The Company was incorporated in Delaware on September 1, 1993. Before July 1999, its main business was the production and sale of less-than-lethal defense sprays and other consumer safety and personal security products. On July 1, 1999, the Company merged American Wash Services, Inc., a company that was engaged in the business of acquiring and operating car wash facilities, into a wholly-owned subsidiary of Mace Security International, Inc. On July 9, 1999, the Company acquired all the outstanding common stock of Innovative Control Systems, Inc. ("ICS"), a developer of point-of-sale systems for the car wash and oil and lubrication industries. On June 2, 2000, the Company sold its computer products subsidiary, ICS, and accordingly, all results of ICS's operations have been classified as "discontinued operations".
The Company's operations are currently conducted through two primary divisions. Since July 1999, the Company's main business has been the ownership and operation of full service car and truck wash facilities. Through a separate security products division, the Company produces retail sale consumer safety and personal security products. In the first quarter of 2000, the Company entered into a Management Agreement with Mark Sport, Inc. ("Mark Sport"). Mark Sport is controlled by Jon E. Goodrich, a director of the Company. The Management Agreement entitles Mark Sport to operate the Company's Security Products Division and receive all profits or losses realized through operation of this division. Under the Management Agreement, Mark Sport pays the Company $20,000 per month. Additionally, Mark Sport must pay the Company an amount equal to the amortization and depreciation on the assets of the division. During the term of the Agreement, Mark Sport must operate the division in substantially the same manner as it has been operated prior to the Management Agreement.
LINES OF BUSINESS
Car and Truck Wash Operations. The Company, through its subsidiaries, owns and operates 57 car washes and five truck washes. The Company operates 16 car wash locations in the region surrounding Philadelphia, Pennsylvania, some of which are located in New Jersey, Pennsylvania and Delaware. The Company also operates six car wash locations in the Sarasota, Florida area, 14 car wash locations in Arizona, and 21 car wash locations in Texas. The Company also owns five truck washes located in Arizona, Indiana, Ohio and Texas. Except for 12 of the Philadelphia-region car washes, which provide only exterior washing, the rest of the Company's locations are full service car washes, providing exterior washing and drying, vacuuming and dusting of dashboards and door panels, and cleaning of all windows and glass.
The typical car or truck wash facility consists of a free standing building of approximately 4,000 square feet, containing a sales area for impulse items and a car wash tunnel of approximately 75 feet in length. Cars are moved through the car wash tunnel by a conveyor system where automatic equipment cleans the vehicle as it moves underneath the equipment. Additional extra services, including wheel cleaning, fragrance and rust protection treatment, interior and wheel treatments, waxing and shampooing, are also offered at the locations. Several locations also offer other consumer products and related car care services, such as professional detailing services (offered at 45 locations), oil and lubrication services (offered at 15 locations), gasoline dispensing services (offered at 24 locations), state inspection services (offered at six locations), and convenience store sales (offered at eight locations). The truck wash facilities provide washing and waxing services for tractor-trailer and fleet transport vehicles. These services are provided by hand and by a unique automated system designed specifically for washing and waxing large vehicles. While certain acquisitions were pending, the Company managed several car wash locations under operating agreements pursuant to which the Company was entitled to all profits generated by that location.
Security Products Division. The Security Products Division is divided into two sub-divisions. The Consumer Division of the Security Products Division designs, markets and sells consumer products for use in protection of the home and automobile, and for personal and child protection. These products include a line of defense sprays, personal alarms, whistles, and window and door lock alarms. The defense sprays, the Consumer Division's most well-known products, include tear gas sprays, pepper sprays and sprays with both tear gas and pepper solution. The Consumer Division markets its products through mass merchants/department stores, consumer catalogues and guns/sporting goods, hardware, auto, convenience, and drug stores as well as on the Internet. The second sub-division of the Security Products Division is Mace Anti Crime Bureau(R) ("MACB") which develops and markets security products and literature primarily for the foreign financial community, including a "dye-pack" used by financial institutions for robbery protection, state-of-the-art training videos and crisis response materials. MACB markets to foreign financial institutions and related businesses throughout the world through direct marketing and the use of independent sales representatives and distributors as well as exhibitions at national trade shows and advertisement in trade publications.
Substantially all of the Company's manufacturing processes are performed at the Company's Bennington, Vermont facility under the Management Agreement through Mark Sport. The Company's defense spray products are manufactured on an aerosol filling machine. Most products are packaged in sealed, tamper-resistant "clamshells." The KinderGard(R) product line is primarily manufactured by an unrelated company and packaged on-site at the Vermont facility. Operating results of the KinderGard(R) product line are immaterial at this time.
