SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-24550
PRIDE, INC.
(Exact name of registrant as specified in its charter)
Delaware 65-0109088
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
Pride House, Watford Metro Centre, Tolpits Lane, Watford, Hertfordshire,
WD1 8SB England
(Address of principal executive offices)
(800) 698-6590
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE
Securities registered pursuant to Section 12(g)
of the Act:
Common Stock, $.002 par value
(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [ ].
The aggregate market value of the voting stock on January 31, 1997 (consisting
of Common Stock, $.002 par value per share) held by non-affiliates was
approximately $409,387.86, based upon the average bid and asked prices for such
Common Stock on said date ($.63), as reported by a market maker. The issuer's
and its subsidiaries had on a consolidated basis, revenues of $12,982,098 for
its fiscal year ended November 30, 1996. On February 21, 1997, there were
1,995,357 shares of Registrant's Common Stock outstanding.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of significant factors
which have affected the Company's financial position and operations during the
years ended November 30, 1996 and 1995.
Pride Inc. (the "Company") which is a holding company, was incorporated as
International Sportsfest, Inc. in the state of Delaware on September 11, 1988.
The Company was a development stage company with no operations through January
13, 1994. On January 13, 1994, the Company acquired Pride Management Services,
Plc ("PMS"), a consolidated group of operating companies located in the United
Kingdom. Simultaneously with the acquisition, the Company changed its name from
International Sportsfest Inc. to Pride, Inc. And now has its corporate offices
in Watford, England and New York City, New York. The Company also decided to
change its year end from April 30 to November 30, in order to coincide
accounting periods with its new subsidiary.
Pursuant to the acquisition, the Company issued an aggregate of 9,000,000
(900,000 shares - post reverse stock split - see Note 13) shares of its common
stock to the stockholders of PMS in the acquisition. The 9,000,000 (pre-reverse
split) shares represented 89% of the 10,155,350 (pre-reverse split) shares of
common stock outstanding immediately after the acquisition. The consideration
given by the Company, in the form of 9,000,000 (pre-reverse split) shares of its
common stock, was determined in arms-length negotiations between management of
the Company and management of PMS. None of the stockholders or management of PMS
were previously affiliated with the Company in any manner. The principal basis
used in the negotiations to determine the number of shares to be issued by the
Company was the percentage of stock which would be owned by the new control
groups after the issuance thereof, rather than any traditional valuation
formulas. By acquiring 100% of the issued and outstanding common stock of PMS,
PMS became a wholly-owned subsidiary of the Company. For accounting purposes,
the acquisition has been treated as a recapitalization of PMS with PMS as the
acquirer in a reverse acquisition. In March 1997, pursuant to the terms and
conditions of a reorganization, the Company exchanged all its shares in Pride
Management Services Plc for 1,500,000 shares of common stock in Pride Automotive
Group Plc (a newly formed Delaware corporation). As a result of this exchange,
Pride Automotive Group, Inc. ("PAG") became a majority owned subsidiary of the
Company and the parent of PMS.
The six wholly-owned subsidiaries of PMS are Pride Vehicle Contracts Limited,
Baker Vehicle Contracts Limited, Pride Vehicle Contracts (UK) Limited, Pride
Leasing Limited, Pride Vehicle Management Limited and Pride Vehicle Deliveries
Limited, which comprise the operations of the Company. These companies jointly
engage in the business of leasing new automobiles to businesses, servicing such
automobiles during the lease term and remarketing the automobiles upon the
expiration of the lease term, which arrangement is described as a "contract
hire." The Company purchases each vehicle pursuant to its clients'
specifications, finances its purchase and pays for all the maintenance on the
vehicle during the lease term.
All references to the Company include its subsidiary Pride Automotive
Group, Inc. and its subsidiaries.
The Company has servicing agreements with automobile dealers and service
centers, which specify pricing schedules for maintenance and repair work to be
performed, all of which require the prior consent of the Company. Typically, the
term of the loan corresponds with the term of the lease, whereby, upon the
completion of the lease term, the automobiles are fully paid and owned by the
Company. Upon the expiration of the lease, the Company remarkets the automobiles
through various distribution channels including, but not limited to, used car
wholesalers or used car retailers. Each client's monthly lease payment is
determined by a computer program which takes into account estimated service
costs, new vehicle pricing, manufacturer bonuses, rebates and options, potential
residual value at lease end, as well as other variable information including
interest rates and other current and anticipated future economic variables. The
<PAGE>
monthly lease payments are usually sufficient to pay the financing and servicing
on the vehicles during the lease term, with the bulk of the profits, if any,
coming on the resale of the automobile.
The Company's principal operations are conducted by PMS which reflects its
financial statements in British pounds. As a result, most assets and liabilities
of the foreign operations are translated into U.S. dollars using current
exchange rates in effect at the balance sheet date. Fixed assets and intangible
assets are translated at historical exchange rates. Revenue and expense accounts
are translated using an average exchange rate during the period except for those
expenses related to assets and liabilities which are translated at historical
exchange rates. These expenses include depreciation and amortization which are
translated at the rates existing at the time the asset was acquired. Any
resulting gains or losses due to the translation are reflected as a separate
item of stockholders' equity.
On November 29, 1996, PAG 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), acquired certain of the assets of AC Cars
Limited and Autokraft Limited. These two companies were engaged in the
manufacture and sale of specialty automobiles. The purchase price of
approximately $6,000,000 was financed by the sale of common stock and by loans.
The acquisition involved the purchase of plant and equipment, the brand name,
inventories and an aircraft and has been recorded using the purchase method of
accounting. (See also Note 19c - notes to financial statements).
Results of Operations - Years Ended November 30, 1996 and November 30, 1995:
Revenues for the year ended November 30, 1996 were approximately $12,982,000
compared to approximately $9,778,000 for the year ended November 30, 1995, an
increase of $3,204,000 or 32.8%. The primary reason for this increase was an
increase in revenues from contract hire income and from the sales of vehicles at
lease maturity, and an overall increase in the contract hire fleet size. There
was also an increase in the fleet management division.
