SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended May 31, 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, $.001 par value. 2,837,600 shares outstanding as of May 31,
1997.
<PAGE>
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page(s)
<S> <C>
PART I. Financial Information: ITEM 1. Financial Statements Consolidated
Condensed Balance Sheets - May 31, 1997 (Unaudited) and November 30, 1996 3.
Consolidated Condensed Statements of Operations (Unaudited) - Six and Three
Months Ended May 31, 1997 and 1996 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) - Six Months
Ended May 31, 1997 and 1996 5.
Notes to Interim Consolidated Condensed Financial Statements (Unaudited) 6.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9.
PART II. Other Information 13.
SIGNATURES 14.
EXHIBITS: Exhibit 11 - Earnings (Loss) Per Share 15.
Exhibit 27 - Financial Data Schedule 16.
</TABLE>
<PAGE>
PART 1. Financial Information
ITEM 1. Financial Statements
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
- ASSETS -
<TABLE>
<CAPTION>
May 31, November 30,
1997 1996
(unaudited) (As restated
see Note 1)
ASSETS:
<S> <C> <C>
Cash and cash equivalents .............................................................................$ 12,675 $ 250,699
Accounts receivable ...................................................................................1,688,366 2,022,011
Inventories ...........................................................................................1,631,786 1,022,655
Property, revenue producing vehicles and equipment - net (Note 2) .....................................24,670,809 20,671,854
Intangible assets - net (Note 3) ......................................................................9,406,622 9,722,363
------------ ------------
TOTAL ASSETS $37,410,258 $ 33,689,582
============ ============
- LIABILITIES AND SHAREHOLDERS' EQUITY -
LIABILITIES (Note 4):
Bank overdraft line of credit .........................................................................$ 5,288,035 $ 2,964,465
Accounts payable ......................................................................................1,508,852 624,953
Accrued liabilities and expenses ......................................................................488,519 490,915
Bank debt .............................................................................................995,281 1,002,571
Obligations under hire purchase contracts .............................................................14,187,097 11,034,951
Other loans - acquisition (Note 5) ....................................................................4,247,500 5,098,470
Other liabilities .....................................................................................-- 33,560
------------ ------------
TOTAL LIABILITIES ......................................................................................26,715,284 21,249,885
------------ ------------
MINORITY INTERESTS (Note 1) ............................................................................82,320 482,486
------------ ------------
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;
2,837,600 and 2,652,500 shares issued and outstanding at May 31,
1997 and November 30, 1996, respectively ....................... 2,838 2,653
Additional paid-in capital ............................................................... 13,453,407 13,487,388
Retained earnings (deficit) .............................................................. (2,324,496) (1,402,587)
Foreign currency translation ............................................................... (519,095) (130,243)
- ------------ ------------
TOTAL SHAREHOLDERS' EQUITY ..............................................................................10,612,654 11,957,211
---------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................................................ $37,410,258 $33,689,582
=========== ============
</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 Six Months For the Three Months
Ended May 31, Ended May 31,
--------------------------------- -----------------------
1997 1996 1997 1996
---------------- ------------ ------------- --------
REVENUE:
<S> <C> <C> <C> <C>
Contract hire income .............................. $ 3,525,059 $ 2,258,438 $1,872,575 $1,197,459
Sale of contract hire vehicles .................... 3,716,495 2,496,380 1,984,679 1,355,996
Sale of vehicles - AC Cars (Note 1) .............. 516,506 -- 313,943 -
Fleet management and other income - contract hire . 409,828 423,975 303,408 237,924
Other income - AC Cars ............................ 87,714 -- 45,714 --
----------- ----------- -----------
8,255,602 5,178,793 4,520,319 2,791,379
----------- ----------- ----------- -----------
EXPENSES:
Cost of sales - contract hire ..................... 4,295,023 2,702,151 2,268,866 1,582,533
Cost of sales - AC Cars ........................... 441,972 -- 269,794 -
Depreciation - contract hire ...................... 1,664,894 1,226,317 847,840 644,343
Depreciation - AC Cars ............................ 218,558 -- 109,289 -
General and administrative expenses - contract hire 739,996 662,139 363,969 259,405
General and administrative expenses - AC Cars ..... 776,457 -- 397,342 --
Amortization of intangible assets - contract hire . 315,360 315,360 157,680 157,680
Amortization of intangible assets - AC Cars ....... 1,232 -- 616 --
Interest expenses and other - contract hire ....... 624,310 459,123 344,999 251,787
Interest expenses and other - AC Cars ............. 185,964 -- 107,582 --
Research and development costs - AC Cars .......... 313,922 -- 232,010 --
