PRIDE, INC.
Watford Metro Centre
Tolpits Lane
Watford Hertordshire, England, WD1 8SB
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 30, 1997
To the Shareholders of PRIDE, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
PRIDE, INC. (the "Corporation") will be held at the corporate offices of Pride,
Inc., located at Watford Metro Centre, Tolpits Lane, Watford Hertordshire,
England WD1 8SB on May 30, 1997 at 10:30 a.m., England time, for the following
purposes:
1. To elect three Directors to the Corporation's Board of Directors to hold
office for a period of one year or until their successors are duly elected and
qualified.
2. To authorize an amendment to the 1994 Stock Option Plan to increase the
number of shares of Common Stock authorized and available for issuance
thereunder from 500,000 to 1,000,000.
3. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
The close of business on April 18, 1997 has been fixed as the record
date for the determination of shareholders entitled to notice of, and to vote
at, the meeting and any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you
plan to attend, please complete, date and sign the accompanying proxy and return
it promptly in the enclosed envelope to assure that your shares are represented
at the meeting. If you do attend, you may revoke any prior proxy and vote your
shares in person if you wish to do so. Any prior proxy will automatically be
revoked if you execute the accompanying proxy or if you notify the Secretary of
the Corporation, in writing, prior to the Annual Meeting of Shareholders.
By order of the Board of Directors
Alan Lubinsky, Secretary
Dated: May 1, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES.NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
<PAGE>
PRIDE, INC.
Watford Metro Centre,
Tolpits Lane, Watford Hertordshire, England
PROXY STATEMENT
FOR
Annual Meeting of Stockholders
To Be Held on May 30, 1997
This proxy statement and the accompanying form of proxy have been
mailed on May 1, 1997 to the stockholders of record on April 18, 1997 of Pride,
Inc., a Delaware corporation (the "Corporation" or "Company") in connection with
the solicitation of proxies by the Board of Directors of the Corporation for use
at the Annual Meeting to be held on May 30, 1997 and at any adjournment thereof.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
Shares of the Corporation's common stock (the "Common Stock")
represented by an effective proxy in the accompanying form will, unless contrary
instructions are specified in the proxy, be voted FOR (i) the election of the
three (3) persons nominated by the Board of Directors as directors and (ii) the
amendment to the 1994 Stock Option Plan.
Any such proxy may be revoked at any time before it is voted. A
stockholder may revoke this proxy by notifying the Secretary of the Corporation
either in writing prior to the Annual Meeting or in person at the Annual
Meeting, by submitting a proxy bearing a later date or by voting in person at
the Annual Meeting. An affirmative vote of a plurality of the shares of Common
Stock, present in person or represented by proxy, at the Annual Meeting and
entitled to vote thereon is required to elect the directors and approve the
amendment to the 1994 Stock Option Plan. A stockholder voting through a proxy
who abstains with respect to the election of directors is considered to be
present and entitled to vote on the election of directors at the meeting, and is
in effect a negative vote, but a stockholder (including a broker) who does not
give authority to a proxy to vote, or withholds authority to vote, on the
election of directors shall not be considered present and entitled to vote on
the election of directors. A stockholder voting through a proxy who abstains
with respect to approval of any other matter to come before the meeting is
considered to be present and entitled to vote on that matter and is in effect a
negative vote, but a stockholder (including a broker) who does not give
authority to a proxy to vote, or withholds authority to vote, on any such matter
shall not be considered present and entitled to vote thereon.
3
<PAGE>
The Corporation will bear the cost of the solicitation of proxies by
the Board of Directors. The Board of Directors may use the services of its
executive officers and certain directors to solicit proxies from stockholders in
person and by mail, telegram and telephone. Arrangements may also be made with
brokers, fiduciaries, custodians, and nominees to send proxies, proxy statements
and other material to the beneficial owners of the Corporation's Common Stock
held of record by such persons, and the Corporation may reimburse them for
reasonable out-of-pocket expenses incurred by them in so doing.
The Corporation's annual report on Form 10-KSB for the fiscal year
ended November 30, 1996 including audited financial statements, and the
Corporation's quarterly report on Form 10-QSB for the three months ended
February 28, 1997 are annexed hereto
The principal executive offices of the Corporation are located at
Watford Metro Centre, Tolpits Lane, Watford Hertordshire, England WD1 8SB, the
Corporation's telephone number is (800) 698-6590.
