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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended May 31, 1996
Commission File Number 0-27944
PRIDE AUTOMOTIVE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 98-0157860
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Pride House, Watford Metro Centre, Tolpits Lane, Watford, England WD1 8SB
(Address of principal executive offices) (Zip Code)
(800) 698-6590
(Issuer's telephone number, including area code)
Indicate by (X) whether 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 and (2) has been subject to such filing requirements for the
past 90 days. YES X NO
Common Stock, $.001 par value. 2,652,500 shares outstanding as of May 31, 1996.
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PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
INDEX
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Page(s)
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PART I. Financial Information:
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets - May 31, 1996
(Unaudited) and November 30, 1995 3.
Consolidated Condensed Statements of Operations (Unaudited) -
Six and Three Months Ended May 31, 1996 and 1995 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Six Months Ended May 31, 1996 and 1995 5.
Notes to Interim Consolidated Condensed Financial Statements (Unaudited) 6.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8.
PART II. Other Information 10.
SIGNATURES 11.
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PART I. Financial Information
ITEM 1. Financial Statements
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
- ASSETS -
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May 31, November 30,
1996 1995
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(unaudited)
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ASSETS:
Cash and cash equivalents $ 459,656 $ 3,377
Accounts receivable 1,322,811 1,241,167
Inventories 137,429 31,137
Property, revenue producing vehicles and equipment - net (Note 2) 11,375,667 9,924,318
Intangible assets - net (Note 3) 10,026,061 10,340,396
Deferred offering costs -- 59,940
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TOTAL ASSETS $23,321,624 $21,600,335
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- LIABILITIES AND SHAREHOLDERS' EQUITY -
LIABILITIES:
Due to creditors (Note 4) $ 9,559,644 $ 9,925,801
Loans payable - directors -- 123,668
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TOTAL LIABILITIES 9,559,644 10,049,469
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (Note 5):
Preferred stock, $.01 par value, 2,000,000 shares authorized
none issued or outstanding -- --
Common stock, $.001 par value, 10,000,000 shares authorized
2,652,500 and 1,560,000 shares issued and outstanding at
May 31, 1996 and November 30, 1995, respectively 2,653 1,560
Additional paid-in capital 14,081,183 11,741,922
Retained earnings (deficit) (988,262) (801,965)
Foreign currency translation 666,406 609,349
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TOTAL SHAREHOLDERS' EQUITY 13,761,980 11,550,866
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 23,321,624 $ 21,600,335
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PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
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For the Six Months For the Three Months
Ended May 31, Ended May 31,
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1996 1995 1996 1995
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REVENUE:
Contract hire income $ 2,258,438 $ 1,745,556 $ 1,197,459 $ 883,082
Sale of vehicles 2,496,380 1,755,760 1,355,996 957,968
Fleet management and other income 423,975 54,015 237,924 27,574
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5,178,793 3,555,331 2,791,379 1,868,624
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EXPENSES:
Cost of sales 2,702,151 1,471,915 1,582,533 921,377
General and administrative expenses 662,139 609,901 259,405 192,274
Depreciation 1,226,317 902,603 644,343 377,676
Amortization of intangible assets 315,360 320,487 157,680 160,244
Interest expenses and other 459,123 462,684 251,787 340,556
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5,365,090 3,767,590 2,895,748 1,992,127
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LOSS BEFORE PROVISION (CREDIT)
FOR INCOME TAXES (186,297) (212,259) (104,369) (123,503)
Provision (credit) for income taxes -- -- -- --
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NET LOSS $ (186,297) $ (212,259) $ (104,369) $ (123,503)
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LOSS PER COMMON SHARE (Note 6) $ (.09) $ (.10) $ (.05) $ (.06)
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WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING (Note 6) 2,163,519 2,060,000 2,266,087 2,060,000
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PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
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For the Six Months
Ended May 31,
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1996 1995
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CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (186,297) $ (212,259)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 1,246,229 1,219,681
Amortization of goodwill 295,449 560,479
(Gain) loss on disposal of fixed assets
Provision for maintenance costs 23,691 (28,984)
Foreign currency translation l25,366 (300,361)
Changes in assets and liabilities:
Increase in accounts receivable (81,644) (227,761)
Increase in inventories (106,292) (13,147)
(Decrease) increase in accounts payable, accrued expenses and bank
line of credit and other creditors (1,162,253) 305,251
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Net cash provided from operating activities 44,717 1,367,508
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of revenue - producing assets (3,207,506) (1,347,226)
Proceeds from sale of fixed assets 570,037 297,566
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Net cash (utilized) by investing activities (2,637,469) (1,049,660)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Bank lines of credit 467,809 --
Proceeds from sale of common stock 3,282,500 --
Costs associated with initial public offering (882,206) --
Loans repaid to officers (123,668) --
Principal payments of long-term debt (42,436) (54,949)
Proceeds from hire purchase contract funding 3,795,711 1,528,931
Principal repayments of hire purchase contract funding (3,448,679) (1,276,733)
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Net cash provided by financing activities 3,049,031 197,249
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NET INCREASE IN CASH AND CASH EQUIVALENTS 456,279 515,097
Cash and cash equivalents, beginning of period 3,377 18,480
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 459,656 $ 533,577
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PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - DESCRIPTION OF COMPANY:
Pride Automotive Group, Inc. (the "Company") was incorporated in the
State of Delaware in March 1995. Pursuant to the terms and conditions
of a reorganization in March 1995, the Company issued 1,500,000 shares
of its common stock to Pride, Inc. (an entity incorporated in the State
of Delaware), thereby making the Company a majority owned subsidiary of
Pride, Inc., in exchange for all of the issued and outstanding shares
held by Pride, Inc. of Pride Management Services, Plc., (PMS) a
consolidated group of operating companies located in the United Kingdom
which are engaged in the leasing of motor vehicles primarily on
contract hire to local authorities and select corporate customers
throughout the United Kingdom. This exchange of stock resulted in PMS
becoming a wholly owned subsidiary of the Company. The Company, its
subsidiary PMS, and PMS's subsidiaries are referred to as the "Company"
unless the context otherwise requires. The accompanying consolidated
financial statements are based on the assumption that the Company and
PMS were combined for all periods presented, in a manner similar to the
pooling of interests method of accounting.