----------- ----------- -----------
9,577,688 5,365,090 5,099,987 2,895,748
----------- ----------- ----------- -----------
LOSS BEFORE MINORITY INTERESTS .................... (1,322,086) (186,297) (579,668) (104,369)
Minority interests in net loss of consolidated
subsidiaries ............................... 400,166 -- 227,093 --
----------- ----------- -----------
LOSS BEFORE PROVISION FOR INCOME
TAXES ............................................. (921,920) (186,297) (352,575) (104,369)
Provision (credit) for income taxes ............... -- -- -- --
----------- ----------- -----------
NET LOSS .......................................... $ (921,920) $ (186,297) $ (352,575) $ (104,369)
=========== =========== =========== ===========
LOSS PER COMMON SHARE (Note 6):
Net loss before minority interest ................. $ (.47) $ (.09) $ (.20) $ (.05)
Minority interest in net loss of subsidiary ....... .14 -- .08 --
----------- ----------- ----------- -----------
$ (.33) $ (.09) $ (.12) $ (.05)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (Note 6) ........ 2,790,016 2,163,519 2,820,866 2,266,087
=========== =========== =========== ===========
</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 Six Months Ended
May 31,
1997 1996
---------------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss .................................................................... $(921,920) $(186,297)
Adjustments to reconcile net loss to net cash provided by operating activities:
Minority interest in net loss of subsidiary ................................. (400,166) --
Depreciation and amortization ............................................... 1,904,595 1,246,229
Amortization of goodwill .................................................... 295,449 295,449
(Gain) on disposal of fixed assets .......................................... (168,710) (9,532)
Provision for maintenance costs ............................................. -- 23,691
Changes in assets and liabilities:
Decrease (increase) in accounts receivable ....................................... 341,221 (81,644)
(Increase) in inventories (609,131) (106,292)
Increase (decrease) in accounts payable, accrued expenses and other liabilities .. 850,217 (1,162,253)
----------- -----------
Net cash provided from operating activities ...................................... 1,291,555 19,351
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of revenue producing assets ........................................... (6,781,178) (3,207,506)
Proceeds from sale of fixed assets ............................................. 1,030,421 570,037
----------- -----------
Net cash (utilized) by investing activities ...................................... (5,750,757) (2,637,469)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from bank lines of credit ......................................... 2,323,570 467,809
Proceeds from sale of common stock and warrants ................................ 92,500 3,282,500
Costs associated with stock/debt offerings ..................................... (126,296) (882,206)
Loans repaid to directors ...................................................... -- (123,668)
Principal payments of long-term debt ........................................... (7,290) (42,436)
Payment of acquisition debt .................................................... (824,600) --
Proceeds from hire purchase contract funding ................................... 9,079,975 3,795,711
Principal repayments of hire purchase contract funding ......................... (5,927,829) (3,448,679)
----------- -----------
Net cash provided by financing activities ........................................ 4,610,030 3,049,031
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .......................................... (388,852) 25,366
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (238,024) ......456,279
Cash and cash equivalents, beginning of year ................................... 250,699 3,377
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ ....................................... 12,675 $ 459,656
=========== ===========
</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.
On November 29, 1996, the Company, through its newly formed,
70%, 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 specialty
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. Fixed assets recorded as a
result of this acquisition aggregated $3,038,182. In April 1997,
the Company, through the services of an independent third-party
expert, determined that the value of such fixed assets acquired
was actually $6,643,365 at the date of acquisition. A portion of
this increase ($1,990,215) was previously reflected as an
intangible asset, which has now been reclassified. The balance
of the increase of $1,614,968, recorded as negative goodwill,
has been offset against non-current assets acquired. The balance
sheet as of November 30, 1996 (year end) included herein has
therefore been restated to reflect this corrected valuation as
follows: Fixed Assets has been increased by $1,990,215 and
Intangible Assets has been reduced by $1,990,215. In addition
financial statements for the year ended November 30, 1996 have
been restated to correct an error in the method by which the
Company was reflecting the minority shareholders' interest in AC
Automotive Group, Inc. The effect of this restatement was to
increase the minority interest liability and decrease additional
paid-in capital as of November 30, 1996 in the amount of
$482,486. The Company has filed an amended Form 10-KSB and this
Form 10-QSB/A with the Securities and Exchange Commission to
reflect such restatements.