Independent Public Accountants
The Board of Directors of the Corporation has selected Civvals
Chartered Accountants, as independent certified public accountants of the
Corporation for the fiscal year ending November 30, 1997. Stockholders are not
being asked to approve such selection because such approval is not required. The
audit services provided by Civvals Chartered Accountants consisted of
examination of financial statements, services relative to filings with the
Securities and Exchange Commission, and consultation in regard to various
accounting matters. Representatives of Civvals Chartered Accountants are
expected to be present at the meeting and will have the opportunity to make a
statement if they so desire and answer appropriate questions.
RECENT DEVELOPMENTS
In November 1996, PAG, through its subsidiary AC Car Group Limited,
purchased all the assets of AC Cars Limited and Autokraft Limited.
In April 1996, Pride Automotive Group, Inc. ("PAG") consummated an
initial public offering, whereby PAG sold 950,000 shares of its common stock at
a purchase price of $5.00 per share and 2,000,000 redeemable common stock
purchase warrants at a price of $0.10 per warrant. The warrants are exercisable
at a price of $5.75 per share, subject to adjustment, beginning April 24, 1997
and expiring April 23, 2001. In connection therewith, PAG also granted to the
underwriter of the offering a warrant to purchase 95,000 shares of PAG's common
stock at a purchase price of $5.00 and 200,000 redeemable common stock purchase
warrants, each warrant exercisable to purchase one share of common stock at a
purchase price of $7.50 per share. Other than with respect to the exercise
price, the terms of the warrants granted to the underwriter are identical to
those described above. PAG's securities are currently traded on the Nasdaq
SmallCap Stock Exchange and the Boston Exchange.
The Company formed PAG, a Delaware corporation in March 1995 for the
purpose of acquiring all of the outstanding shares of common stock of Pride
Management Services, Plc., an English corporation ("PMS"). Prior to the
acquisition PMS was a wholly owned subsidiary of the Company. Pursuant to the
terms and conditions of the reorganization in March 1995 (the "Reorganization"),
between the Company, PAG and PMS, PAG issued 1,500,000 shares of its Common
Stock to the Company in exchange for all of the issued and outstanding shares of
PMS.
4
<PAGE>
In connection with the Reorganization and formation of PAG, PMS became a wholly
owned subsidiary of the PAG which is 96% owned by the Company.
In October 1994, the Company acquired certain assets of Master Vehicle
Contracts Ltd. ("Master"), an English Company pursuant to the terms of an asset
purchase agreement. This sale was entered into by the appointed receivers
pursuant to Master's receivership. In connection with this purchase, the Company
acquired the rights to use the Master's name. Automobiles, client lists and
computer systems software and hardware approximately $400,000.
Ivan Averbuch has entered into an employment agreement with PAG dated
September 1995, for a term of 12 months, commencing December 1, 1995, to become
the PAG's Chief Financial Officer, which agreement is continent on Mr. Averbuch
obtaining a work permit from the British government, in order to work in
England. The agreement is automatically extendable for an additional 12 months,
subject to cancellation by either the Company or Mr. Averbuch on 90 days written
notice. Pursuant to the terms of the agreement Mr. Averbuch is to receive an
annual salary of $55,000 per annum, subject to review by the board of directors.
VOTING SECURITIES AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The securities entitled to vote at the meeting are the Corporation's
Common Stock, par value $.002 per share. The presence, in person or by proxy, of
a majority of shares entitled to vote will constitute a quorum for the meeting.
Each share of Common Stock entitles its holder to one vote on each matter
submitted to stockholders. The close of business on April 18, 1997 has been
fixed as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting and any adjournment thereof. At that date,
1,995,357 shares of Common Stock were outstanding. Voting of the shares of
Common Stock is on a non-cumulative basis.
The following table sets forth information as of April 18, 1997, with
respect to the beneficial ownership of shares of Common Stock by (i) each person
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended), known by the Corporation to be the
owner of more than 5% of the outstanding shares of Common Stock, (ii) each
director, and (iii) all officers and directors as a group. Except to the extent
indicated in the footnotes to the following table, each of the individuals
listed below possesses sole voting power with respect to the shares of Common
Stock listed opposite their name.
