preferred Stock may be viewed as having the effect of discouraging an
unsolicited attempt by another person to acquire control of Mace and may
therefore have an anti-takeover effect. Issuances of authorized preferred shares
can be implemented, and have been implemented by some companies in recent years
with voting or conversion privileges intended to make an acquisition of the
company more difficult or costly. Such an issuance could discourage or limit the
stockholders' participation in certain types of transactions that might be
proposed (such as a tender offer), whether or not such transactions were favored
by the majority of the stockholders, and could enhance the ability of officers
and directors to retain their positions.
Some provisions of Delaware law may prevent us from being acquired. We are
governed by Section 203 of the Delaware General Corporation Law, which prohibits
a publicly held Delaware corporation from engaging in a "business combination"
with a person who is an "interested stockholder" for a period of three (3)
years, unless approved in a prescribed manner. This provision of Delaware law
may affect our ability to merge with, or to engage in other similar activities
with, some other companies. This means that we may be a less attractive target
to a potential acquirer who otherwise may be willing to pay a price for our
common stock above its market price.
We do not expect to pay cash dividends on our common stock. We do not
expect to pay any cash dividends on our common stock in the foreseeable future.
We will reinvest any cash otherwise available for dividends in our business.
There are additional risks set forth in the incorporated documents. In
addition to the risk factors set forth above, you should review the financial
statements and exhibits incorporated into this report. Such documents may
contain, in certain instances and from time to time, additional and supplemental
information relating to the risks set forth above and/or additional risks to be
considered by you, including, without limitation, information relating to losses
experienced by Mace in particular historical periods, working capital deficits
of Mace at particular dates, information relating to pending and recently
completed acquisitions, descriptions of new or changed federal or state
regulations applicable to Mace, data relating to remediation and the actions
taken by Mace, and estimates at various times of Mace's potential liabilities
for compliance with environmental laws or in connection with pending litigation.
Results of Operations for the Three Months Ended March 31, 2001 Compared to the
Three Months Ended March 31, 2000
Revenues
Car Care Services
The Company owns full service, exterior only and self-service car wash locations
in New Jersey, Pennsylvania, Delaware, Texas, Florida and Arizona, as well as
truck washes in Arizona, Indiana, Ohio and Texas. The Company earns revenues
from washing and detailing automobiles; performing oil and lubrication services,
minor auto repairs, and state inspections; selling fuel; and selling merchandise
through convenience stores within the car wash facilities. Revenues generated
for the three months ended March 31, 2001 for the car care segment were
comprised of approximately 83% car wash and detailing, 9% lube and other
automotive services, 8% fuel and merchandise.
The majority of revenues are collected in the form of cash or credit card
receipts, thus minimizing customer accounts receivable.
Weather can have a significant impact on volume at the individual locations.
However, the Company believes that the geographic diversity of its operating
locations minimizes weather-related influence on its volume.
14
Security Products
The Company is currently being paid $20,000 per month under a Management
Agreement which allows Mark Sport, Inc. an entity controlled by Jon E. Goodrich,
a director of the Company, to operate the Security Products segment. Total
revenues under the Management Agreement were $60,000 for the three months ending
March 31, 2001.
Computer Products and Services
The Company's computer products and services subsidiary, ICS, was sold in June
of 2000 and has accordingly been reflected as discontinued operations in 2000.
Cost of Revenues
Car Care Services
Cost of revenues consists primarily of direct labor and related taxes and
benefits, chemicals, wash and detailing supplies, rent, real estate taxes,
utilities, maintenance and repairs of equipment and facilities, as well as the
cost of the fuel and merchandise sold.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of management,
clerical and administrative salaries, professional services, insurance premiums,
and costs relating to marketing and sales.
The Company capitalizes direct incremental costs associated with purchase
acquisitions. Indirect acquisition costs, such as executive salaries, corporate
overhead, public relations, and other corporate services and overhead are
expensed as incurred. The Company also charges as an expense any capitalized
expenditures relating to proposed acquisitions that will not be consummated.
At March 31, 2001, capitalized costs related directly to proposed acquisitions
that were not yet consummated were approximately $54,000. The Company
periodically reviews the future likelihood of these acquisitions and records
appropriate provisions against capitalized costs associated with projects that
are not likely to be completed.