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.
Page 6.
<PAGE>
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - DESCRIPTION OF COMPANY (Continued):
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, 1997 and the results of its operations
for the six and three month periods ended May 31, 1997 and 1996
and its cash flows for the six month periods ended May 31, 1997
and 1996.
The results of operations for the six and three month periods
ended May 31, 1997 are not necessarily indicative of the results
to be expected for the full year.
NOTE 2 - FIXED ASSETS:
<TABLE>
<CAPTION>
Fixed assets consists of the following:
May 31, November 30,
1997 1996
<S> <C> <C>
Building and improvements $ 1,719,415 $ 1,719,415
Revenue producing vehicles 22,218,436 17,282,095
Furniture, fixtures and machinery 4,739,322 4,641,388
Aircraft 927,751 927,751
-------------- -------------
29,604,924 24,570,649
Less: accumulated depreciation 4,934,115 3,898,795
------------- ------------
$24,670,809 $20,671,854
=========== ===========
</TABLE>
NOTE 3 - INTANGIBLE ASSETS:
Intangible assets consist 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, 1997
and November 30, 1996 aggregated $3,307,218 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.
Page 7.
<PAGE>
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - LIABILITIES:
Included in liabilities as of May 31, 1997, are amounts in the
aggregate of $13,140,301 which are not due and payable until
after May 31, 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.
In 1997, the Company completed a private placement of 18 1/2
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 notes are
payable on the earlier of 18 months from the date of issuance or
a closing of an underwritten public offering of the Company's
(or any of its subsidiaries) securities.
NOTE 6 - EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share are computed based upon the weighted
average shares and common equivalent shares outstanding. Common
stock equivalents have been excluded from the computation since
the results would be anti-dilutive. 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.
In February 1997, the Financial Accounting Standards Board
issued Statement No. 128 "Earnings Per Share" ("SFAS 128"),
which changes the method for calculating earnings per share.
SFAS 128 requires the presentation of "basic" and "diluted"
earnings per share on the face of the income statement. SFAS 128
is effective for financial statements for periods ended after
December 15, 1997. The Company will adopt SFAS 128 for the year
ended November 30, 1997, and accordingly restate prior periods,
as early adoption is not permitted. Statement No. 128 is not
expected to materially differ from primary earnings (loss) per
share as reported in Exhibit 11 in the Company's quarterly Form
10-QSB.
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 Inc. ("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 Pride'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 Pride's
ownership interest to 56.55%.
On November 29, 1996, the Company, through its newly formed,
70%, 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 specialty
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. Fixed assets recorded as a
result of this acquisition aggregated $3,038,182. In April 1997,
the Company, through the services of an independent third-party
expert, determined that the value of such fixed assets acquired
was actually $6,643,365 at the date of acquisition. A portion of
this increase ($1,990,215) was previously reflected as an
intangible asset, which has now been reclassified. The balance
of the increase of $1,614,968, recorded as negative goodwill,
has been offset against non-current assets acquired. The balance
sheet as of November 30, 1996 (year end) included herein has
therefore been restated to reflect this corrected valuation as
follows: Fixed Assets has been increased by $1,990,215 and
Intangible Assets has been reduced by $1,990,215. In addition
financial statements for the year ended November 30, 1996 have
been restated to correct an error in the method by which the
Company was reflecting the minority shareholders' interest in AC
Automotive Group, Inc. The effect of this restatement was to
increase the minority interest liability and decrease additional
paid-in capital as of November 30, 1996 in the amount of
$482,486. The Company has filed an amended Form 10-KSB and this
Form 10-QSB/A with the Securities and Exchange Commission to
reflect such restatements.
The financial information presented herein include: (i)
Consolidated Condensed Balance Sheets as of May 31, 1997 and
November 30, 1996 (as restated); (ii) Consolidated Condensed
Statements of
Page 9.