The Company's cost of sales increased both in actual dollars and as a percent of
sales, when comparing the years ended November 30, 1996 and 1995. These costs
increased by approximately $2,675,000 or 35.2%. As a percent of sales, costs of
sales for 1996 were 79.1% versus 77.7% for 1995. Management believes that the
increase was primarily due to the continuation of the more prudent
(conservative) approach to estimating the residual values of vehicles thereby
increasing depreciation expense and costs of sales and reducing residual value
risk. This more conservative approach reduces the residual value of an auto
thereby increasing the amount of the auto to be depreciated. This approach will
therefore increase depreciation expense, which costs will reduce the income from
contract leasing. Since the residual value is now lower, the income from the
ultimate sale of the vehicle is now higher.
General and administrative expenses decreased from $1,941,000 for 1995 to
$1,835,000 for 1996 a decrease of $106,000 or 5.5%. As a percent of sales these
expenses represented 14% of sales for 1996 and 19.9% for 1995. Management
believes that the decrease in overhead costs relate to an aggressive costs
reduction program instituted by management during 1996 and 1995.
Interest expense increased when comparing the year ended November 30, 1996 to
1995 from $630,000 to $884,000, an increase of $254,000 or 40.3%. Management
attributes this increase to a higher volume of borrowings on hire purchase
contracts. The Company is continuously negotiating with various banking
institutions to obtain credit lines, all of which are secured by the vehicles
purchased.
<PAGE>
Income (loss) before taxes for the years ended November 30, 1996 and 1995, prior
to amortization of goodwill for the period ($635,000 and $631,000, respectively)
aggregated $306,000 and ($389,000), respectively. This improvement was primarily
due to the increased revenues as described above and a portion of the losses
being allocated to minority shareholders. For the year ended November 30, 1996,
the Company reflected a net loss of ($328,741) or $.16 per share. For the year
ended November 30, 1995, the Company reported a net loss of ($1,019,624) or $.54
per share.
Liquidity and Capital Resources
Due to the nature of the Company's business, namely contract leasing of motor
vehicles which are fixed long-term assets, the balance sheet has been prepared
on an unclassified basis. Accordingly, there is no classification of current
assets and current liabilities. At November 30, 1996 and 1995, the Company's
balance sheet reflected cash of $255,000 and $74,000, respectively, accounts
receivable of $1,936,000 and $1,256,000, respectively, and total assets of
$33,535,000 and $21,426,000, respectively. The principal reasons for the
increase in total assets are the acquisition described above, an increase in
contract hire vehicles available for lease and the proceeds from PAG's initial
public offering.
In December 1995, PAG 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 $120,000 ($.24 per share).
In April 1996 PAG successfully completed an initial public offering of its
common stock, which yielded net proceeds to the Company of $2,166,000.
The Company's total assets as of November 30, 1996 and 1995 include intangible
assets of $9,544,000 and $10,141,000, respectively. These intangible assets
consist of the unamortized portion of the costs over net assets acquired in
acquisitions, which are being amortized over periods ranging from 10 to 20
years. When adjusted for these intangible assets, the net tangible book value of
the Company at November 30, 1996 and 1995 would be approximately ($2,967,000)
and $1,172,000, respectively.
The Company had reflected convertible debt of $562,292 as of November 30, 1994.
These loans were to bear interest of 6% and were repayable five years from the
date of issue. The original debt, which was not convertible, arose at the time
PMS acquired one of its subsidiaries in 1992. The Company acquired this
subsidiary for $1 and assumed approximately $11,500,000 of net liabilities. The
acquisition resulted in goodwill of approximately $11,500,000. The ultimate
holder of the debt in 1994, was given the option of converting such loans into
shares of Pride, Inc.'s common stock at the end of such period based upon their
guarantee of the ultimate sales values of the related revenue producing
vehicles. This debtholder was the controlling shareholder of the Company's
parent at the time of this transaction.
During the year ended November 30, 1995, the Company determined with the
agreement of the debtholder, that the estimated ultimate sales values of the
vehicles were less than expected and it was agreed that the debt would be
written off against the debtholder guarantee. The balance of the debt, $562,292,
was therefore treated as an early extinguishment of debt. At the time of the
extinguishment, the debt outstanding was owed to a related party. In accordance
with APB No. 26, extinguishment transactions between related entities should be
treated as capital transactions. Accordingly, the gain on the extinguishment was
added to additional paid-in capital.
During the year ended November 30, 1995, the Company generated cash flows from
operating activities aggregating approximately $2,450,000. During the year ended
November 30, 1996, the Company generated $456,000 of cash flows from operations.
<PAGE>
Investing activities reflect uses of cash for the years ended November 30, 1996
and 1995 of $8,759,000 and $2,526,000, respectively. These uses of cash are the
result of the purchases of fixed assets (primarily revenue producing vehicles)
net of the proceeds received from the sale of vehicles at lease expiration dates
and the acquisition described above.
In order to replenish its fleet of revenue producing vehicles, annually, the
Company is required to purchase from 300 to 400 new vehicles at an average cost
of approximately $25,000 each. At the time of purchase, the Company typically
makes a cash deposit of approximately 10% and finances the balance. The Company
has funding lines with several financing institutions for this purpose which
aggregate approximately $18,200,000 at November 30, 1996. At November 30, 1996,
there was approximately $11,000,000 outstanding under these lines. These lines
are typically open for between 24 and 60 months depending on the terms, the most
important term being the interest rate. Therefore, the principal amount of the
Company's current credit lines is constantly changing. Since the Company's
funding lines are asset based (secured by the vehicles purchased), there is
generally no difficulty obtaining funding lines, however, the Company is
continuously seeking to find the best terms and rates. Typically financing
institutions authorize credit lines with a fixed interest rate, which line is to
be open for a certain period of time. During the term of the line, the Company
may draw down on such line in order to finance the purchase of vehicles to
lease. When the time for drawing down on the line expires, the Company can no
longer draw down on such line to finance additional vehicles, however, the
amount drawn is repaid pursuant to the terms of such line.
