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 August 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. 2,837,500 shares outstanding as of August
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 - August 31, 1997 (Unaudited) and November 30, 1996 3.
Consolidated Condensed Statements of Operations (Unaudited) - Nine and
Three Months Ended August 31, 1997 and 1996 .............. 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) - Nine Months
Ended August 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 2
<PAGE>
PART 1. Financial Information
ITEM 1. Financial Statements
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
- ASSETS -
<TABLE>
<CAPTION>
August 31, November 30,
1997 1996
(unaudited) (As restated
see Note 1)
ASSETS:
<S> <C> <C>
Cash and cash equivalents ......................................... $ 26,178 $ 250,699
Accounts receivable ............................................... 2,035,511 2,022,011
Inventories ....................................................... 1,691,941 1,022,655
Property, revenue producing vehicles and equipment - net (Note 2) . 26,699,630 20,671,854
Intangible assets - net (Note 3) .................................. 9,247,939 9,722,363
- ------------------------------------------------------------------- -------------------------
TOTAL ASSETS ...................................................... $ 39,701,199 $ 33,689,582
=================================================================== =========================
- - LIABILITIES AND SHAREHOLDERS' EQUITY -
LIABILITIES (Note 4):
Bank overdraft line of credit ..................................... $ 5,972,743 $ 2,964,465
Accounts payable .................................................. 2,759,541 624,953
Accrued liabilities and expenses .................................. 374,944 490,915
Bank debt ......................................................... 948,782 1,002,571
Obligations under hire purchase contracts ......................... 15,326,166 11,034,951
Other loans - acquisition (Note 5) ................................ 4,274,500 5,098,470
Other liabilities ................................................. 114,627 33,560
- ------------------------------------------------------------------- -------------------------
TOTAL LIABILITIES ................................................. 29,771,303 21,249,885
- ------------------------------------------------------------------- -------------------------
MINORITY INTERESTS (Note 1) ....................................... -- 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;
2,837,500 and 2,652,500 shares issued and outstanding at August 31,
1997 and November 30, 1996 2,838 2,653
Additional paid-in capital ........................................ 13,399,751 13,487,388
Retained earnings (deficit) ....................................... (3,138,333) (1,402,587)
Foreign currency translation ...................................... (334,360) (130,243)
- ------------------------------------------------------------------- -------------------------
TOTAL SHAREHOLDERS' EQUITY ........................................ 9,929,896 11,957,211
- ------------------------------------------------------------------- -------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........................ $ 39,701,199 $ 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 Nine Months For the Three Months
Ended August 31, Ended August 31,
1997 1996 1997 1996
REVENUE:
<S> <C> <C> <C> <C>
Contract hire income $ 5,571,724 $3,524,377 $2,046,665 $1,265,939
Sale of contract hire vehicles 5,343,285 4,105,599 1,626,790 1,609,219
Fleet management and other income - contract hire 660,455 646,413 250,627 222,438
Sale of vehicles - AC Cars (Note 1) 516,506 - - -
Service and spare parts revenue - AC Cars 192,956 - 105,242 -
Other income - AC Cars 184,936 - 184,936 -
12,469,862 8,276,389 4,214,260 3,097,596
EXPENSES:
Cost of sales - contract hire 6,530,114 4,415,012 2,235,091 1,712,861
Cost of sales - AC Cars 492,353 - 50,381 -
Depreciation - contract hire 2,559,706 1,984,034 894,812 757,717
Depreciation - AC Cars 329,057 - 110,499 -
General and administrative expenses - contract hire 1,029,518 1,017,478 289,522 355,339
General and administrative expenses - AC Cars 1,254,423 - 477,966 -
Amortization of intangible assets - contract hire 473,040 473,399 157,680 158,039
Amortization of intangible assets - AC Cars 1,847 - 615 -
Interest expenses and other - contract hire 1,043,702 724,434 419,392 265,311
Interest expenses and other - AC Cars 286,576 - 100,612 -
Research and development costs - AC Cars 691,166 - 377,244 -
14,691,502 8,614,357 5,113,814 3,249,267
LOSS BEFORE MINORITY INTERESTS (2,221,640) (337,968) (899,554) (151,671)
Minority interests in net loss of consolidated
subsidiaries (Note 1) 485,894 - 85,728 -
LOSS BEFORE PROVISION FOR INCOME TAXES (1,735,746) (337,968) (813,826) (151,671)
Provision (credit) for income taxes - - - -
NET LOSS $ (1,735,746) $ (337,968) $ (813,826) $ (151,671)
LOSS PER COMMON SHARE (Note 6):
Net loss before minority interest $(.79) $(.15) $(.32) $(.06)
Minority interest in net loss of subsidiary .17 - .03 -
$(.62) $(.15) $(.29) $(.06)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (Note 6) 2,805,878 2,328,139 2,837,600 2,652,500
</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 Nine Months Ended
August 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss ...................................................................... $ (1,735,746) $ (337,968)
Adjustments to reconcile net loss to net cash provided by operating activities:
Minority interest in net loss of subsidiary ................................. (485,894) --
Depreciation and amortization ............................................... 2,888,753 2,013,901
Amortization of goodwill .................................................... 474,424 443,174
(Gain) on disposal of fixed assets .......................................... (193,752) (46,078)
