SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended February 28, 1997
Commission File Number 33-24718-A
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, 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, $.002 par value. 1,995,357 shares outstanding as of February
28, 1997.
<PAGE>
PRIDE INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page(s)
PART I. Financial Information:
ITEM 1. Financial Statements
<S> <C>
Consolidated Condensed Balance Sheets - February 28, 1997
(Unaudited) and November 30, 1996 3.
Consolidated Condensed Statements of Operations (Unaudited) -
Three Months Ended February 28, 1997 and February 29, 1996 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Three Months Ended February 28, 1997 and February 29, 1996 5.
Notes to Interim Consolidated Condensed Financial Statements (Unaudited) 6.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8.
PART II. Other Information 10.
SIGNATURES 11.
EXHIBITS:
Exhibit 11 - Computation of Earnings (Loss) Per Share 12.
Exhibit 27 - Financial Data Schedule 13.
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
PRIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
- ASSETS -
<TABLE>
<CAPTION>
February 28, November 30,
1997 1996
(Unaudited)
ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 29,606 $ 255,283
Accounts receivable - net of allowance for doubtful accounts 1,846,865 1,936,166
Inventories 1,410,341 1,127,452
Property, revenue producing vehicles and equipment - net (Note 2) 19,866,127 18,681,638
Intangible assets - net (Note 3) 11,294,921 11,534,509
------------ ------------
TOTAL ASSETS $34,447,860 $33,535,048
=========== ===========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
LIABILITIES (Note 4):
Bank overdraft line of credit $ 3,735,283 $ 2,964,465
Accounts payable 1,173,506 654,920
Accrued liabilities and expenses 314,596 490,915
Bank debt 1,726,692 1,002,571
Obligations under hire purchase contracts 11,645,767 11,034,951
Loans payable - directors 34,610 -
Other loans - acquisition 4,156,000 5,098,470
Other liabilities 35,939 33,560
------------- -------------
TOTAL LIABILITIES 22,822,393 21,279,852
------------ ------------
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES (Note 5) 5,671,127 5,369,073
------------- -------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
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 shares issued and outstanding 3,991 3,991
Additional paid-in capital 7,683,110 8,824,392
Retained earnings (deficit) (1,412,154) (1,585,855)
Foreign currency translation (320,607) (356,405)
-------------- --------------
5,954,340 6,886,123
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $34,447,860 $33,535,048
=========== ===========
</TABLE>
See notes to interim consolidated condensed
financial statements.
Page 3.
<PAGE>
PRIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
February 28, February 29,
1997 1996
------------------ -----------
REVENUES:
<S> <C> <C>
Contract hire income $1,652,484 $1,130,936
Sale of contract hire vehicles 1,731,816 1,164,798
Fleet management and other income 414,542 149,990
------------ ------------
3,798,842 2,445,724
----------- -----------
EXPENSES:
Cost of sales 2,986,696 1,704,050
General and administrative expenses 926,758 407,422
Amortization of goodwill and acquisition costs 167,999 157,680
Interest expense and other 357,693 207,335
------------ ------------
4,439,146 2,476,487
----------- -----------
LOSS BEFORE MINORITY INTERESTS (640,304) (30,763)
Minority interests in net loss of consolidated subsidiaries (Note 4) 418,490 22,271
----------- ------------
LOSS BEFORE PROVISION FOR INCOME TAXES (221,814) (8,492)
Provision for income taxes - -
------------------ -------------
NET LOSS $ (221,814) $ (8,492)
=========== =============
LOSS PER COMMON SHARE (Note 6):
Net loss before minority interest $(.32) $(.02)
Minority interests in net loss of subsidiary .21 .02
------ ------
LOSS PER COMMON SHARE $(.11) $ -
===== ====
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (Note 6) 1,995,357 1,905,357
========= =========
</TABLE>
See notes to interim consolidated condensedfinancial statements.
Page 4.