Depreciation and Amortization
Depreciation and amortization consists primarily of depreciation of buildings
and equipment, and amortization of goodwill and other intangible assets.
Buildings and equipment are depreciated over the estimated useful lives of the
assets using the straight-line method. Goodwill is amortized on a straight-line
basis over 25 years. Other intangibles are amortized over their useful lives
ranging from three to twenty years, using the straight line method.
Other Income and Expense
Other income and expense includes gains and losses on the sale of equipment and
rental income received on renting out excess space at the Company's car wash
facilities.
15
Taxes
Income tax expense is derived from tax provisions for interim periods that are
based on the Company's estimated annual effective rate. Currently, the
effective rate differs from the federal statutory rate primarily due to state
and local income taxes, non-deductible costs related to acquired intangibles,
and the use of net operating loss carryforwards.
The following table presents the percentage each item in the consolidated
statements of operations bears to total revenues:
Three Months Ended
March 31,
--------------------
2001 2000
--------- ----------
(Restated)
Revenues 100.0% 100.0%
Cost of revenues 70.8 69.9
Selling, general and administrative expenses 14.3 14.1
Depreciation and amortization 5.3 4.8
--------- ----------
Operating income 9.6 11.2
Interest expense, net (6.3) (6.0)
Other income 0.5 0.7
--------- ----------
Income from continuing operations before income taxes 3.8 5.9
Income tax expense 1.4 1.9
--------- ----------
Income from continuing operations 2.4 4.0
Loss from discontinued operations - (1.6)
--------- ----------
Net income 2.4% 2.4%
========= ==========
Revenues
Car Care Services
Revenues for the three months ended March 31, 2001 were $12.8 million as
compared to $11.7 million for the three months ended March 31, 2000, an increase
of $1.1 million or 8.9%. Of the $1.1 million increase, approximately $1.4
million was from wash and detail services, which was partially offset by a
decrease of approximately $350,000 in fuel and merchandise sales. Of the $12.8
million of revenues for the three months ended March 31, 2001, $10.6 million or
83% was generated from car wash and detailing, $1.2 million or 9% from lube and
other automotive services, and $1.0 million or 8% from fuel and merchandise
sales. Of the $11.7 million of revenues for the three months ended March 31,
2000, $9.3 million or 79% was generated from car wash and detailing, $1.2
million or 10% from lube and other automotive services, and $1.2 million or 11%
from fuel and merchandise sales. The increase in total revenue in 2001 is
attributable to (1) revenues earned at a car wash and five truck washes the
Company acquired subsequent to the first quarter of 2000, and (2) internal
growth through a focus on selling detailing and additional on-line services
which increased the average wash and detailing revenue per car by 12% or $1.45
to $13.34 in the quarter ended March 2001 from $11.89 per car in the first
quarter of 2000.
During the three months ended March 31, 2000, the Company managed one car wash
location under an operating agreement, under which the Company was entitled to
all profits generated from the operation of that location. The income earned
under the agreement is shown as revenue net of related operating expenses.
Gross revenue generated by the location under an operating agreement for the
three months ended March 31, 2000 was $209,000. No locations were operated
under operating agreements during the three months ended March 31, 2001.
Security Products
During the three months ended March 31, 2001, pursuant to a Management
Agreement, the Company was paid $60,000. This amount is included under revenues
from operating agreements. The Company was paid $40,000 under this Agreement
for the three months ended March 31, 2000.
16
Cost of Revenues
Car Care Services
Cost of revenues for the three months ended March 31, 2001 were $9.1 million or
71% of revenues with car washing and detailing costs at 69% of respective
revenues, lube and other automotive services costs at 75% of respective
revenues, and fuel and merchandise costs at 90% of respective revenues.
Cost of revenues for the three months ended March 31, 2000 were $8.2 million, or
70% of revenues. However, because income earned under operating agreements is
shown as a net figure in revenue, already reduced by cost of revenues, the cost
of revenue percentage for this segment is better analyzed on a gross method.