<PAGE>
Operations for the Six and Three Month Periods Ended May 31,
1997 and 1996 and (iii) Consolidated Condensed Statements of
Cash Flows for the Six Month Periods Ended May 31, 1997 and
1996.
Results of Operations
Contract Hire/Fleet Management:
Revenues increased by $1,369,283 when comparing the three months
period May 31, 1997 to the three months ended May 31, 1996. The
primary reason for the 49% increase was due to an increase in
revenues from contract hire, sale of vehicles at lease maturity
and the selling of vehicles at low margins to take advantage of
dealer bonuses. During this period, 128 new contracts were
written at an average rental of $608 per vehicle as against 85
contracts in the corresponding period in 1996 at an average
rental of $512 per vehicle. During this quarter, 20 vehicles
were disposed of on termination of contracts at an average
profit of $3,275 per vehicle. During the same quarter in 1996,
30 vehicles were disposed of at an average profit of $2,910 per
vehicle.
For the six month period May 31, 1997, revenues increased by
$2,472,589 or 48%, when compared to the same period in 1996. The
primary reason for this increase was due to an increase in
revenues from contract hire, sale of vehicles at lease maturity
and the selling of vehicles at low margins to take advantage of
dealer bonuses. During this period, 245 new contracts were
written at an average rental of $566 per vehicle as against 126
contracts in the corresponding period in 1996 at an average
rental of $498 per vehicle. For the six month period ending May
31, 1997, 60 vehicles were disposed of on termination of
contracts at an average profit of $2,759 per vehicle as against
46 vehicles being disposed of in the corresponding period in
1996 at an average profit of $2,658 per vehicle. As of May 31,
1997, 1,528 vehicles were under lease and management compared to
1,220 vehicles as at May 31, 1996.
Cost of sales (including depreciation) as a percent of revenue
decreased from 80% to 75% when comparing the three months ended
May 31, 1997 and 1996. Management attributes this decrease
mainly to the increased profitability on sale of vehicles on
termination of contracts during the quarter and the writing of
more profitable contracts. Cost of sales as a percent of revenue
increased from 76% to 78% when comparing the six month periods
ending May 31, 1997 and 1996. Management attributes this
increase primarily to the increase in buying and selling of
vehicles and selling onto third parties at low margins to take
advantage of dealer bonuses as well as the more prudent approach
to estimating residual values of vehicles, thereby increasing
the depreciation expense and cost of sales and reducing the
residual risk.
General and administrative expenses increased by $104,564 when
comparing the three month periods ended May 31, 1997 and 1996.
This increase is mainly due to an increase in staff levels as
result of growth of business and normal increases in operating
overhead. For the six month period ending May 31, 1997, compared
to the same period in the prior year, general and administrative
expenses increased by $77,857 which is in line with the growth
of the business.
Interest expense increased by 37% and 36% for the three month
and six month periods ending May 31, 1997 and 1996,
respectively. This increase is in line with the increase in new
contracts written and associated increase in funding of
vehicles.
Page 10.
<PAGE>
AC Cars
The Company, on November 29, 1996, through its newly formed 70%
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 Autocraft 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 half of the year has devoted most
of its resources to resurrecting operations. This has involved
upgrading of production facilities, improving efficiency,
appointing new dealerships, installing systems and controls and
appointing new management where necessary. New dealerships have
been appointed in the United Kingdom and a distributor has also
been appointed in Australia. The Company has embarked on a
program to bring the new AC Ace sports car into production in
the last quarter of 1997, and has incurred research and
development costs associated with such planned production.
For the three-month period ended May 31, 1997, these operations
reported a loss of $756,976. Revenues for the period were
$359,657 as against $244,563 for the previous quarter. Cost of
sales amounted to $269,794 as against $172,178 for the previous
quarter. General and administrative expenses increased
marginally from $379,115 to $397,342 when comparing the quarters
ended February 28 and May 31, 1997. Interest charges amounted to
$107,582 as against $78,382for the first quarter.
Research and development costs incurred relate to the
manufacture and distribution of the AC Cobra and AC Ace cars.
These costs amounted to $313,922 and $232,010 for the six and
three months ended May 31, 1997, respectively.
The shortfall in the working capital requirements of the AC Cars
has been funded by the contract hire operations which have
obtained increased bank lines of credit for this purpose. This
will continue in the future until AC Cars is self supportive and
able to fund its own working capital requirements. The repayment
of the monies owed to the contract hire operations will be
funded out of proceeds of vehicle sales.