For the year ended November 30, 1996, the Company provided cash from financing
activities of approximately $9,250,000 primarily as a result of minority
shareholders investments ($2,300,000) and the financing needed to acquire new
vehicles ($11,500,000) net of the amounts utilized to pay hire purchase contract
financing ($6,100,000). For fiscal 1995, the Company utilized cash for financing
activities ($185,000) primarily due to loan repayments and the amounts needed to
reduce hire purchase contract financing ($3,496,000) net of new hire purchase
contract financing.
Other than the annual acquisitions of revenue producing vehicles as mentioned
above, there are no material planned capital expenditures at the present time.
The Company believes that its cash flow from operations, and its available
funding lines for the acquisition of revenue producing vehicles will be
sufficient for at least the ensuing 12 month period.
This report contains forward-looking statements and information that is based on
management's beliefs and assumptions, as well as information currently available
to management. When used in this document, the words "anticipate, " "estimate,"
"expect," "intend," and similar expressions are intended to identify
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Such statements are
subject to certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize, or should the underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
estimated or expected.
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page Nos
<S> <C>
Independent Auditors' Report ..................................................... F - 2
Financial Statements:
Consolidated Balance Sheets as of November 30, 1996 and 1995 ................. F - 3
Consolidated Statements of Operations for the Years Ended November 30, 1996
and 1995 ..................................................................... F - 4
Consolidated Statement of Changes in Shareholders' Equity for the Two Years in
the Period Ended November 30, 1996 ........................................... F - 5
Consolidated Statements of Cash Flows for the Years Ended November 30, 1996
and 1995 ..................................................................... F - 6
Notes to Consolidated Financial Statements ....................................... F - 7
</TABLE>
F - 1
<PAGE>
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Pride Inc and
subsidiaries as of November 30, 1996 and 1995 and the related consolidated
statements of operations, changes in shareholders' equity and cash flows for
each of the two years in the period ended November 30, 1996. These consolidated
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United Kingdom which are substantially the same as those followed in the
United States. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the above mentioned consolidated financial statements present
fairly, in all material respects, the consolidated financial position of the
Corporation as of November 30, 1996 and 1995 and the results of their operations
for the two years in the period ended November 30, 1996 in conformity with
accounting principles generally accepted in the United States of America.
Our audits also include the translation of British pounds into United States
dollars for amounts included in the consolidated financial statements. In our
opinion, such translation has been made in conformity with the basis stated in
Note 2(h) of the notes to the consolidated financial statements.
MARBEL ARCH HOUSE FEBRUARY 14, 1997 EXCEPT
66-68 SEYMOUR STREET AS TO NOTES 12 AND 19(c)
LONDON W1H 5AH WHICH ARE DATED CIVVALS
UNITED KINGDOM JUNE 26, 1997 CHARTERED ACCOUNTANTS
F - 2
<PAGE>
PRIDE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- ASSETS (Note 6a) -
<TABLE>
<CAPTION>
November 30,
1996 1995
--------------- ----------
ASSETS:
<S> <C> <C>
Cash and cash equivalents ....................................................... $ 255,283 $ 73,946
Accounts receivable (Notes 2c and 3) ............................................ 1,936,166 1,255,690
Inventories (Note 2d) ........................................................... 1,127,452 31,137
Property, revenue producing vehicles and equipment - net
(Notes 2e, 4, 6, 7 and 19c) .................................................. 20,671,854 9,924,318
Intangible assets - net (Notes 2f and 19c) ...................................... 9,544,293 10,141,130
------------ ------------
TOTAL ASSETS ........................................................................ $ 33,535,048 $ 21,426,221
============ ============
- LIABILITIES AND SHAREHOLDERS' EQUITY -
LIABILITIES:
Bank line of credit (Note 6a) ................................................... $ 2,964,465 $ 1,093,680
Accounts payable ................................................................ 654,920 1,328,455
Accrued liabilities and expenses (Note 5) ....................................... 490,915 358,892
Bank debt (Note 6b) ............................................................. 1,002,571 1,070,492
Obligations under hire purchase contracts (Note 7) .............................. 11,034,951 5,578,565
Loans payable - directors (Note 9) .............................................. -- 149,938
Other liabilities (Note 8) ...................................................... 33,560 532,804
Acquisition debt payable (Note 10) .............................................. 5,098,470 --
------------
TOTAL LIABILITIES ................................................................... 21,279,852 10,112,826
------------ ------------
MINORITY INTERESTS IN SUBSIDIARIES (Note 12) ........................................ 5,677,891 --
------------
COMMITMENTS AND CONTINGENCIES (Notes 15, 18 and 19)
SHAREHOLDERS' EQUITY (Notes 11, 13 and 14):
Preferred stock, $.001 par value, 5,000,000 shares authorized none
issued or outstanding ......................................................... -- --
Common stock, $.002 par value, 500,000,000 shares authorized 1,995,357 and
1,905,357 shares issued and outstanding in 1996 and 1995, respectively ........ 3,991 3,811
Additional paid-in capital ...................................................... 8,425,722 12,126,311
Retained earnings (deficit) ..................................................... (1,555,104) (1,226,363)
Foreign currency translation (Note 2h) .......................................... (297,304) 409,636
------------ ------------
TOTAL SHAREHOLDERS' EQUITY .......................................................... 6,577,305 11,313,395
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .......................................... $ 33,535,048 $ 21,426,221
============ ============
</TABLE>
See notes to consolidated financial statements.