With revenues and cost of revenues for locations under operating agreement shown
on a gross basis, total cost of revenues for the three months ended March 31,
2000 was $8.4 million or 71% of revenues for this segment, with car wash and
detailing costs at 68% of respective revenues, lube and other automotive
services costs at 75% of respective revenues, and fuel and merchandise costs at
85% of respective revenues. Although the Company increased its average wash and
detailing revenues per car by $1.45 or 12% since the first quarter of 2000, the
Company's current margins were consistent with the prior year due to a 5.1%
reduction in car wash volume due largely to inclement weather in the current
year. In the March 2001 quarter, approximately 59% of the Company's operating
days within its markets were rainy or cloudy as compared to 38% in the March
2000 quarter.
Security Products
During 2000 and 2001, pursuant to a Management Agreement, no costs were incurred
by the Company.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended March
31, 2001 were $1.84 million compared to $1.65 million for the same period in
2000, an increase of approximately $190,000 or 11%. SG&A costs as a percent of
revenues were 14.3% for the three months ended March 31, 2001 as compared to
14.1% in the first quarter of 2000. Approximately one-third of this increase is
as a result of SG&A costs incurred at the six additional locations acquired
since the first quarter of 2000. The remainder of the increase is primarily the
result of increases in advertising, insurance costs and business taxes. This
increase was partially offset by a reduction of administrative costs as a result
of efficiencies gained through consolidating all regional back office activity
into the Mt. Laurel, New Jersey corporate office.
Depreciation and Amortization
Depreciation and amortization totaled $675,000 for the three months ended March
31, 2001 as compared to $563,000 for the same period in 2000. This increase is
primarily attributable to the six additional sites acquired since the first
quarter of 2000 and two sites transitioned from an operating agreement to being
owned since the first quarter of 2000.
Taxes
The Company recorded a tax expense of $178,000 for the three months ended March
31, 2001. Tax expense reflects the recording of income taxes at an effective
rate of 37%. The effective rate differs from the federal statutory rate
primarily due to state and local income taxes, non-deductible costs related to
acquired intangibles, and the use of net operating loss carryforwards.
Liquidity and Capital Resources
The Company's business requires substantial amounts of capital, most notably to
pursue the Company's acquisition strategies and for equipment purchases and
upgrades. The Company plans to meet these capital needs from various financing
sources, including borrowings, internally generated funds, and the issuance of
common stock as the market price of the Company's stock improves.
As of March 31, 2001, the Company had a working capital deficit of approximately
$161,000 and cash and cash equivalents of $5.4 million. For the three months
ended March 31, 2001, net cash provided by operations was approximately
$781,000, net cash used in financing activities was approximately $423,000 and
net cash provided by investing activities was approximately $209,000 resulting
in an increase in cash and cash equivalents for the quarter of approximately
$567,000. Capital expended during the period included approximately $250,000
for the purchase of operating equipment, real estate, and intangibles.
17
The Company's acquisition program and operations to date have required
substantial amounts of working capital, and the Company expects to continue to
expend funds to support its acquisition program and capital needs for
equipment. The Company estimates aggregate capital expenditures, exclusive of
acquisitions of businesses, of approximately $750,000 for the remainder of the
year ending December 31, 2001.
At March 31, 2001, the Company had borrowings of $36.4 million. The Company
does not have any letters of credit outstanding nor does it maintain a revolving
credit facility. During 2000, the Company refinanced on a long term basis under
favorable terms the majority of its short term debt related to its 1999 and 2000
acquisitions. In February 2000, the Company entered into a $4.8 million term
loan with Bank One, Texas, NA ("Bank One") to refinance the remaining balance of
a short term promissory note related to the Genie acquisition and entered into
several new loan agreements with Bank One to finalize the assumption of notes
held by Bank One relating to the Colonial acquisition. Additionally, in
November 2000, the Company entered into a $6.7 million three year term note (15
year amortization basis) with Bank One to refinance a $1.3 million convertible
promissory note to Bullseye Properties assumed in connection with the
acquisition of Eager Beaver, a $2.1 million SouthTrust Bank note maturing in May
2001, and a $1.0 million promissory note related to the Red Baron Truck Wash
acquisition. The Bank One term note also provided approximately $800,000 for
the purchase of the leased Beneva Car Wash property and approximately $1.6
million of additional funding, net of loan closing costs, for capital
improvements and working capital.