<PAGE>
PRIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
February 28, February 29,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (221,814) $ (8,492)
Adjustments to reconcile net loss to net cash provided by operating activities:
Minority interests in net loss of subsidiaries (418,490) (22,271)
Depreciation and amortization 837,328 581,974
Amortization of goodwill 148,683 156,655
(Gain) loss on disposal of fixed assets (28,470) 13,792
Provision for maintenance costs - (14,651)
Foreign currency translation 298,769 (539)
Changes in assets and liabilities:
Decrease in accounts receivable 89,301 228,981
(Increase) in inventories (282,889) (236,913)
Increase in accounts payable, accrued expenses and other liabilities 344,646 356,645
------------- --------------
Net cash provided by operating activities 767, 064 1,055,181
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of revenue producing assets (2,918,307) (1,133,500)
Proceeds from sale of fixed assets 517,139 221,135
------------- ------------
Net cash (utilized) by investing activities (2,401,168) (912,365)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from hire purchase contract funding 3,701,474 1,323,788
Principal repayments of hire purchase contract funding (3,090,658) (1,464,676)
Principal payments of long-term debt (6,679) (18,294)
Loans received from (repaid to) officers 34,610 (6,634)
Net proceeds from subsidiary's sale of stock 78,862 120,000
Costs associated with subsidiary's sale of stock - (150,536)
Net proceeds from bank lines of credit 770,818 -
Payment of acquisition debt (80,000) -
-------------- ---------------
Net cash provided (utilized) by financing activities 1,408,427 (196,352)
------------ ----------------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (225,677) (53,536)
Cash and cash equivalents, at beginning of year 255,283 73,946
------------- ---------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 29,606 $ 20,410
============= ==============
</TABLE>
See notes to interim consolidated condensed financial statements.
Page 5.
<PAGE>
PRIDE, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
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
that date, the Company acquired, through an exchange of stock,
Pride Management Services Plc ("PMS"), a consolidated group of
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, New York. By acquiring
100% of the issued and outstanding common stock of Pride
Management, PMS became a wholly-owned subsidiary of the Company.
For accounting purposes the acquisition was treated as a
recapitalization of Pride Management with PMS as the acquiror 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, Inc. (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. See also Note 5
re: Minority Interest in Subsidiaries.
Pride Management Services Plc ("PMS") is a holding company of
six subsidiaries which are 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 was financed with the proceeds
of a private debt offering which was completed, by PAG, in
December 1996 and by loans. The acquisition has been recorded
using the purchase method of accounting.
The accounting policies followed by the Company are set forth in
Note 2 to the Company's consolidated financial statements
included in its Annual Report on Form 10-KSB for the year ended
November 30, 1996, which is incorporated herein by reference.
Specific reference is made to this report for a description of
the Company's securities and the notes to consolidated financial
statements included therein.
In the opinion of management, the accompanying unaudited interim
consolidated condensed financial statements of Pride, Inc. and
its wholly-owned subsidiaries, contain all adjustments necessary
to present fairly the Company's financial position as of
February 28, 1997 and the results of its operations and cash
flows for the three month periods ended February 28, 1997 and
February 29, 1996.
The results of operations for the three month period ended
February 28, 1997 are not necessarily indicative of the results
to be expected for the full year.
Page 6.
<PAGE>
PRIDE, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - FIXED ASSETS:
<TABLE>
<CAPTION>
Fixed assets consists of the following:
February 28, November 30,
1997 1996
<S> <C> <C>
Building and improvements $ 1,719,415 $ 1,719,415
Revenue producing vehicles 18,835,804 17,282,095
Furniture, fixtures and machinery 2,301,842 2,247,430
Aircraft 1,331,493 1,331,493
------------- -------------
24,188,554 22,580,433
Less: accumulated depreciation 4,322,427 3,898,795
------------- -------------
$19,866,127 $18,681,638
=========== ===========
</TABLE>
NOTE 3 - INTANGIBLE ASSETS:
Intangible assets include goodwill which arose in connection
with the acquisition of certain subsidiaries of PMS. Acquisition
costs representing organization type expenditures have also been
capitalized as intangible assets. These assets and costs are
being amortized on a straight-line basis over 20 and 10 year
periods, respectively. Also included in intangible assets are
the amounts assigned to brand names arising from the acquisition
of AC Car Group Limited, which amounts are being amortized over
40 years on a straight-line basis.