F - 3
<PAGE>
PRIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
November 30,
1996 1995
---------------- ----------
REVENUES (Notes 2i and 15):
<S> <C> <C>
Contract hire income .............................. $ 6,286,677 $ 4,723,539
Sale of vehicles .................................. 5,839,080 4,629,860
Fleet management and other income ................. 856,341 369,657
Gain on sale of investment ........................ -- 54,780
------------ ------------
TOTAL REVENUES ........................................ 12,982,098 9,777,836
------------ ------------
COSTS AND EXPENSES:
Cost of sales ..................................... 10,272,334 7,596,580
General and administrative expenses ............... 1,834,815 1,940,539
Amortization of goodwill .......................... 634,813 630,718
Interest and other ................................ 884,223 629,623
------------ ------------
13,626,185 10,797,460
LOSS BEFORE MINORITY INTERESTS AND
PROVISION FOR INCOME TAXES ........................ (644,087) (1,019,624)
Minority interests (Note 12) ...................... 315,346 --
------------
LOSS BEFORE PROVISION FOR INCOME TAXES ................ (328,741) (1,019,624)
Provision for income taxes (Notes 2g and 16) ...... -- --
------------
NET LOSS .............................................. $ (328,741) $ (1,019,624)
============ ============
LOSS PER COMMON AND DILUTIVE COMMON
EQUIVALENT SHARE (Note 2j):
Net loss before minority interest ............ $ (.32) $ (.54)
Minority interests in net loss of subsidiaries .16 --
------------ ------------
NET LOSS PER SHARE .................................... $ (.16) $ (.54)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING (Note 2j) ........... 1,995,357 1,892,440
============ ============
</TABLE>
See notes to consolidated financial statements.
F - 4
<PAGE>
PRIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Shares Additional Retained Foreign Total
(As Restated Common Paid-in Earnings Currency Shareholders
See Note 13) Stock Capital (Deficit) Translation Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at December 1, 1994 .............................1,750,357 $3,501 $11,971,621 $(206,739) $97,190 $11,865,573
Shares issued in exchange for debt (Notes 11 and 13) ....155,000 310 154,690 -- -- 155,000
Foreign currency translation adjustment .................-- -- -- -- 312,446 312,446
Net loss for the year ended November 30, 1995 ...........-- -- -- (1,019,624) -- (1,019,624)
Balance at November 30, 1995 ............................1,905,357 3,811 12,126,311 (1,226,363) 409,636 11,313,395
Compensatory stock (Note 13) ............................90,000 180 5,820 -- -- 6,000
Minority interest in shareholders equity at time of issue
of shares in subsidiary (Note 12) .......................-- -- (3,706,409) -- -- (3,706,409)
Foreign currency translation adjustment .................-- -- -- -- (706,940) (706,940)
Net loss for the year ended November 30, 1996 ...........-- -- -- (328,741) -- (328,741)
BALANCE AT NOVEMBER 30, 1996 ............................1,995,357 $3,991 $8,425,722 $(1,555,104) $(297,304) $6,577,305
</TABLE>
See notes to consolidated financial statements.
F - 5
<PAGE>
PRIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
November 30,
1996 1995
--------------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) ..................................................................... $ (328,741) $ (1,019,624)
Adjustments to reconcile net (loss) to net cash (utilized)provided by
operating activities:
Depreciation and amortization ............................................ 2,354,942 2,361,515
Minority interests in net loss of subsidiary ............................. (315,346) --
Amortization of goodwill ................................................. 594,735 630,718
(Gain) loss on disposal of fixed assets .................................. (119,030) 223,446
Provision for maintenance costs .......................................... (18,524) (176,302)
Changes in assets and liabilities:
(Increase) in accounts receivable .......................................... (556,622) (369,352)
(Increase) decrease in inventories ......................................... (198,591) 111,382
(Decrease) increase in accounts payable, accrued expenses and bank overdraft (956,502) 688,651
------------ ------------
Net cash (utilized) provided by operating activities ....................... 456,321 2,450,434
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets ..................................................... (9,858,724) (3,433,132)
Acquisition of assets in new subsidiary ..................................... (969,279) --
Proceeds from sales of fixed assets .......................................... 2,068,601 906,727
------------ ------------
Net cash (utilized) by investing activities .................................. (8,759,402) (2,526,405)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank lines of credit ......................................................... 1,870,785 --
Minority shareholders investment in subsidiary ............................... 2,285,929 --
Repayment of loans receivable ................................................ -- 123,148
Loans received from officers ................................................. -- 149,938
Loans repaid to affiliates ................................................... -- (132,147)
Loans repaid to officers ..................................................... (294,719) --
Principal payments of long term debt ......................................... (67,921) (92,375)
Proceeds from hire purchase contract funding ................................. 11,530,175 3,262,390
Principal repayments of hire purchase contract funding ....................... (6,073,790) (3,495,819)
------------ ------------
Net cash provided (utilized) by financing activities ......................... 9,250,459 (184,865)
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ............................................ (766,041) 312,446
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS .......................................... 181,337 51,610
Cash and cash equivalents, beginning of year ................................. 73,946 22,336
------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR ............................................. $ 255,283 $ 73,946
============ ============
</TABLE>
SUPPLEMENTAL INFORMATION:
(i) In November 1996, the Company acquired certain of the assets of AC
Cars Limited aggregating $6,067,749 and incurred debt obligations
aggregating $5,098,470
(ii)The loss on the disposal of fixed assets resulted from the sale of
certain non-revenue producing assets whereby the proceeds were less than
the carrying value
See notes to consolidated financial statements.