5
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of
Name Shares Share Ownership
<S> <C> <C>
Alan Lubinsky (1)(2)(3)(4) 1,765,535 70.3%
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertordshire
WD1 8SB England
Peter Dixon (5)(8) 20,000 *
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertordshire
WD1 8SB England
Alan Berkun (6)(8) 10,000 *
83 Arnold Court
East Rockaway, New York
Ivan Averbuch (7) 50,000 *
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertordshire
WD1 8SB England
New World Finance, Ltd. (1) 1,050,535 52.6%
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertordshire
WD1 8SB England
Eros Nominees, Ltd. (1) 100,000 5.0%
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertordshire
WD1 8SB England
6
<PAGE>
Fort Investments, Ltd. (1) 100,000 5.0%
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertordshire
WD1 8SB England
All officers and
Directors as a group
(4 persons) (1)(2)(3)(4)(5)(6)(7) 1,845,535 70.3%
</TABLE>
(1) Although Mr. Lubinsky disclaims beneficial ownership of the shares
owned by New World Finance, Ltd., Eros Nominees, Ltd., Fort Investments, Ltd.
and Regent Nominees, Ltd., it may be expected that each of such entities will
vote their respective shares in favor of proposals espoused by Mr. Lubinsky.
(2) Includes 170,000 shares which are issuable upon the exercise of options
granted under the Company's 1994 Stock Option Plan. Of the 170,000 shares
issuable upon exercise of the options, 60,000 vested on December 28, 1995 and
110,000 vested on February 14, 1996.
(3) Includes 175,000 shares which are issuable upon the exercise of options
granted under the Company's 1994 Stock Option Plan on May 8, 1996. None of the
175,000 shares issuable upon the exercise of the options are vested.
(4) Includes 75,000 shares which are issuable upon the exercise of options
granted under the Company's 1994 Stock Option Plan on July 21, 1995. Of the
75,000 shares issuable upon the exercise of the options, 25,000 vested on July
21, 1996.
(5) Includes 20,000 shares which are issuable upon the exercise of options
granted under the Company's 1994 Stock Option Plan. None of the 20,000 shares
issuable upon the exercise of the options are vested.
(6) Includes 10,000 shares which are issuable upon the exercise of options
granted under the Company's 1994 Stock Option Plan. Of the 10,000 shares
issuable upon exercise of the options, 5,000 vested on December 28, 1995 and
5,000 vested on February 14, 1996 and 5,000 vested on December 28, 1995.
(7) Includes 50,000 shares which are issuable upon the exercise of options
granted under the Company's 1994 Stock Option Plan. None of the 50,000 shares
issuable upon the exercise of the options are vested.
(8) Messrs. Dixon and Berkun are not nominated for election to the Board of
Directors for 1997.
Certain Reports
No person who, during the fiscal year ended November 30, 1996, was a
director, officer or beneficial owner of more than ten percent of the
Corporation's Common Stock (which is the only class of securities of the
Corporation registered under Section 12 of the Securities Exchange Act of 1934
(the "Act") (a "Reporting Person") failed to file on a timely basis, reports
required by Section 16 of the Act during the most recent fiscal year or prior
years, except Alan Lubinsky did not file a Form 4 with respect to the receipt of
stock options in July 1995 and May 1996. Mr. Lubinsky has stated that he intends
on filing a Form 5 to rectify the situation. Neither Ivan Averbuch nor Peter
Dixon filed a Form 4 with respect to the receipt of stock options in May 1996.
Messrs. Averbuch and Dixon have stated that they intent to file Form 5's to
rectify the situation. The Company has no basis to believe that any other
required filing by any of the above indicated individuals has not been made.
It is expected that the following will be considered at the meeting
and action taken thereon.
7
<PAGE>
I. ELECTION OF DIRECTORS
The Board of Directors currently consists of three members elected for
a term of one year and until their successors are duly elected and qualified.
An affirmative vote of a plurality of the shares of Common Stock,
present in person or represented by proxy at the Annual Meeting, and entitled to
vote thereon is required to elect the directors. All proxies received by the
Board of Directors will be voted for the election as directors of the nominees
listed below if no direction to the contrary is given. In the event any nominee
is unable to serve, the proxy solicited hereby may be voted, in the discretion
of the proxies, for the election of another person in his stead. The Board of
Directors knows of no reason to anticipate this will occur.