Provision for maintenance costs ............................................. -- 31,679
Changes in assets and liabilities:
(Increase) in accounts receivables .................................................... (13,500) (351,809)
(Increase) in inventories ............................................................. (669,286) (163,859)
Increase (decrease) in accounts payable, and other liabilities ........................ 2,099,683 (1,055,398)
Net cash provided from operating activities 2,364,682 533,642
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of revenue producing assets .......................................... (10,162,619) (6,438,370)
Proceeds from sale of fixed assets ............................................ 1,443,250 1,195,509
Net cash (utilized) by ........................................................ (8,719,369) (5,242,861)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from bank lines of credit ........................................ 3,008,278 452,301
Proceeds from sale of common stock and warrants ............................... 92,500 3,282,500
Costs associated with stock/debt offerings .................................... (179,952) (882,206)
Loans repaid to directors ..................................................... -- (123,668)
Principal payments of long-term debt .......................................... (53,789) (43,537)
Payment of acquisition debt ................................................... (823,970) --
Proceeds from hire purchase contract funding .................................. 14,438,622 7,628,185
Principal repayments of hire purchase contract funding ........................ (10,147,407) (5,533,009)
------------ ------------
Net cash provided by financing activities ............................................. 6,334,282 4,780,566
EFFECT OF EXCHANGE RATE CHANGES ON CASH ......................................... (204,116) (48,570)
------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ............................ (224,521) 22,777
Cash and cash equivalents, beginning of year .................................. 250,699 3,377
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........................................ $ 26,178 $ 26,154
============ ============
</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, and has 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 with the
Securities and Exchange Commission to reflect such restatements.
Due to operating losses of AC Automotive Group, the minority interest in
its common stock has been written down to zero as of August 31, 1997.
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>
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 August 31, 1997 and the results of
its operations for the nine and three month periods ended August 31, 1997 and
1996 and its cash flows for the nine month periods ended August 31, 1997 and
1996.
The results of operations for the nine and three month periods ended August
31, 1997 are not necessarily indicative of the results to be expected for the
full year.
NOTE 2 - FIXED ASSETS:
Fixed assets consists of the following:
August 31, November 30,
1997 1996
Building and improvements $ 1,719,415 $ 1,719,415
Revenue producing vehicles 25,056,005 17,282,095
Furniture, fixtures and machinery 4,519,731 4,641,388
Aircraft 927,751 927,751
- -------------- -------------
32,222,902 24,570,649
Less: accumulated depreciation 5,523,272 3,898,795
------------- ------------
$26,699,630 $20,671,854
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
August 31, 1997 and November 30, 1996 aggregated $3,465,050 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 August 31, 1997, are amounts in the aggregate
of $13,773,911 which are not due and payable until after August 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 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, and has 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 with the
Securities and Exchange Commission to reflect such restatements.
Page 9.
<PAGE>
Due to operating losses of AC Automotive Group, the minority interest in
its common stock has been written down to zero as of August 31, 1997.
The financial information presented herein includes: (i) Consolidated
Condensed Balance Sheets as of August 31, 1997 and November 30, 1996 (as
restated); (ii) Consolidated Condensed Statements of Operations for the Nine and
Three Month Periods Ended August 31, 1997 and 1996 and (iii) Consolidated
Condensed Statements of Cash Flows for the Nine Month Periods Ended August 31,
1997 and 1996.
Results of Operations
Contract Hire/Fleet Management:
Revenues increased by $826,486 when comparing the three months period
August 31, 1997 to the three months ended August 31, 1996. The primary reason
for this 27% 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 quarter, 168 new contracts were
written at an average rental of $582 per vehicle compared with 102 contracts in
the corresponding period in 1996 at an average rental of $663 per vehicle. The
average monthly rental is dependent on the type of vehicle being rented and the
terms of the contract. During this quarter, 32 vehicles were disposed of on
termination of contracts at an average profit of $1,076 per vehicle. During the
same quarter in 1996, 30 vehicles were disposed of at an average profit of
$2,276 per vehicle.
For the nine month period August 31, 1997, revenues increased by $3,299,075
or 40%, 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, 403 new contracts were written at an
average rental of $572 per vehicle compared with 235 contracts in the
corresponding period in 1996 at an average rental of $574 per vehicle. For the
nine month period ending August 31, 1997, 92 vehicles were disposed of on
termination of contracts at an average profit of $2,106 per vehicle compared
with 76 vehicles being disposed of in the corresponding period in 1996 at an
average profit of $2,616 per vehicle. As of August 31, 1997, 1,654 vehicles were
under lease and management compared to 1,299 vehicles as at August 31, 1996.