Consolidated
For the three months ended May 31, 1997, the Company reported a
loss of $421,372 before amortization and minority interests, as
compared to a profit of $53,311 for the same period in 1996. The
reason for this, is that this quarter includes the operating
losses of AC Cars. The loss for the quarter comprises a loss of
$756,360 before amortization and minority interests in AC Cars
and a profit before goodwill amortization of $334,988 in the
contract hire operations.
For the six-month period ended May 31, 1997, the Company
reported a loss of $1,005,494 before amortization and minority
interests as compared to a profit of $129,063 for the same
period in 1996. The loss comprises a loss of $1,332,653 before
amortization and minority interests in AC Cars and a profit
before goodwill amortization of $327,159 in the contract hire
operations.
Liquidity and Capital Resources
In 1997, the Company completed a private placement of 18.5
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.
Page 11.
<PAGE>
The Company acquires new vehicles as required. There are no
material planned capital expenditures at the present time.
Other
Except for historical information contained herein, the matters
set forth above may be forward-looking statements that involve
certain risks and uncertainties that could cause actual results
to differ from those in the forward-looking statements.
Potential risks and uncertainties include such factors as the
level of business and consumer spending in the Company's
industry, the competitive environment, the ability of the
Company to expand its operations, the level of costs incurred in
connection with the Company's expansion efforts and economic
conditions. Investors are also directed to consider other risks
and uncertainties discussed in documents filed by the Company
with the Securities and Exchange Commission.
Page 12.
<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 of Security Holders.
None.
ITEM 5 - Other Information.
None.
ITEM 6 - Exhibits or Reports on Form 8-K.
Exhibit 27 - Financial Data Schedule
Exhibit 11 - Computation of Earnings Per Share
Page 13.
<PAGE>
SIGNATURES
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 17, 1997 PRIDE AUTOMOTIVE GROUP, INC.
By: /s/ Alan Lubinsky
Chief Executive Officer
Page 14.
<PAGE>
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months For the Three Months
Ended May 31 , Ended May 31,
----------------------------- ----------------------
1997 1996 1997 1996
--------------- ------------ ------------- -------
<S> <C> <C> <C> <C>
LOSS BEFORE MINORITY INTERESTS ............................ $(1,322,086) $ (186,297) $ (579,668) $ (104,369)
Minority interests in net loss of consolidated subsidiaries 400,166 -- 227,093 --
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES .................... (921,920) (186,297) (352,575) (104,369)
Provision (credit) for income taxes ....................... -- -- -- --
-----------
NET LOSS .................................................. $ (921,920) $ (186,297) $ (352,575) $ (104,369)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING ........................................ 2,790,016 2,163,519 2,820,866 2,266,087
=========== =========== =========== ===========
LOSS PER COMMON SHARE:
Net loss before minority interest ......................... $ (.47) $ (.09) $ (.20) $ (.05)
Minority interest in net loss of subsidiary ............... .14 -- (.08) --
----------- ----------- ----------- -----------
$ (.33) $ (.09 $ (.12) $ (.05)
=========== =========== =========== ===========
</TABLE>
- Exhibit 11 -
Page 15.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
EXHIBIT 27
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
The schedule contains summary financial information extracted from the
consolidated financial statements for the six months ended May 31, 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> may-31-1997
<CASH> 12,675
<SECURITIES> 0
<RECEIVABLES> 1,688,366
<ALLOWANCES> 0
<INVENTORY> 1,631,786
<CURRENT-ASSETS> 0
<PP&E> 29,604,924
<DEPRECIATION> 4,934,115
<TOTAL-ASSETS> 37,410,258
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 2,838
<OTHER-SE> 10,615,492
<TOTAL-LIABILITY-AND-EQUITY> 37,410,258
<SALES> 7,758,060
<TOTAL-REVENUES> 8,255,602
<CGS> 4,736,995
<TOTAL-COSTS> 4,736,995
<OTHER-EXPENSES> 316,592
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 810,274
<INCOME-PRETAX> (921,920)
<INCOME-TAX> 0
<INCOME-CONTINUING> (921,920)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (921,920)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
</TABLE>