The accounting policies followed by the Company are set forth in Note 2
to the Company's consolidated financial statements included in its
registration statement on Form SB-2 which was filed with the Securities
and Exchange Commission and which is incorporated herein by reference.
Specific reference is made to this report for a description of the
Company's securities and the notes to consolidated financial statements
included therein.
In the opinion of management, the accompanying unaudited interim
consolidated condensed financial statements of Pride Automotive Group,
Inc. and its wholly owned subsidiaries, contain all adjustments
necessary to present fairly the Company's financial position as of May
31, 1996 and the results of its operations for the six and three month
periods ended May 31, 1996 and 1995 and its cash flows for the six
month periods ended May 31, 1996 and 1995.
The results of operations for the six and three month periods ended May
31, 1996 are not necessarily indicative of the results to be expected
for the full year.
NOTE 2 - FIXED ASSETS:
Fixed assets consists of the following:
May 31, November 30,
1996 1995
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Building and improvements $ 1,719,415 $ 1,719,415
Revenue producing vehicles 14,039,749 11,989,192
Furniture, fixtures and machinery 529,771 519,753
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16,288,935 14,228,360
Less: accumulated depreciation 4,913,268 4,304,042
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$11,375,667 $ 9,924,318
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PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - INTANGIBLE ASSETS:
Intangible assets consist primarily of goodwill which arose in
connection with the acquisition of certain subsidiaries of PMS.
Goodwill is being amortized over a period of 10 - 20 years on a
straight-line basis. Accumulated amortization as of May 31, 1996
aggregated $2,671,173. Accumulated amortization as of November 30, 1995
aggregated $2,355,813, respectively.
The Company periodically reviews the valuation and amortization of
goodwill to determine possible impairment by evaluating events and
circumstances that might indicate an inability to recover the carrying
amount. Such evaluation is based on various analyses, including
profitability projections and cash flows that incorporate the impact on
existing Company business.
NOTE 4 - DUE TO CREDITORS:
Included in due to creditors as of May 31, 1996, are amounts in the
aggregate of $3,725,807 which are not due and payable until after May
31, 1997. This amount consists of amounts due to trade creditors, loans
payable, equipment notes payable and various accruals.
NOTE 5 - COMMON STOCK/INITIAL PUBLIC OFFERING:
In December 1995, the Company completed a private placement offering
selling 20 units, each unit consisting of 25,000 shares of common
stock, at $6,000 per unit for aggregate gross proceeds of $120,000.
In April 1996, the Company successfully completed an initial public
offering of its common stock. The Company sold 592,500 shares of common
stock (including the underwriter's over allotment) at a price of $5.00
per share and 2,000,000 redeemable common stock purchase warrants at a
price of $.10 per warrant for aggregate net proceeds of $2,280,294.
Each common stock purchase warrant entities the holder to purchase one
share of common stock at an exercise price of $5.75.
NOTE 6 - EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share are computed based upon the weighted average
shares and common equivalent shares outstanding. The shares issued in
connection with the reorganization (see Note 1), and shares issued at
values below the price at which shares were sold in the Company's
initial public offering (see Note 5) have been treated as outstanding
for all periods presented, in accordance with the guidelines of the
Securities and Exchange Commission.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Pride Automotive Group, Inc. (the "Company") was incorporated in the
State of Delaware in March 1995. Pursuant to the terms and conditions
of a reorganization agreement entered into in March 1995, the Company
issued 1,500,000 shares of its Common Stock to Pride, Inc. (an entity
incorporated in the State of Delaware), in exchange for all the issued
and outstanding shares of PMS, thereby making the Company a majority
owned subsidiary of Pride and PMS a wholly-owned subsidiary of the
Company. PMS is the holding company for six wholly-owned subsidiaries,
operating as one unit, located in the United Kingdom. The accompanying
consolidated financial statements are based on the assumption that the
Company and PMS were combined for all periods presented, in a manner
similar to the pooling of interests method of accounting. PMS and its
wholly-owned subsidiaries are located in the United Kingdom and follow
generally accounting principles in the United Kingdom. For purposes of
the consolidated financial statements of the Company, the statements
have been converted to the generally accepted accounting principles in
the United States.