The Company also has various other long term mortgage notes up for periodic
review during 2001. The Company is currently working on renewals of the notes
with the related financial institutions which the Company expects to receive;
however, no assurances can be given that the loans will be renewed. Several of
the Company's debt agreements as amended contain certain affirmative and
negative covenants and require the maintenance of certain levels of tangible net
worth and the maintenance of certain debt coverage ratios on an individual
subsidiary and consolidated level. The Company is currently in compliance with
these covenants.
On April 5, 2000, the Company executed a master facility agreement with Fusion
Capital Fund II, LLC ("Fusion") pursuant to which Fusion agreed to enter into up
to two equity purchase agreements, each with an aggregate principal amount of
$12.0 million. The equity purchase agreements allow the Company to suspend the
purchasing of its common stock by Fusion if the price of the Company's common
stock is less than $7.00 per share. The Company is currently not permitting the
purchase of its common stock under the equity purchase agreement due to the
current low trading value of the Company's common stock and the potentially
dilutive effect of such stock purchases. When the Company agrees to the
purchase of its stock, Fusion has the right to purchase from the Company shares
of common stock up to $12.0 million at a price equal to the lesser of (1) 140%
of the average of the closing bid prices for our common stock during the 10
trading days prior to the date of the applicable equity purchase agreement or
$7.00, whichever is greater or (2) a price based upon the future performance of
the common stock, in each case without any fixed discount to the market price.
As long as the Company has not suspended Fusion from purchasing its stock, the
equity purchase agreement requires that at the beginning of each month, Fusion
will pay $1.0 million to the Company as partial prepayment for the common stock.
Once the $1.0 million has been applied to purchase shares of our common stock,
Fusion will pay the remaining principal amount upon receipt of our common stock.
The first equity purchase agreement was executed by Fusion on April 17, 2000.
Proceeds from purchased shares through March 31, 2001 totaled approximately $1.3
million. The second equity purchase agreement will be executed after delivery
of an irrevocable written notice by the Company to Fusion stating that we elect
to enter into such purchase agreement with Fusion. The second equity purchase
agreement may be entered into only after the principal amount under the first
equity purchase agreement is fully converted into the Company's common stock.
Seasonality and Inflation
The Company believes that its car washing and detailing operations are adversely
affected by periods of inclement weather. The Company has mitigated and intends
to continue to mitigate the impact of inclement weather through geographic
diversification of its operations.
The Company believes that inflation and changing prices have not had, and are
not expected to have any material adverse effect on its results of operations in
the near future.
Year 2000
The Company completed its year 2000 remediation plan prior to the end of 1999.
Although we believe our year 2000 remediation plan was adequate to address the
year 2000 issue, the Company is continually acquiring new businesses and
locations, which may require an on-going process to convert, assess, and if
necessary, remediate newly acquired systems. This issue is part of our standard
due diligence when evaluating potential acquisitions so that remedial efforts,
if any, can be evaluated and scheduled.
18
PART II
OTHER INFORMATION
Item 5. Other Information
On April 19, 2001, the Company was advised by Nasdaq that its common stock had
failed to trade above one dollar for thirty consecutive business days, and was
therefore not in compliance with Marketplace Rule 4450(a)(5) of the Nasdaq
National Market. Nasdaq advised the Company that it had until July 18, 2001 to
maintain a bid price of at least one dollar for ten consecutive business days or
be delisted. The Company maintained a minimum bid price of at least one dollar
for ten consecutive business days ending May 4, 2001. On May 11, 2001, the
Company was advised by Nasdaq that it was in compliance with Market Place Rule
4450(a)(5) and was not subject to being delisted.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
NONE
(b) Current Reports on Form 8-K or 8-K/A:
On April 23, 2001, the Company filed a report on Form 8-K dated
April 19, 2001, under Item 5 to report communication received
from Nasdaq regarding the Company's failure to maintain a minimum
bid price of $1.00 over the prior 30 consecutive trading days.
19
SIGNATURES
In accordance with 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, thereunto duly authorized.
Mace Security International, Inc.
BY: /s/ Louis D. Paolino, Jr.
------------------------------
Louis D. Paolino, Jr., Chairman, Chief Executive Officer and
President
BY: /s/ Gregory M. Krzemien
------------------------------
Gregory M. Krzemien, Chief Financial Officer
BY: /s/ Ronald R. Pirollo
------------------------------
Ronald R. Pirollo, Controller (Principal Accounting Officer)
DATE: May 11, 2001
20