F - 6
<PAGE>
PRIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1995
NOTE 1 - DESCRIPTION OF COMPANY:
Pride Inc (the "Company") which is a holding company, was
incorporated as International Sportsfest, Inc in the state of
Delaware on September 11, 1988. The Company was a development
stage company with no operations through January 13, 1994. On
January 13, 1994, the Company acquired Pride Management Services,
Plc ("PMS"), a consolidated group of operating companies located
in the United Kingdom. Simultaneously with the acquisition, the
Company changed its name from International Sportsfest Inc to
Pride Inc and now has its corporate offices in Watford, England
and New York City, New York. The Company also decided to change
its year end from April 30 to November 30, in order to coincide
accounting periods with its new subsidiary.
Pursuant to the acquisition, the Company issued an aggregate of
9,000,000 (900,000 shares - post reverse stock split - see Note
13) shares of its common stock to the stockholders of PMS in the
acquisition. The 9,000,000 (pre-reverse split) shares represented
89% of the 10,155,350 (pre-reverse split) shares of common stock
outstanding immediately after the acquisition. The consideration
given by the Company, in the form of 9,000,000 (pre-reverse
split) shares of its common stock, was determined in arms-length
negotiations between management of the Company and management of
PMS. None of the stockholders or management of PMS were
previously affiliated with the Company in any manner. The
principal basis used in the negotiations to determine the number
of shares to be issued by the Company was the percentage of stock
which would be owned by the new control groups after the issuance
thereof, rather than any traditional valuation formulas. By
acquiring 100% of the issued and outstanding common stock of PMS,
PMS became a wholly-owned subsidiary of the Company. For
accounting purposes, the acquisition has been treated as a
recapitalization of PMS with PMS as the acquirer in a reverse
acquisition. In March 1995, pursuant to the terms and conditions
of a reorganization, the Company exchanged all its shares in
Pride Management Services Plc for 1,500,000 shares of common
stock in Pride Automotive Group Plc (a newly formed Delaware
corporation). As a result of this exchange, Pride Automotive
Group Inc ("PAG") became a majority owned subsidiary of the
Company and the parent of PMS.
Pride Management Services Plc (PMS) is a holding company of six
subsidiaries engaged in the leasing of motor vehicles primarily
on contract hire to local authorities and selected corporate
customers throughout the United Kingdom.
On November 29, 1996, the Company, through PAG's 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 net assets of AC Cars
Limited and Autokraft Limited. These two companies were engaged
in the manufacture and sale of specialty automobiles. The
purchase price of $6,067,000 is being financed with the proceeds
of a private debt offering which was completed, by PAG, in
December 1996 (see Note 19a) and by loans (see Note 10). The
acquisition has been recorded using the purchase method of
accounting (see also Note 19c).
.
F - 7
<PAGE>
PRIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1995
NOTE 1 - DESCRIPTION OF COMPANY (Continued):
The following unaudited pro-forma results of operations assume
the acquisition occurred as of March 1, 1996 (amounts in millions
except per share data):
Revenues ............ $ 14.3
Net loss ............ (2.1)
Loss per common share $ (1.05)
The pro-forma financial information, which is only available
beginning March 1, 1996, is not necessarily indicative of the
operating results that would have occurred had the acquisition
been consummated as of March 1, 1996, nor are they necessarily
indicative of future operating results. This is because AC Cars
Limited and Autokraft Limited were in administrative receivership
in the United Kingdom and this severely restricted the ability of
the companies to manufacture and market their products. The
Company has made the United States Securities and Exchange
Commission aware of the fact that financial information is not
available for prior periods.
All references to the Company include its' subsidiary, Pride
Automotive Group, Inc. and its subsidiaries.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PMS, the operating group of companies, which is located in the
United Kingdom, follows generally accepted accounting principles
in the United Kingdom. For purposes of these consolidated
financial statements, the Company has converted to the generally
accepted accounting principles of the United States.
(a) Basis of Consolidation and Presentation:
The consolidated financial statements include the accounts of the
Company (Pride Inc), its' wholly owned subsidiary Pride
Automotive Group, Inc. and its' wholly owned subsidiaries, and
its' majority owned subsidiary, AC Automotive Group Inc and its'
wholly owned subsidiary. All material intercompany balances and
transactions have been eliminated.
Due to the current nature of the Company's business, contract
leasing of motor vehicles (revenue producing assets) which are
treated as non-current fixed assets, the balance sheet is
reflected on an unclassified basis. Accordingly, current assets
and current liabilities are not reflected separately on the face
of the balance sheet.
(b) Use of Estimates:
In preparing financial statements in accordance with generally
accepted accounting principles, management makes certain
estimates and assumptions, where applicable, that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and
expenses during the reporting period. While actual results could
differ from those estimates, management does not expect such
variances, if any, to have a material effect on the financial
statements.
F - 8
<PAGE>
PRIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(c) Concentration of Credit Risk/Fair Value:
Financial instruments that potentially subject the Company to
concentrations of credit risk in accordance with SFAS No 105
consist principally of accounts receivable. The Company believes
however, that risks associated with accounts receivable are
limited due to its large customer base and the fact that it
leases vehicles to companies in many industries.
The carrying amounts of cash and cash equivalents, trade
receivables, other assets, accounts payable and debt obligations,
approximate fair value.
(d) Inventories:
Inventories include vehicles which are no longer being leased to
customers and which are temporarily being held for resale at cost
less accumulated depreciation, which approximates net realizable
value. The inventories of AC Automotive Group Inc and its
subsidiary consist of finished goods, work in progress and spare
parts of specialty automobiles and are stated at the lower of
cost (first-in, first-out method) or market. Market is considered
as net realizable value.
As of November 30, 1996 and 1995, inventories consisted of the
following:
1996 1995
------------- ------
Vehicles held for resale $ 124,932 $ 31,137
Finished goods ......... 180,307 --
Work-in-progress ....... 684,305 --
Spare parts ............ 137,908 --
---------- ----------
$1,127,452 $ 31,137
========== ==========
(e) Fixed Assets and Depreciation:
Fixed assets are stated at cost less depreciation. Depreciation
is provided on all assets at rates calculated to write off the
cost of each asset over its estimated useful life, as follows:
Building and improvements 50 years straight-line basis
Revenue producing vehicles 3-6 years straight-line basis
Furniture and fixtures 4 years double declining basis
Machinery and equipment 4 years double declining basis
Aircraft 4 years double declining basis
Maintenance and repairs are charged to operations and major
improvements are capitalized. Upon retirement, sale of other
disposal, the associated cost and accumulated depreciation of the
asset are eliminated from the accounts and any resulting gain or
loss is included in operations.
