SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended February 28, 1997
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. 2,812,500 shares outstanding as of February
28, 1997.
<PAGE>
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
INDEX
Page(s)
PART I. Financial Information:
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets - February 28, 1997
(Unaudited) and3.ovember 30, 1996 3.
Consolidated Condensed Statements of Operations (Unaudited)
Three Months Ended February 28, 1997 and February 29, 1996 4.
Consolidated Condensed Statements of Cash Flows (Unaudited)
Three Months Ended February 28, 1997 and February 29, 1996 5.
Notes to Interim Consolidated Condensed Financial Statements (Unaudited) 6.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9.
PART II. Other Information 12.
SIGNATURES 13.
EXHIBITS: Exhibit 11 - Earnings (Loss) Per Share 14.
Exhibit 27 - Financial Data Schedule 15.
Page 2.
<PAGE>
PART 1. Financial Information
ITEM 1. Financial Statements
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
- ASSETS -
February 28, November 30,
1997 1996
(unaudited)
ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 26,244 $ 250,699
Accounts receivable 1,891,598 2,022,011
Inventories 1,298,916 1,022,655
Property, revenue producing vehicles and equipment -
net (Note 2) 19,866,127 18,681,638
Intangible assets - net (Note 3) 11,494,187 11,712,578
TOTAL ASSETS $34,577,072 $33,689,581
- LIABILITIES AND SHAREHOLDERS' EQUITY -
LIABILITIES (Note 4):
Bank overdraft line of credit $ 3,735,283 $ 2,964,465
Accounts payable 1,152,057 624,953
Accrued liabilities and expenses 314,213 490,915
Bank debt 1,726,692 1,002,571
Obligations under hire purchase contracts 11,645,767 11,034,951
Other loans - acquisition 4,156,000 5,098,470
Other liabilities 35,939 33,560
TOTAL LIABILITIES 22,765,951 21,249,885
MINORITY INTERESTS 295,759 -
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;
2,812,500 and 2,652,500 shares issued and outstanding at
February 28, 1997 and November 30, 1996 2,813 2,653
Additional paid-in capital 13,565,190 14,026,758
Retained earnings (deficit) (1,868,476) (1,456,963)
Foreign currency translation (184,165) (132,752)
TOTAL SHAREHOLDERS' EQUITY 11,515,362 12,439,696
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $34,577,072
$33,689,581
</TABLE>
See notes to interim consolidated condensed financial statements
Page 3.
<PAGE>
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
February 28, February 29,
1997 1996
REVENUE:
<S> <C> <C>
Contract hire income $1,652,484 $1,060,979
Sale of contract hire vehicles 1,731,816 1,140,384
Sale of vehicles - AC Cars (Note 1) 202,563 -
Fleet management and other income 207,420 186,051
3,794,283 2,387,414
EXPENSES:
Cost of sales - contract hire 2,843,212 1,701,592
Cost of sales - AC Cars 144,022 -
General and administrative expenses - contract hire 376,027 402,734
General and administrative expenses - AC Cars 543,238 -
Amortization of intangible assets - contract hire 157,680 157,680
Amortization of intangible assets - AC Cars 10,319 -
Interest expenses and other - contract hire 279,311 207,336
Interest expenses and other - AC Cars 78,382 -
4,432,191 2,469,342
LOSS BEFORE MINORITY INTERESTS (637,908)
(81,928)
Minority interests in net loss of consolidated subsidiaries 226,395 -
LOSS BEFORE PROVISION FOR INCOME TAXES (411,513)
(81,928)
Provision (credit) for income taxes - -
NET LOSS $ (411,513) $ (81,928)
LOSS PER COMMON SHARE (Note 6):
Net loss before minority interest $ (.23) $ (.04)
Minority interest in net loss of subsidiary .08 -
$ (.15 ) $ (.04)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (Note 6) 2,759,167
2,060,000
</TABLE>
See notes to interim consolidated condensed financial statements
Page 4.
<PAGE>
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
February 28, February 29,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (411,513) $ (81,928)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Minority interest in ne (226,395) -
Depreciation and amorti 837,328 581,974
Amortization of goodwil1 148,683 156,655
(Gain)loss on disposal of fixed assets (28,470) 13,792
Provision for maintenan - (14,651)
Foreign currency transl 276,330 1,025
Changes in assets and liabilities:
Decrease in accounts receivable 130,413 258,693
(Increase) in inventories (276,261) (195,756)
Increase in accounts payable, accrued expenses and other liabilities 352,781 248,062
Net cash provided from operating activities 802,896 967,866
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of revenue producing assets (2,918,307) (1,133,500)
Proceeds from sale of fixed assets 517,139 221,135
Net cash (utilized) by (2,401,168) (912,365)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from bank lines of credit 770,818 1,567
Proceeds from sale of common stock and warrants 80,900 120,000
Costs associated with initial public offering (2,038) -
Loans repaid to directors - (6,634)
Principal payments of long-term debt (6,679) (18,294)
Payment of acquisition debt (80,000) -
Proceeds from hire purchase contract funding 3,701,474 1,323,788
Principal repayments of hire purchase contract funding (3,090,658)
(1,464,676)
Net cash provided (utilized) by financing activiti 1,373,817 (44,249)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(224,455) 11,252
Cash and cash equivalents, beginning of year 250,699 3,377
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 26,244
$ 14,629
</TABLE>
See notes to interim consolidated condensed financial statements
Page 5.