Pride, the Company's parent, is an entity reporting under the Exchange
Act, and its reports may be obtained and reviewed by either contacting
the Company or the Securities and Exchange Commission. Pride, Inc. on
its own has virtually no operations. As such, its financial viability
is represented by the financial statements of the Company. Pride was
incorporated as L.H.M. Corp. in the State of Delaware on May 10, 1988
as a "blank check" company, for the purpose of seeking potential
business ventures through acquisition or merger. In April 1990, L.H.M.
Corp. entered into an Agreement and Plan of Reorganization with
International Sportsfest, Inc. ("ISI"), a company formed to engage in
and establish sports exposition in sports merchandise such as clothing
and equipment. ISI never engaged in any business operations. In January
1994, ISI entered into an Agreement and Plan of Reorganization with
PMS, whereby PMS became a wholly-owned subsidiary of ISI and ISI
changed its name to Pride, Inc.
The financial information presented herein includes: (i) Consolidated
Condensed Balance Sheets as of May 31, 1996 and November 30, 1995; (ii)
Consolidated Condensed Statements of Operations for the Six and Three
Month Periods Ended May 31, 1996 and 1995 and (iii) Consolidated
Condensed Statements of Cash Flows for the Six Month Periods Ended May
31, 1996 and 1995.
Results of Operations
Revenues increased when comparing the three months ended May 31, 1995
to the three months ended May 31, 1996 from $1,868,624 to $2,791,379.
This increase of $922,755 or 49% was due to more new business being
written and more vehicles being sold on termination of leases. A
portion of the increase, approximately $210,000, resulted from the
Company's fleet management division. For the six months ended May 31,
1996, revenues increased by $1,623,462 as compared to the prior year.
As stated above, this was due to increases in new business being
written, more vehicles being sold and an increase in fleet management
revenues.
Cost of sales for the three and six month periods ended May 31,
increased as a percent of revenue by 7.4% and 9.8%, respectively, when
comparing 1995 to 1996. Management attributes this increase to the
buying of vehicles and selling to third parties at low margins to take
advantage of dealer bonuses. General and administration expenses
increased by $67,131 and $52,238, respectively, for the three and six
month periods ended May 31, when comparing 1995 to 1996. Management
attributes this increase and the increase in depreciation to the
increase in business activity, when comparing 1995 to 1996. Income
before taxes for the three months ended May 31, 1995 and May 31, 1996,
prior to the amortization of goodwill for the period ($160,244 and
$157,880, respectively) aggregated $36,741 (or $.02 per share) and
$53,331 (or
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$.02 per share) respectively.
This 45% increase is primarily due to the 49% increase in revenues for
the quarter. Income before taxes for the six months ended May 31, 1995
and May 31, 1996, prior to the amortization of goodwill for the period
($320,487 and $315,360, respectively) aggregated $108,228 (or $.05 per
share) and $129,063 (or $.06 per share), respectively.
The Company reported losses after goodwill amortization of $123,503 (or
$.06 per share) and $104,369 (or $.05 per share) for the three month
periods ended May 31, when comparing 1995 and 1996. The Company
reported losses after goodwill amortization of $212,259 (or $.10 per
share) and $186,297 (or $.09 per share) for the six month periods ended
May 31, when comparing 1995 and 1996.
Liquidity and Capital Resources
In December 1995, the Company sold in a private offering, 20 units,
each unit consisting of 25,000 shares of common stock at $6,000 per
unit for aggregate proceeds of $120,000. In April 1996, the Company
successfully completed an initial public offering of its common stock
which yielded $2,280,294 of net proceeds. Securities sold in this
offering consisted of 592,500 shares of common stock and 2,000,000
redeemable common stock purchase warrants.
The Company's balance sheet at May 31, 1996 reflects total assets of
$23,321,624 and total liabilities of $9,559,644. Due to the nature of
the Company's business, full maintenance leasing of motor vehicles
which are long-term assets, the balance sheet has been prepared on an
unclassified basis. Therefore, there is no classification of current
assets and current liabilities.
The Company's total assets and resulting net worth includes the excess
of cost over net assets acquired and acquisition costs, net of
amortization, aggregating $10,026,061. These excess costs are being
amortized over 10 and 20 year periods, respectively.
The Company acquires new vehicles as required. There are no material
planned capital expenditures at the present time.
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S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: July 12, 1996
PRIDE AUTOMOTIVE GROUP, INC.
By: /s/ Alan Lubinsky
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Chief Executive Officer
By: /s/ Ivan Averbach
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Chief Financial Officer