F - 9
<PAGE>
PRIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(f) 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 November 30,
1996 and 1995 aggregated $2,990,626 and $2,355,813, respectively.
In November 1996, the PAG acquired certain of the assets of AC
Cars Limited and Autokraft Limited (see Note 1). The purchase
price exceeded the tangible net assets acquired by $16,780. This
amount was assigned to the brand name and is to be amortized over
20 years on a straight-line basis. See also Note 19c.
The Company periodically reviews the valuation and amortization
of goodwill and other intangibles to determine possible
impairment by evaluating events and circumstances that might
indicate an inability to recover the carrying amount. Such
evaluation is based on analysis, including profitability,
projections and cash flows that incorporate the impact on
existing Company business.
(g) Income Taxes:
The Company conducts all of its operating activities in the
United Kingdom (UK). As such, it is subject to taxation in the UK
based upon that country's tax statutes. Under UK taxation rules,
provision is made for taxation deferred as a result of material
timing differences between the incidence of income and
expenditures for taxation and accounting purposes, using the
liability method, only to the extent that there is reasonable
probability that a liability or asset will crystallize in the
near future. See also Note 16 regarding SFAS No 109 - Accounting
for Income Taxes.
(h) Foreign Currency Translation:
The Company's principal operations are conducted by PMS which
reflects its financial statements in British pounds. As a result,
most assets and liabilities of the foreign operations are
translated into US dollars using current exchange rates in effect
at the balance sheet date. Fixed assets and intangible assets are
translated at historical exchange rates. Revenue and expense
accounts are translated using an average exchange rate during the
period except for those expenses related to assets and
liabilities which are translated at historical exchange rates.
These include depreciation and amortization which are translated
at the rates existing at the time the asset was acquired. Any
resulting gains or losses due to the translations are reflected
as a separate item of shareholders' equity.
F - 10
<PAGE>
PRIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(i) Income Recognition:
Contract hire income of leased vehicles is recognized as
operating leases over the period of the contract in accordance
with SFAS No 13 - Accounting for Leases and the related
amendments and interpretations. Income from the sale of
previously leased vehicles, is reflected at the time of sale of
the vehicle. Fleet management revenues and miscellaneous income
are reflected on the accrual basis over the term that the
services are provided.
(j) Earnings Per Share:
Earnings 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), the
shares issued in lieu of compensation for legal services and the
shares sold during the year ended November 30, 1996 (see Note
13), have been treated as outstanding for all periods presented,
in accordance with the guidelines of the Securities and Exchange
Commission. Common stock equivalents have been excluded from the
computation since the results would be anti-dilutive.
(k) Cash and Cash Equivalents:
For purposes of the statements of cash flows, the Company
considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.
(l) Lease Agreements:
The Company leases vehicles with terms generally ranging from two
to four years. The following table shows the future minimum lease
payments of existing leases, to be received net of related costs
(see also Note 7):
November 30, 1997 ............ $ 5,103,977
November 30, 1998 ............ 4,390,779
November 30, 1999 ............ 2,634,819
November 30, 2000 ............ 1,007,729
-----------
Total minimum lease payments receivable
net of executory costs ................ $13,137,304
(m) Accounting Changes:
As permitted by SFAS 123, Accounting for Stock-Based
Compensation, which becomes effective for the Company as of
December 1, 1996, and which encourages companies to record
expense for stock options and other stock-based employee
compensation awards based on their fair value at date of grant,
the Company will continue to apply its current accounting policy
under Accounting Principles Board Opinion No. 25 and will include
the necessary disclosures in its fiscal 1997 financial
statements.
F - 11
<PAGE>
PRIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1995
NOTE 3 - ACCOUNTS RECEIVABLE:
Accounts receivable consists of the following:
1996 1995
-------------- ---------
Trade receivables .......... $1,288,074 $ 955,437
Lease maintenance receivable 330,902 69,182
Value added Tax ............ 102,114 97,707
Other ...................... 215,076 133,364
---------- ----------
$1,936,166 $1,255,690
Included in the above trade receivables is $59,002 due on a long
term basis as of November 30,1996.
Based upon past experience, the Company has deemed that no
allowance for uncollectible accounts is necessary.
NOTE 4 - FIXED ASSETS AND DEPRECIATION:
Fixed assets consist of the following:
1996 1995
----------- -----------
Buildings and improvements .................. $ 1,719,415 $ 1,719,415
Revenue producing vehicles .................. 17,282,095 11,989,192
Furniture, fixtures, plant and equipment .... 4,641,388 519,753
Aircraft .................................... 927,751 --
-----------
24,570,649 14,228,360
Less: accumulated depreciation (including
$3,388,495 and $3,853,753 of
accumulated depreciation on revenue
producing vehicles) for 1996 and 1995,
respectively ......................... 3,898,795 4,304,042
----------- -----------
$20,671,854 $ 9,924,318
=========== ===========
Depreciation expense for the years ended November 30, 1996 and
1995 aggregated $2,295,164 and $2,415,117 respectively.
One of the buildings owned by Pride Management is not currently
being utilized by the Company. This building is being leased to
an unrelated party at an annual rent of approximately $80,000 per
annum.