In the first quarter of 2000, the Company entered into a Management Agreement with Mark Sport, Inc. ("Mark Sport"), a Vermont corporation controlled by Jon E. Goodrich, a director of the Company. The Management Agreement entitles Mark Sport to operate the Company's 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. Under the Management Agreement, Mark Sport pays the Company $20,000 per month. The payments commenced in February 2000 and continue through the term of the Management Agreement. Additionally, Mark Sport must pay the Company an amount equal to the amortization and depreciation on the assets of the division. During the term of the Agreement, Mark Sport must operate the division in substantially the same manner as it has been operated prior to the Management Agreement.
Point-of-Sale Systems and Software Sales and Development. On July 9, 1999, the Company acquired ICS in exchange for 604,000 shares of company common stock and the assumption of $750,000 of debt. From July 1999 to June 2000, ICS was involved in the development, marketing and sale of automated point-of-sale control systems that are used to monitor, manage and analyze car wash systems and lubrication centers. On June 2, 2000, the Company sold ICS. Accordingly, all results of ICS operations have been classified as "discontinued operations".
BUSINESS STRATEGIES
Growth Of Car and Truck Wash Business.
. Internal Growth. The Company believes that it can achieve --------------- internal growth, principally from additional sales into its current markets, by providing superior and improved service and through its existing marketing efforts. To improve market share in a given operating region, the Company spends up to 3% of its regional revenue on strong regional advertising campaigns emphasizing brand awareness. The Company believes that only about 30% of the general population routinely use car wash services. The Company believes that this relatively low level of participation is the result of (i) lack of effective advertising; (ii) inconsistent wash quality and service levels across fragmented locations; and (iii) concerns about scratches and other adverse effects from the automated wash process. The Company believes that through consumer education and by developing a strong brand reputation, known for consistent quality and safe, dependable service across locations, it can increase consumer participation rates and generate significant internal growth from existing locations. The Company also intends to selectively implement price increases when competitive advantages and appropriate market conditions exist. In addition, the Company believes that it can achieve internal growth through the addition of ancillary profit centers to its existing car wash locations such as oil and lubrication centers, gasoline dispensing services, professional detailing centers and convenience stores.
. Increasing Productivity and Operating Efficiency. The ------------------------------------------------ Company believes that it can reduce the total operating expenses of its owned businesses by implementing centralized financial controls. In addition, the Company is implementing programs to take advantage of certain economies of scale in such areas as the purchase of equipment, chemicals and supplies, parts, equipment maintenance, data processing, financing arrangements, employee benefits, insurance, and communications. The Company trains its operating personnel to emphasize customer service, labor savings, safe operation and improved sales of add-on and ancillary services. Location managers, once trained, will implement the Company's standardized service menu option list and high-margin service add-ons at each of the Company's present and acquired operating locations.
Acquisitions.
From May 1999 through December 2000, and including its merger with American Wash Services, Inc., the Company has acquired 57 car wash facilities and five truck wash facilities through the acquisition of 17 separate businesses. The majority of the locations were acquired by acquiring a company, or the assets of a company, that owned several locations in a given geographic area.
The Company will continue to acquire car washes when it can do so on advantageous terms. In evaluating potential acquisitions, the Company will consider: (i) the potential for operating cost reductions, revenue growth through advertising, and managerial efficiencies; (ii) the commercial viability and underlying real estate value of each location; (iii) the potential for geographic diversification throughout the United States; and (iv) other relevant factors.
The Company is also exploring potential acquisitions, mergers and strategic alliances with companies not in the car wash business.
As consideration for future acquisitions, the Company intends to continue to use combinations of common stock, cash, and assumption of indebtedness. The consideration for each future acquisition will vary on a case-by-case basis depending on the financial interests of the Company, the historic operating results of the acquisition target, and the growth potential of the business to be acquired. The Company expects to finance future acquisitions through funds provided by operations, mortgage loans and the proceeds of possible future equity sales.
. Completed Acquisitions in 2000. Since January 1, 2000, the Company ------------------------------ acquired three car care companies and a truck wash company.
MARKETING
Car and Truck Wash Business. The car care industry services customers on a local and regional basis. The Company employs operational and customer service people at its operating locations. The operational and customer service people are supervised by the management of the operating locations. The Company emphasizes providing quality services as well as customer satisfaction and retention, and believes that it will attract customers in the future because of its reputation for quality service. The Company markets its services through coupon advertising and direct-mail marketing programs. The Company contains a diverse customer base, with no single customer accounting for five percent or more of the Company's consolidated revenues for the fiscal year ended December 31, 2000. The Company does not believe that the loss of any single customer would have a material adverse effect on the Company's business or results of operations.