Cost of sales (including depreciation) as a percent of revenue remained
constant at 80% when comparing the three months ended August 31, 1997 and 1996.
Cost of sales as a percent of revenue increased marginally from 77% to 78% when
comparing the nine month periods ending August 31, 1997 and 1996.
General and administrative expenses decreased by $65,817 when comparing the
three month periods ended August 31, 1997 and 1996. For the nine month period
ending August 31, 1997, compared to the same period in the prior year, general
and administrative expenses increased marginally by $12,040 which indicates that
despite the 40% growth in business general and administrative expenses are being
kept under control.
Interest expense increased by 58% and 44% for the three month and nine
month periods ending August 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.
Since the Company did not own AC Cars during the prior year, the discussion
below represents the current quarter as compared to the previous quarter of the
current year.
The Company acquired the business out of administrative receivership and
for most 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 August 31, 1997, these operations reported
a loss of $827,139. Revenues for the period were $290,178 compared with $359,657
for the previous quarter. Included in revenues is a profit of $184,936 related
to the sale of an option on the property. Cost of sales amounted to $50,381
compared with $269,794 for the previous quarter. General and administrative
expenses increased from $397,342 to $477,966 when comparing the quarters ended
May 31 and August 31, 1997. The main reason for the increase is due to an
increase in factory overheads over the last quarter. Interest charges amounted
to $100,612 compared with $107,581 for 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 $377,244
and $232,010 for the three months ended August 31, and May 31, 1997,
respectively.
The shortfall in the working capital requirements of 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 require ments. 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 August 31, 1997, the Company reported a loss of
$741,259 before amortization and minority interests, as compared to a profit of
$6,368 for the same period in 1996. The quarter loss comprises a loss of
$826,524 before amortization and minority interests in AC Cars, a profit of
$131,140 in the contract hire operations before amortization, and a loss in the
Holding Company of $45,875.
For the nine-month period ended August 31, 1997, the Company reported a
loss of $1,746,753 before amortization and minority interests as compared to a
profit of $135,431 for the same period in 1996. The loss comprises a loss of
$2,159,177 before amortization and minority interests in AC Cars and a profit
before goodwill amortization of $509,079 in the contract hire operations and a
loss in the Holding Company of $96,655, which is mainly due to interest accrued
on the acquisition loan of $1,850,000.
Page 11.
<PAGE>
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.
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: October 14, 1997 PRIDE AUTOMOTIVE GROUP, INC.
By: /s/ Alan Lubinsky
Chief Executive Officer, and
Principal Accounting Officer
Page 14.
<PAGE>
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months For the Three Months
Ended August 31, Ended August 31,
---------------------------- -------------------------
1997 1996 1997 1996
--------------- ------------ ------------- -------
<S> <C> <C> <C> <C>
LOSS BEFORE MINORITY INTERESTS ............................ $(2,221,640) $ (337,968) $ (899,554) $ (151,671)
Minority interests in net loss of consolidated subsidiaries 485,894 -- 85,728 --
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES .................... (1,735,746) (337,968) (813,826) (151,671)
Provision (credit) for income taxes ....................... -- -- -- --
-----------
NET LOSS .................................................. $(1,735,746) $ (337,968) $ (813,826) $ (151,671)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING ........................................ 2,805,878 2,328,139 2,837,600 2,652,500
=========== =========== =========== ===========
LOSS PER COMMON SHARE:
Net loss before minority interest ......................... $ (.79) $ (.15) $ (.32) $ (.06)
Minority interest in net loss of subsidiary ............... .17 -- .03 --
----------- ----------- ----------- -----------
$ (.62) $ (.15) $ (.29) $ (.06)
=========== =========== =========== ===========
</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 nine months ended August 31, 1997 and
is qualified in its entirety by reference to such statements.
</LEGEND>
<CAPTION>
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> nov-30-1997
<PERIOD-END> aug-31-1997
<CASH> 26,178
<SECURITIES> 0
<RECEIVABLES> 2,035,511
<ALLOWANCES> 0
<INVENTORY> 1,691,941
<CURRENT-ASSETS> 0
<PP&E> 32,222,902
<DEPRECIATION> 5,523,272
<TOTAL-ASSETS> 39,701,199
<CURRENT-LIABILITIES> 15,997,392
<BONDS> 13,773,911
0
0
<COMMON> 2,838
<OTHER-SE> 9,927,058
<TOTAL-LIABILITY-AND-EQUITY> 39,701,199
<SALES> 11,431,515
<TOTAL-REVENUES> 12,469,862
<CGS> 7,022,467
<TOTAL-COSTS> 7,022,467
<OTHER-EXPENSES> 474,887
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,330,278
<INCOME-PRETAX> (1,735,746)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,735,746)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,735,746)
<EPS-PRIMARY> (.62)
<EPS-DILUTED> (.62)
</TABLE>