F - 12
<PAGE>
PRIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1995
NOTE 5 - ACCRUED LIABILITIES AND EXPENSES:
Accrued liabilities and expenses consist of the following:
1996 1995
--------- --------
Taxes other than income taxes $418,082 $333,586
Miscellaneous accrued expenses 72,833 25,306
-------- --------
$490,915 $358,892
NOTE 6 - BANK LOANS/LINE OF CREDIT:
(a) The Company has a $2,684,800 line of credit with a bank at an
interest rate of 3% in excess of the base rate (6% as of November
30, 1996). This line of credit is payable on demand and is
secured by all assets of the Company other than revenue producing
vehicles and buildings which are already pledged (see Notes 6b
and 7). As of November 30, 1996, the bank had granted a temporary
increase in the line to $3,720,000 at similar terms.
(b) At November 30, 1996, bank loans consisted of $1,002,571 due to
two banks at rates of 3% and 5% in excess of the banks' base rate
(6% as of November 30, 1996). These loans are secured by the
freehold properties (buildings) owned by Pride Management and its
subsidiaries, and mature in 2001 and 2017.
The scheduled principal payments of this bank debt as of the
fiscal year ended November 30, 1996 are as follows:
For the Year Ended November 30,
1997 $ 98,890
1998 98,890
1999 98,890
2000 98,890
2001 98,890
Thereafter 508,121
------------
$1,002,571
NOTE 7 - HIRE PURCHASE CONTRACTS/EQUIPMENT FINANCING:
The Company has funding lines with several financing institutions
in the United Kingdom in the aggregate amount of approximately
$18,200,000 as of November 30, 1996. These funding lines are
utilized to acquire revenue producing vehicles, which vehicles
collateralize the outstanding obligations.
F - 13
<PAGE>
PRIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1995
NOTE 7 - HIRE PURCHASE CONTRACTS/EQUIPMENT FINANCING (Continued):
Assets (revenue producing vehicles) obtained under hire purchase
contracts are capitalized as fixed assets and depreciated over
their useful lives. The obligations under such agreements, which
mature at various dates within five years from inception, are
reflected separately on the balance sheet net of finance charges,
which are charged to the periods to which they apply. At November
30, 1996 obligations under hire purchase contracts are as
follows:
For the Year Ended November 30,
1997 $ 4,951,662
1998 3,977,882
1999 1,878,445
2000 226,962
--------------
$11,034,951
The annual interest rates on these obligations range from 7.25%
to 15.6%.
NOTE 8 - OTHER LIABILITIES:
At November 30, 1996 and 1995 other liabilities consisted of
$33,560 and $532,804, respectively due to other creditors at
interest rates approximating the current market rates and
repayable on a demand basis.
NOTE 9 - RELATED PARTY TRANSACTIONS:
At November 30, 1995 the Company was indebted to its President in
the aggregate amount of $149,938 These unsecured loans were
repayable on demand at an interest rate of 2 1/2% in excess of
the base lending rate (6.75% at November 30, 1995) of the
Company's bank. The loan was repaid during the year ended
November 30, 1996.
NOTE 10 - ACQUISITION DEBT PAYABLE:
As of November 30, 1996 acquisition debt payable (see Note 1) consisted of
the following:
Unsecured notes payable on demand after October 31, 1999;
interest payable quarterly at 8% per annum .............. $1,678,000
Unsecured notes payable on demand after May 31, 1998;
interest payable quarterly at 2% above the base rate
839,000
Other short-term notes payable (see Note 19) ............ 2,581,470
----------
$5,098,470
F - 14
<PAGE>
PRIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1995
NOTE 11 - CONVERTIBLE DEBT:
The Company had reflected convertible debt of $208,602 as of
November 30, 1994. These loans, which were incurred at the time
PMS acquired one of its subsidiaries, were to bear interest at 6%
and were repayable five years from date of issue. The lenders had
the option of converting such loans into shares of the Company's
common stock at the end of such period. During the current year,
the Company re-evaluated the aforementioned acquisition and found
that the residual value of the net assets acquired was less than
anticipated at the maturity date of the contract hire agreements.
Accordingly, the Company and the holder of a portion of the debt
reached an agreement whereby $53,602 of this debt would be
canceled, resulting in an offsetting reduction in the residual
values of the vehicles acquired and their corresponding
accumulated depreciation. The effect of this change in estimate
was to reduce depreciation expense in the current period by
$53,602. In January 1995, the balance of $155,000 was converted
into 155,000 shares of common stock.
NOTE 12 - MINORITY INTERESTS:
In April 1996, PAG successfully completed an initial public
offering of its common stock, as a result of which the Company's
investment in PAG was reduced to 56.55%. The Company has recorded
a charge to additional paid-in capital of $3,706,409 in order to
properly reflect the aggregate minority interest liability at
$5,677,891 which represents 43.45% of the net assets of PAG
including the minority interest in PAGs 70% owned, newly formed,
subsidiary, AC Automotive Group Inc.
NOTE 13 - COMMON STOCK/RECAPITALIZATION:
On September 20, 1994, the Company's board of directors approved
a one-for-ten reverse stock split of the Company's issued and
outstanding common stock to be effective on September 28, 1994.
All references to the number of common shares and per common
share amounts have been restated to retroactivity reflect the
reverse split.
During the year ended November 30, 1995 the Company issued
155,000 shares of common stock at a price of $1.00 per share in
lieu of repayment of loans aggregating $155,000.
In May 1996, the Company issued 90,000 shares of its common stock
in lieu of professional fees owed in the amount of $6,000.
F - 15
<PAGE>
PRIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1995
NOTE 14 - STOCK OPTION PLANS:
During 1994, the Company adopted a Stock Option Plan ("the Plan")
whereby options to purchase an aggregate of not more than 500,000
shares of common stock may be granted from time to time to key
employees, officers, directors, advisors and independent
consultants to the Company and its subsidiaries.
As of November 30, 1996, the Company had granted options to
purchase an aggregate of 500,000 shares of common stock to three
directors, at exercise prices ranging from $.48 to $1.65 per
share, aggregating $365,850. None of these options have been
exercised.