<PAGE>
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. The PMS companies 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.
On November 29, 1996, the Company, through its newly formed majority owned
subsidiary, AC Automotive Group Inc., and its wholly-owned subsidiary AC Car
Group Limited (registered in the United Kingdom), completed the acquisition of
certain assets of AC Cars Limited and Autocraft Limited. These two companies
were engaged in the manufacture and sale of speciality automobiles. The purchase
price of approximately $6,067,000 was financed with the proceeds of a private
offering of the Company's common stock and by loans.
The accounting policies followed by the Company are set forth in Note 2 to
the Company's consolidated financial statements included in its Annual report on
Form 10-KSB for the year ended November 30, 1996 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 February 28, 1997 and the results
of its operations and cash flows for the three month periods ended February 28,
1997 and February 29, 1996.
The results of operations for the three month period ended February 28,
1997 are not necessarily indicative of the results to be expected for the full
year.
Page 6.
<PAGE>
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS (Unaudited)
NOTE 2 - FIXED ASSETS:
Fixed assets consists of the following:
February 28, November 30,
1997 1996
Building and improvements $ 1,719,415 $ 1,719,415
Revenue producing vehicles 18,835,804 17,282,095
Furniture, fixtures and machinery 2,301,842 2,247,430
Aircraft 1,331,493 1,331,493
24,188,554 22,580,433
Less: accumulated depreciation 4,322,427 3,898,795
- ------------- ------------
$19,866,127 $18,681,638
NOTE 3 - INTANGIBLE ASSETS:
Intangible assets consist of goodwill which arose in connection with the
acquisition of certain subsidiaries of PMS and brand names arising from the
acquisition of AC Car Group. Goodwill is being amortized over a period of 10 -
20 years on a straight-line basis. Brand names are being amortized over 40 years
on a straight line basis. Accumulated amortization as of February 28, 1997 and
November 30, 1996 aggregated $3,148,306 and $2,990,626, 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 - LIABILITIES:
Included in liabilities as of February 28, 1997, are amounts in the
aggregate of $12,589,097 which are not due and payable until after February 28,
1998. This amount consists of amounts due to trade creditors, loans payable and
equipment notes payable.
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 entitles the holder to purchase one share of common stock at an exercise
price of $5.75.
Page 7.
<PAGE>
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 - COMMON STOCK/INITIAL PUBLIC OFFERING (Continued):
In December 1996, the Company completed a private placement of 16 units,
each unit consisting of a 10% promissory note in the amount of $95,000 and
10,000 shares of the Company's common stock for an aggregate price of $100,000
per unit.
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.
Page 8.
<PAGE>
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 nine
wholly-owned subsidiaries, operating as one unit, located in the United Kingdom.
PMS and its wholly-owned subsidiaries are located in the United Kingdom and
follow generally accepted 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 acquisitions 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 expositions 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.
In December 1995, Pride Automotive Group, Inc. consummated a private
placement offering of common stock of 500,000 shares, which reduced the
Company's ownership interest to 72.8%. In April 1996, Pride Automotive Group,
Inc. completed an initial public offering of 592,500 shares of common stock at
$5.00 per share and 2,000,000 redeemable common stock warrants at a price of
$.10 each. The effect of the offering was to reduce the Company's ownership
interest to 56.55%.
On November 29, 1996, the Company, through its newly formed majority owned
subsidiary, AC Automotive Group Inc., and its wholly-owned subsidiary AC Car
Group Limited (registered in the United Kingdom), completed the acquisition of
certain assets of AC Cars Limited and Autocraft Limited. These two companies
were engaged in the manufacture and sale of speciality automobiles. The purchase
price of approximately $6,067,000 was financed with the proceeds of a private
offering of the Company's common stock and by loans.
The financial information presented herein include: (i) Consolidated
Condensed Balance Sheets as of February 28, 1997 and November 30, 1996; (ii)
Consolidated Condensed Statements of Operations for the Three Month Periods
Ended February 28, 1997 and February 29, 1996 and (iii) Consolidated Condensed
Statements of Cash Flows for the Three Month Periods Ended February 28, 1997 and
February 29, 1996.
Page 9.
<PAGE>
Results of Operations
Contract Hire/Fleet Management:
Revenues increased by $1,204,306 or 50%, when comparing the three months
ended February 29, 1996 to the three months ended February 28, 1997. The primary
reason for this increase was due to an increase in revenues from contract hire
income, sales of vehicles at lease maturity, and an increase in fleet management
income.