Security Products Division. The Company does not directly market its line of personal safety and security devices. All marketing and sales are done by Mark Sport under the Management Agreement. Each market category is reached through dedicated in-house sales managers, and/or through a nationwide network of manufacturers' representatives. Market categories are also reached through catalogue, magazine and trade publication advertising, Internet website and promotion at industry trade shows. Mark Sport also sells directly to wholesale distributors and to certain large department stores. Mail order and specialty accounts are handled directly by Mark Sport.
Point-of-Sale and Software Business. The Company, having sold ICS, no longer markets the point-of-sale systems manufactured by ICS.
PRODUCTION AND SUPPLIES
Car and Truck Wash Business. The Company does not manufacture any of the car or truck wash equipment and supplies which it uses. There are numerous suppliers of the equipment and supplies required by the Company's car and truck wash operations.
Security Products Division. Substantially all of the manufacturing processes for the Security Products Division are performed under the Management Agreement by Mark Sport at the Company's Bennington, Vermont facility. The Company's defense spray products are manufactured on an aerosol filling machine. Most products are packaged in sealed, tamper-resistant "clamshells." The KinderGard(R)product line and its MaceCash dye pack bag are primarily manufactured by unrelated companies and packaged on-site at the Vermont facility. There are numerous potential suppliers of the components and parts required in the production process. The Company has developed strong beneficial long-term relationships with many of its suppliers including the following: Allplax, Inc., Moldamatic, Inc., Piper Impact, Inc., Amber International, Inc. and Springfield Printing, Inc. In addition, Mark Sport purchases for resale a variety of products produced by others including whistles, alarms, and window and door locks, among others.
Point-of-Sale and Software Business. Prior to the sale of ICS in June 2000, all of the Company's manufacturing processes for its Point-of-Sale and Software Business were performed at the Company's Nazareth, Pennsylvania facility. The component parts of the Company's Point-of-Sale systems were manufactured by unrelated companies and assembled at the Nazareth, Pennsylvania facility.
COMPETITION
Car and Truck Wash Business. The car wash industry is a highly fragmented industry comprised of many "mom and pop" private businesses. At any wash location the main competitors are privately owned car washes which may, in many instances, be located near the Company's car washes. The car wash industry is highly competitive. Competition is based primarily on location, facilities, customer service, available services and rates. The Company also faces competition from sources outside the car wash industry, such as gas stations that offer automated car wash services. Because barriers to entry in the general car wash industry are relatively low, competition may arise from new sources not currently competing with the Company. The Company believes that the largest owner of car washes is currently Wash Depot Holdings, Inc., which presently operates approximately 68 car washes and five truck washes throughout the United States. The Company also competes with other companies intending to become a national car wash chain including, Car Wash Partners, Car Wash of America, Car Spa and Oasis Car Wash.
Security Products Division. The Company and Mark Sport face intense competition in the security products consumer market. Domestically, there continues to be a number of companies marketing defense sprays to civilian consumers. While the Company and Mark Sport continue to offer defense spray products that management believes distinguish themselves through brand name recognition, superior product features and formulations and research and development, this division has experienced a sales decline for these products. The Company attributes this decline not only to the strong competition, but also to lower demand in general.
TRADEMARKS AND PATENTS
Car and Truck Wash Business. The Company recently announced that it selected Super Bright Car Wash as its national car wash chain's new brand name. This new name marks the beginning of an expanded marketing and advertising initiative, which will include a modernized image for all of the Company's existing car wash facilities. The Company filed a U.S. Service Mark application on March 28, 2000, with the U.S. Patent and Trademark Office.
Security Products Division. The Company began marketing products in 1988 under the Mace(R) brand name and related trademarks pursuant to an exclusive license for sales of defense sprays to the consumer market in the continental United States, and a non-exclusive license for sales to the consumer market worldwide. The license agreement was renegotiated in 1992 to include a purchase option. The Company exercised this option and purchased outright the Mace(R) brand name and related trademarks (Pepper Mace(R), Chemical Mace(R), Mace . . . Just in Case(R), CS Mace(TM) and Magnum Mace(TM). In conjunction with this purchase, the Company acquired a non-exclusive worldwide license to promote a patented pepper spray formula in both markets. The Company also has various other patents and trademarks for the devices it sells, including, trademarks and patents for, the Big Jammer(R) door brace, Window Jammer(TM), Sonic Alert(TM), Safety Flasher(TM), Sport Strobe(TM), Child Safe Alarm(TM), Window Alert(TM), Motion Alert(TM), Emergency Whistle(TM), and Auto Alert(TM), Screecher(R), Peppergard(R), Slam(R), and Mace (Mexico)(R), Viper(R) defense spray, KinderGard(R), Zip-a-Babe(R), Hand n-Hand(R) and Safe-T-Zip(R). The Company has been issued letters patent on the locking mechanism for the Mark VI defense spray unit.