NOTE 15 - ECONOMIC DEPENDENCY:
For the years ended November 30, 1996 and 1995, the Company had
two unaffiliated customers, which accounted for an aggregate of
approximately 17% (1995 - 18%) and 12% (1995 - 15%) respectively,
of the Company's total revenues.
The Company purchases all of the automobiles that it leases to
its clients from automotive dealerships, usually several at a
time. The Company does not depend on any one dealership for its
purchase of automobiles and does not have any written agreements
with any of the dealerships it purchases vehicles from. The
Company believes that it will continue to be able to purchase
automobiles at competitive prices and terms into the future.
NOTE 16 - INCOME TAXES:
The provisions for United Kingdom income taxes utilizing the
requirements of SFAS No 109 consisted of the following for the
years ended November 30, 1996 and 1995:
1996 1995
--------- ---------
Current tax expense .............. $ 760,350 $ 860,000
Deferred tax expense ............. 174,650 --
Investment tax credits on vehicles (935,000) (860,000)
--------- ---------
$$$$$$$$$ $$$$$$$$$
========= =========
F - 16
<PAGE>
PRIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1995
NOTE 16 - INCOME TAXES (Continued):
The components of the deferred tax asset, pursuant to SFAS No
109, as of November 1996, are as follows:
1996 1995
Operating loss carryforward $ 38,000 $ 51,000
Valuation allowance ....... (38,000) (51,000)
-------- --------
$$$$$$$$ $$$$$$$$
========
The Company has available operating losses carryforwards for tax
purposes aggregating approximately $112,000 as of November 30,
1996, which may result in a deferred tax asset. The Company has
recognized this asset but has provided a valuation allowance for
the full amount since there is no assurance that such losses will
be utilized in the near future.
NOTE 17 - PENSION PLAN:
PMS and its' subsidiaries have a fully insured defined
contribution plan for all of its eligible employees.
Contributions to the plan, which are discretionary, for the years
ended November 30,1996 and 1995 amounted to $33,264 and $55,817,
respectively.
NOTE 18 - COMMITMENTS:
(a) Leases:
PAG has entered into a one-year lease agreement for the
manufacturing facility being utilized for its new subsidiary at a
cost of approximately $54,000 per month. PAG has an option to
purchase this facility at a cost of $8,700,000 through August
1997. This lease expires in December 1997.
(b) Employment Agreements:
In August 1995, the Company entered into an employment agreement
with its President/Chairman of the Board of Directors. This
three-year agreement provides for an annual salary of $160,000
with annual escalations of 10% and also contains certain
non-compete restrictions. This employee was also granted 100,000
stock options (see Note 14).
In September 1995, the Company entered into an employment
agreement with an officer/director for a period of twenty four
months commencing December 1, 1995. This agreement is
automatically extendable for a further twenty four month period
and provides for an annual salary of $55,000, subject to review
by the Board of Directors.
F - 17
<PAGE>
PRIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1995
NOTE 18 - COMMITMENTS (Continued):
(c) Rental Income:
The Company leases one of its owned facilities to an unaffiliated
company. The lease, which expires in 2004, provides for rental
income of approximately $80,000 per annum. The annual cost of
servicing the mortgage and real estate taxes on this building
approximates to $70,000.
NOTE 19 - SUBSEQUENT EVENT:
(a) In December 1996, PAG completed a private placement of 14 units,
each unit consisting of a 10% promissory note of $95,000 and
10,000 shares of PAG's common stock for an aggregate price of
$100,000 per unit. The gross proceeds of $1,400,000 was used to
satisfy a portion of the debt owed re: the acquisition of AC Cars
(see Notes 1 and 10).
(b) The Company also entered into a loan agreement with its bank for
$755,100 with interest payable at 8% per annum, secured by a
first lien on the aircraft owned by the Company as a result of
the acquisition described in Note 1. This loan is to be repaid
from the proceeds of the sale of the aircraft.
(c) In connection with the acquisition of AC Cars Limited (see Note
1) PAG originally recorded fixed assets aggregating $3,038,182
and intangible assets aggregating $1,990,215. In April 1997, PAG,
through the services of an independent third-party expert,
determined that the value of the fixed assets was actually
$6,643,365. Accordingly, as of the date of acquisition, PAG
reclassified the intangible assets to fixed assets, and recorded
negative goodwill of $1,614,968 in order to reflect the increased
value of the fixed assets acquired. In accordance with Accounting
Principles Board Opinion No. 16, the negative goodwill has been
offset against non-current assets acquired.
F - 18
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 18th day of September, 1997.
PRIDE, INC.
/s/ Alan Lubinsky
ALAN LUBINSKY, President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Alan Lubinsky President, Secretary and Chairman 9/18/97
ALAN LUBINSKY of the Board of Directors (Principal Date
Executive Officer)
/s/ Ivan Averbuch Chief Financial Officer 9/18/97
IVAN AVERBUCH Date
/s/ Allan Edgar Director 9/18/97
ALLAN EDGAR Date
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for the year ended November 30, 1996 and is
qualified in its entirety by reference of such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<CASH> 255,283
<SECURITIES> 0
<RECEIVABLES> 1,936,166
<ALLOWANCES> 0
<INVENTORY> 1,127,452
<CURRENT-ASSETS> 0
<PP&E> 24,570,649
<DEPRECIATION> 3,898,795
<TOTAL-ASSETS> 33,535,048
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 3,991
<OTHER-SE> 6,573,314
<TOTAL-LIABILITY-AND-EQUITY> 33,535,048
<SALES> 12,982,098
<TOTAL-REVENUES> 12,982,098
<CGS> 10,272,334
<TOTAL-COSTS> 10,272,334
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 884,223
<INCOME-PRETAX> (328,741)
<INCOME-TAX> 0
<INCOME-CONTINUING> (328,741)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (328,741)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