Cost of sales increased both in dollars and as a percent of sales, when
comparing the three months ended February 29, 1996 to the three months ended
February 28, 1997. These costs increased by $1,141,620 or 67%. As a percent of
sales, cost of sales were 79% versus 71% for the respective periods for 1997 and
1996. Management believes that the increase was primarily due to the
continuation of the more prudent approach to estimating the residual values of
vehicles, thereby increasing the depreciation expense and cost of sales and
reducing the residual value risk.
General and administration expenses decreased by $26,707 when comparing the
three months ended February 29, 1996 to the three months ended February 28,
1997. As a percent of sales, these expenses represent 10% of revenues for the
period ended February 28, 1997 compared with 17% for the period ended February
29, 1996.
Interest expense increased by $71,975 or 35%, when comparing the three
month period ended February 28, 1997 to the three months ended February 29,
1996. Management attributes this increase to the higher volume of borrowing on
hire purchases as result of increased business.
AC Cars - New Vehicles:
The Company, on November 29, 1996, through its newly formed majority owned
subsidiary, AC Automotive Group, Inc. and its wholly-owned subsidiary AC Car
Group Limited, completed the acquisition of certain assets of AC Cars Limited
and Autokraft Limited. These two companies are engaged in the manufacture and
sale of sports cars among which the famous AC Cobra sells for approximately
$100,000.
The Company acquired the business out of administrative receivership and
for the first quarter has devoted most of its resources to resurrecting
operations. This has involved the upgrading of production facilities and
equipment, appointing new dealerships, installing systems and controls and
appointing new management where necessary. New dealerships have been set up in
the United Kingdom and a distributor has been appointed in Australia.
The Company has also embarked on a program to bring the new AC Ace Sports
car into production in the last quarter of 1997. For the three month period
ended February 28, 1997, the operations reported a loss of $573,398, after
amortization of intangibles. Revenues, for the three month period, amounted to
$202,563, with costs of sales amounting to $144,022. General and administration
expenses and interest amounted to $543,238 and $78,382, respectively.
Consolidated:
For the three months ended February 28, 1997 and February 29, 1996, the
Company reported, prior to amortization of goodwill, write-off of acquisition
costs and minority interests, a loss from operations of $469,909 and a profit of
$75,752 respectively. Of the overall loss of $469,909 in 1997, $563,079 is
attributable to AC Cars (prior to amortization of intangibles) amd a profit of
$93,170 is attributable to Pride.
Page 10.
<PAGE>
Liquidity and Capital Resources
In December 1996, the Company completed a private placement of 16 units,
each unit consisting of a 10% promissory note in the amount of $95,000 and
10,000 shares of the Company's common stock for an aggregate price of $100,000
per unit. The proceeds have been used to satisfy a portion of the debt owed for
the acquisition of AC Car Group Limited.
The Company acquires new vehicles as required. There are no material
planned capital expenditures at the present time. Page 11.
<PAGE>
Part II - Other Information
ITEM 1. Legal Proceedings. None.
ITEM 2. Changes in Securities. None.
ITEM 3. Defaults Upon Senior Securities. None.
ITEM 4. Submission of Matters to a Vote. None.
ITEM 5. Other Information. None.
ITEM 6. Exhibit and Reports on Form 8-k.
(a) Exhibit 27 Financial Data Schedule.
(b) None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized
Dated: April 17, 1997
Pride Automotive Group, Inc.
by: \s\ Alan Lubinsky
Alan Lubinsky
<PAGE>
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
February 28, February 29,
1997 1996
<S> <C> <C>
LOSS BEFORE MINORITY INTERESTS $(637,908) $ (81,928)
Minority interests in net loss of
consolidated subsidiaries 226,395 -
LOSS BEFORE PROVISION FOR
INCOME TAXES (411,513) (81,928)
Provision (credit) for income taxes - -
NET LOSS $(411,513) $(81,928)
LOSS PER COMMON SHARE:
Net loss before minority interest $ (.23) $ (.04)
Minority interest in net loss of subsidiary .08 -
$ (.15 ) $ (.04)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 2,759,167 2,060,000
</TABLE>
- Exhibit 11 -
Page 14.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contais summary financial information extracted from the
consolidated financial statements for the three months ended February 28, 1997
and is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> FEB-28-1997
<CASH> 26,244
<SECURITIES> 0
<RECEIVABLES> 1,891,598
<ALLOWANCES> 0
<INVENTORY> 1,298,916
<CURRENT-ASSETS> 0
<PP&E> 24,188,554
<DEPRECIATION> 4,322,427
<TOTAL-ASSETS> 34,577,072
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 2,813
<OTHER-SE> 11,512,549
<TOTAL-LIABILITY-AND-EQUITY> 34,577,072
<SALES> 3,794,283
<TOTAL-REVENUES> 3,794,283
<CGS> 2,987,234
<TOTAL-COSTS> 2,987,234
<OTHER-EXPENSES> 167,999
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 357,693
<INCOME-PRETAX> (411,513)
<INCOME-TAX> 0
<INCOME-CONTINUING> (411,513)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (411,513)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