The following table sets forth as of April 18, 1997, with respect to
the three nominees for election as directors of the Corporation:
<TABLE>
<CAPTION>
Director
Name Position with Corporation; Continually
Principal Occupation and Age Since
<S> <C> <C>
Alan Lubinsky President, Secretary and Chairman 1994
of the Board; 38
Ivan Averbuch Chief Financial Officer, Treasurer 1995
and Director; 41
Allan Edgar Director; ----
- --------------------------------
</TABLE>
All directors hold office until the next annual meeting of stockholders or
until their successors are elected and qualified. Vacancies on the Board of
Directors may be filled by the remaining directors. Officers are elected
annually by, and serve at the discretion of the Board of Directors. There are no
family relationships between and among any officer or director of the
Corporation.
Alan Lubinsky Mr Lubinsky has been the President, Secretary and director of
the Company since January 14, 1994. Mr. Lubinsky has been the Chairman and
Managing Director of Pride Management Services, Plc ("PMS") since its inception
in 1988. Mr. Lubinsky has been the President and a director of Pride Automotive
Group, Inc. ("PAG") since its inception in March 1995. Mr. Lubinsky has 18 years
experience in the motor vehicle industry in positions of executive management.
Ivan Averbuch has been the Chief Financial Officer of the of the Company
since December 1995. Mr. Averbuch has been a director and the Chief Financial
Officer of PAG since December 1995. From September 1987 to November 1995, Mr.
Averbuch was employed at Kessel Feinstein, a member firm of Grant Thorton
International, an accounting firm. In January 1989, Mr. Averbuch was promoted to
audit manager and appointed as a partner in October 1992.
Allan Edgar
8
<PAGE>
As permitted under Delaware General Corporation Law, the Company's
certificate of incorporation eliminates the personal liability of the directors
to the Company or any of its shareholders for damages for breaches of their
fiduciary duty as directors. As a result of the inclusion of such provision,
stockholders may be unable to recover damages against directors for actions
taken by them which constitute negligence or gross negligence or that are in
violation of their fiduciary duties. The inclusion of this provision in the
Company's Certificate of Incorporation may reduce the likelihood of derivative
litigation against directors and other types of shareholder litigation.
Board Meetings, Committees and Compensation
During the fiscal year ended November 30, 1996, no meetings of the
Board of Directors were held and action was taken on _____ occasions by
unanimous written consent of the Board of Directors in lieu of meeting. The
Corporation does not pay its directors for attendance at meetings of the Board
of Directors or committee meetings.
The Board of Directors recommends that you vote "FOR" the nominees for
Director.
EXECUTIVE COMPENSATION AND RELATED MATTERS
Summary of Cash and Certain Other Compensation
The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, paid by PMS Company during the years ended November 30, 1996,
1995 and 1994. The Company did not incur any compensation expense during such
periods.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
(a) (b) (c) (d) (e)
Name and Principal Other Annual Options/
Position (1) Year Salary($) Bonus($) Compensation($)(2) SARS
- ------------------------ ---- --------- -------- ------------------ ------
<S> <C> <C> <C> <C> <C>
Alan Lubinsky
President, Secretary 1996 $160,000 - $30,000 275,000(3)(4)
and Chairman of the Board 1995 $137,750 - 30,000 245,000(5)
1994 $135,000 - 30,000 -
</TABLE>
(notes from previous page)
(1) All of the Company's administrative functions, including the payment of
salaries, are performed by Pride Vehicle Contracts Limited, since the Company's
operations run basically as one operation. The Company believes that it is
easier and cost effective to operate in this manner. The Company plans on
continuing this practice in the future.
(2) Includes contributions to the Company's pension plan of $18,000 in each
of 1996, 1995 and 1994, respectively, and the cost of an automobile and expenses
of $12,000 annually.
9
<PAGE>
(3) Alan Lubinsky entered into an employment agreement with PAG in August
1995. The agreement is for a term of three years, and pays Mr. Lubinsky an
annual salary of $160,000 per annum with 10% yearly escalations, subject to
adjustment by PAG's board of directors. Pursuant to the agreement, Mr. Lubinsky
received stock options under PAG's Senior Management Incentive Plan to purchase
100,000 shares at $5.50 per share. These options vest at the rate of 33 1/3% per
annum commencing August 1996.