In July 1998, in connection with its sale of its Law Enforcement division, the Company transferred its Mace (R) brand trademark and all related trademarks and a patent (No. 5,348,193) to its wholly-owned subsidiary, Mace Trademark Corp. The purchaser
of its Law Enforcement division received a 99 year license to use the Mace (R) brand, certain other such trademarks and the patent in the Law Enforcement Market only.
GOVERNMENT REGULATION/ENVIRONMENTAL COMPLIANCE
Car and Truck Wash Business. The Company is subject to various local, state and federal laws regulating the discharge of pollutants into the environment. The Company believes that its operations are in compliance in all material respects with applicable environmental laws and regulations. Compliance with these laws and regulations is not expected to materially affect the Company's competitive position. Three major areas of regulation facing the Company are disposal of lubrication oil at the Company's oil change centers, the compliance with all underground storage tank laws in connection with the Company's gasoline sales and the proper recycling and disposal of water used in the Company's car washes. The Company uses approved waste-oil haulers to remove its oil and lubricant waste. The Company, before acquiring a gasoline dispensing site, investigates it to verify that any underground storage tanks are in compliance with all legal requirements. The Company recycles its waste water and where it has proper permits it is disposed of into sewage drains, 70% of the detergent and wax products used in the car wash are recycled within a built-in reclaim system.
Security Products Division. The distribution, sale, ownership and use of consumer defense sprays are legal in some form in all 50 states and the District of Columbia. However, in most states, sales to minors are prohibited and in several states (MA, MI, NE, NY, WI), sales of defense sprays are highly regulated. On January 1, 1996, California eased restrictions on defense sprays. On November 1, 1996, New York lifted an overall ban on defense sprays allowing for the sale of oleoresin capsicum (OC) pepper sprays in licensed pharmacies and licensed gun stores only. Massachusetts requires both users and sellers to be licensed. Wisconsin allows the sale of OC pepper sprays only and they must be sold from behind a counter or under glass. Michigan does not permit sales of chloroacetophenone (CN) sprays. Nevada permits sales of orthochlorobenzalmalononitrile (CS) sprays only. The Company has been able to sell its defensive sprays within the guidelines set by state regulations. There can be no assurance, however, that broader, more severe restrictions will not be enacted that would have an adverse impact on the Company's financial condition. The Company believes it is in compliance with all federal, state, and local environmental laws.
RESEARCH AND DEVELOPMENT
Car and Truck Wash Business. The Company has a car wash school established at its Austin, Texas car washes. The school is used to train managers and assistant managers for the Company's car washes.
Security Products Division. The Company has an on-site laboratory. Research and development is conducted to maintain Mace's reputation in the defense spray industry. The Company is continually reviewing ideas and potential licensing arrangements to expand its product lines. The Company spent approximately $13,000 on research and development in 1999.
INSURANCE
The Company maintains various insurance coverages for its assets and operations. These coverages include Property coverages including Business Interruption protection for each location. The Company maintains garage keepers and commercial general liability coverages in the amount of $1,000,000 per occurrence and $3,000,000 in the aggregate with an umbrella policy which provides coverage up to $25,000,000. The Company also maintains workers compensation policies in every state in which it operates. Nevertheless, there can be no assurance that the Company's insurance will provide sufficient coverages in the event a claim is made against the Company, or that the Company will be able to maintain in place such insurance at reasonable prices. An uninsured or under insured claim against the Company of sufficient magnitude could have a material adverse effect on the Company's business and results of operations.
EMPLOYEES
As of March 15, 2001, the Company had approximately 2,055 employees, of which approximately 2,011 were employed in the car care services, 39 in clerical, administrative and sales positions, and five in management. None of the Company's employees are covered by collective bargaining agreements.
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 December 31, 2000, we had negative working capital of approximately $1.0 million. 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. 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.
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.
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.
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.
Our consumer safety product businesses face governmental regulation. The distribution, sale, ownership and use of consumer defense sprays are legal in some form in all 50 states and the District of Columbia. We cannot assure you, however, that restrictions on the manufacture or use of consumer defense sprays will not be enacted that would have an adverse impact on our financial condition. Some of our consumer defense spray manufacturing operations currently incorporate hazardous materials, the use and emission of which are regulated by various state and federal environmental protection agencies, including the Environmental Protection Agency. We believe that we are in compliance currently with all state and local statutes governing our disposal of these hazardous materials, but if there are any changes in environmental permit or regulatory requirements, or if we fail to comply with any environmental requirements, these changes or failures may have a material adverse effect on our business and financial condition.
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 effect 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, 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.