The Company periodically reviews the valuation and amortization
of goodwill to determine possible impairment by comparing the
carrying value to the undiscounted future cash flows of the
related assets.
NOTE 4 - LIABILITIES:
Included in liabilities as of February 28, 1997, are amounts in
the aggregate of $12,589,097 which are not due and payable until
after February 28, 1998. This amount consists of amounts due to
trade creditors, loans payable and equipment notes payable.
NOTE 5 - MINORITY INTERESTS IN SUBSIDIARIES:
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 53.32%. PAG owns 70% of a newly
formed subsidiary AC Automotive Group, Inc., ("AC Group"). The
minority interests liabilities represent the minority
shareholders' portion of the equity in these two subsidiaries.
NOTE 6 - COMMON STOCK / EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share has been computed on the basis of the
weighted average number of common shares and common equivalent
shares outstanding during each period presented.
Page 7.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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
that date, the Company acquired, through an exchange of stock,
Pride Management Services Plc ("PMS"), a consolidated group of
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, New York.
By acquiring 100% of the issued and outstanding common stock
of Pride Management, PMS became a wholly-owned subsidiary of
the Company. For accounting purposes the acquisition was
treated as a recapitalization of Pride Management with PMS as
the acquiror 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, Inc. (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.
In December 1995, Pride Automotive Group, Inc. consummated a
private placement offering of common stock of 500,000 shares,
which reduced the Company's ownership interest to 72.8%. In
April 1996, Pride Automotive Group, Inc. completed an initial
public offering of 592,500 shares of common stock at $5.00 per
share and 2,000,000 redeemable common stock warrants, at a
price of $.10 each. The effect of the offering was to reduce
the Company's ownership interest to 53.32%.
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), completed the acquisition of certain
assets of AC Cars Limited and Autokraft Limited. These two
companies were engaged in the manufacture and sale of
speciality automobiles. The purchase price of approximately
$6,067,000 was financed with the proceeds of a private
offering of PAG's common stock and by loans.
Pride Management Services Plc. ("PMS") is a holding company of
six subsidiaries which are engaged in the leasing of motor
vehicles, primarily on contract hire, to local authorities and
selected corporate customers throughout the United Kingdom.
Prior to the aforementioned reorganization PMS prepared its
financial statements in accordance with generally accepted
accounting principles of the United Kingdom. The Company is
now preparing its financial statements in accordance with
generally accepted accounting principles in the U.S.
The financial information presented herein include: (i)
Consolidated Condensed Balance Sheets as of February 28, 1997
and November 30, 1996; (ii) Consolidated Condensed Statements
of Operations for the Three Month Periods Ended February 28,
1997 and February 29, 1996 and (iii) Consolidated Condensed
Statements of Cash Flows for the Three Month Periods Ended
February 28, 1997 and February 29, 1996.
Page 8.
<PAGE>
Results of Operations
Revenues increased by 55% when comparing the three months
ended February 28, 1997 to the three months ended February 29,
1996. The primary reason for this increase was due to an
increase in revenues from contract hire income, sales of
vehicles at lease maturity, and an increase in fleet
management income.
Cost of sales increased from 70% to 78% of sales when
comparing February 29, 1996 to February 28, 1997. This
increase was primarily due to the continuation of the more
prudent approach to estimating the residual values of
vehicles, thereby increasing the depreciation expense and cost
of sales and reducing the residual value risk.
General and administration expenses increased by $519,336 when
comparing the three months ended February 28, 1997 to February
29, 1996. Most of this increase is attributed to the AC
Automotive Group, through its wholly owned subsidiary, AC Car
Group Limited.
Interest expenses increased by $150,358 when comparing the
three month period ended February 28, 1997 to the three months
ended February 29, 1996. Management attributes this increase
to the higher volume of borrowing on hire purchase contracts
as a result of increased business and the cost of financing AC
Car Group Limited.
Losses before income taxes for the three months ended February
28, 1997 and February 29, 1996, prior to the amortization of
goodwill for the periods ($167,999 and $157,680, respectively)
and minority interests, aggregated $472,305 or loss of $.24
per share, and income of $126,917, or $.07 per share. The
Company reported losses after goodwill amortization and
minority interests of $221,814 ($.11 per share) and $8,492
($.00 per share) for the three month periods ended February
28, 1997 and February 29, 1996, respectively. Of the loss of
$221,814, $185,023 comprises the Company's share of losses
reported by AC Car Group Limited.
It should be noted that PAG acquired AC Car Group Limited out
of administrative receivership and that for the first quarter
the Company has devoted substantial resources to resurrect its
operations.
Liquidity and Capital Resources
In December 1996, PAG completed a private placement of 16
units, each unit consisting of a 10% promissory note in the
amount of $95,000 and 10,000 shares of PAG's common stock for
an aggregate price of $100,000 per unit. The proceeds have
been used to satisfy a portion of the debt owed for the
acquisition of AC Car Group Limited.
Page 9.
<PAGE>
PART II. OTHER INFORMATION
Part II - Other Information
ITEM 1. Legal Proceedings. None.
ITEM 2. Changes in Securities. None.
ITEM 3. Defaults Upon Senior Securities. None.
ITEM 4. Submission of Matters to a Vote. None.
ITEM 5. Other Information. None.
ITEM 6. Exhibit and Reports on Form 8-k.
(a) Exhibit 27 Financial Data Schedule.
(b) None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized
Dated: April 17, 1997
Pride, Inc.
by: \s\ Alan Lubinsky
Alan Lubinsky
<PAGE>
PRIDE, INC. AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
February 28, February 29,
1997 1996
<S> <C> <C>
LOSS BEFORE MINORITY INTERESTS $ (640,304) $ (30,763)
Minority interests in net loss of consolidated subsidiaries (Note 4) 418,490 22,271
----------- ------------
LOSS BEFORE PROVISION FOR INCOME TAXES (221,814) (8,492)
Provision for income taxes - -
NET LOSS $ (221,814) $ (8,492)
=========== =============
LOSS PER COMMON SHARE:
Net loss before minority interest $(.32) $(.02)
Minority interests in net loss of subsidiary .21 .02
------ ------
LOSS PER COMMON SHARE $(.11) $ -
===== ====
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,995,357 1,905,357
========= =========
</TABLE>
- Exhibit 11 -
Page 12.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contais summary financial information extracted from the
consolidated financial statements for the three months ended February 28, 1997
and is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Nov-30-1997
<PERIOD-START> Dec-01-1996
<PERIOD-END> Feb-28-1997
<CASH> 29,606
<SECURITIES> 0
<RECEIVABLES> 1,846,865
<ALLOWANCES> 0
<INVENTORY> 1,410,341
<CURRENT-ASSETS> 0
<PP&E> 24,188,554
<DEPRECIATION> 4,322,427
<TOTAL-ASSETS> 34,447,860
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 3,991
<OTHER-SE> 5,950,349
<TOTAL-LIABILITY-AND-EQUITY> 34,447,860
<SALES> 3,798,842
<TOTAL-REVENUES> 3,798,842
<CGS> 2,986,696
<TOTAL-COSTS> 2,986,696
<OTHER-EXPENSES> 167,999
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 357,693
<INCOME-PRETAX> (221,814)
<INCOME-TAX> 0
<INCOME-CONTINUING> (221,814)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (221,814)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
<PAGE>
</TABLE>