(4) On May 8, 1996, Mr. Lubinsky was granted an option to purchase an
additional 175,000 shares of the Company's Common Stock at an exercise price of
$0.48 per share. The shares underlying this option vest one year from the date
of grant.
(5) On December 28, 1994, Mr. Lubinsky was granted an option to purchase up
to an aggregate of 60,000 shares of the Company's Common Stock at an exercise
price of $1.65 per share. The shares underlying this option vested on December
28, 1995. On February 14, 1995, Mr. Lubinsky was granted an option to purchase
an additional 110,000 shares of the Company's Common Stock at an exercise price
of $0.90 per share. The shares underlying this option vested on February 14,
1996. On July 21, 1995, Mr. Lubinsky was granted an option to purchase an
additional 75,000 shares of the Company's Common Stock at a purchase price of
$0.50 per share. These shares vest 25,000 on each anniversary of the date of
grant commencing July 21, 1996.
10
<PAGE>
Stock Options
The following table sets forth certain information concerning the grant
of stock options made during the year ended November 30, 1996, under the
Company's 1994 Stock Option Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<CAPTION>
Individual Grants
(a) (b) (c) (d) (e)
% of Total
# of Securities Options/SAR's
underlying Granted to
Options/SAR's Employees in Exercise or Base
Name Granted(1) Fiscal Year Price ($/SH) Expiration Date
- ---- ----------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Alan Lubinsky 175,000 71.4% $0.48 5/8/01
Ivan Averbuch 50,000 20.4% $0.48 5/8/01
Peter Dixon 20,000 8.2% $0.48 5/8/01
</TABLE>
- ------------------------
(1) Represents incentive stock options granted under the Company's 1994
Stock Option Plan (the "Option Plan"). Options granted under the Option
Plan are intended to qualify as incentive stock options under the
Internal Revenue Code of 1986, as amended. Under the terms of the
Option Plan, options may be granted to officers, key employees,
directors and consultants of the Company until December 1999. Options
granted to directors, who are not officers or employees, or to
consultants, do not qualify as incentive stock options. The option
price per share may not be less than the fair market value of the
Company's shares on the date the option is granted. However, options
granted to persons owning more than 10% of the Company's Common Stock
may not have a term in excess of five years and may not have an option
price of less than 110% of the fair market value per share of the
Company's shares on the date the option is granted. See "-- 1994 Stock
Option Plan."
11
<PAGE>
The following table contains information with respect to employees of
the Company concerning options held as of November 30, 1996
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Value of
Number of Unexercised In-
Unexercised The-Money
Options/SAR's at Options/SAR's at
FY-End (#) FY-End($)
Shares Acquired Value Realized($) Exercisable/ Exercisable/
Name on Exercise (#) Unexercisable Unexercisable
- ---- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Alan Lubinsky 0 0 60,000/0 0/0 (1)
Alan Lubinsky 0 0 110,000/0 0/0 (2)
Alan Lubinsky 0 0 25,000/50,000 $3,125/0 (3)
Alan Lubinsky 0 0 0/175,000 0/0 (4)
Ivan Averbuch 0 0 0/50,000 0/0 (4)
Peter Dixon 0 0 0/20,000 0/0 (4)
Alan Berkun 0 0 5,000/0 0/0 (1)
Alan Berkun 0 0 5,000/0 0/0 (2)
</TABLE>
(1) As of February 21, 1997, the average of the prior day's closing bid and
ask prices was $0.63. Since the exercise prices of the Options ($1.65) is
greater than the current average price, the Company believes the Options have no
value.
(2) As of February 21, 1997, the average of the prior day's closing bid and
ask prices was $0.63. Since the exercise prices of the Options ($0.90) is
greater than the current average price, the Company believes the Options have no
value.
(3) As of February 21, 1997, the average of the prior day's closing bid and
ask prices was $0.63. As of February 21, 1997, 25,000 shares underlying these
options have vested. However, Mr. Lubinsky has not exercised this option.
(4) None of these options vest until May 8, 1997, therefore, the Company
believes the Options have no value.
Employment Agreements
Alan Lubinsky entered into an employment agreement with PAG in August 1995.
The agreement is for a term of three years, and pays Mr. Lubinsky an annual
salary of $160,000 per annum with 10% yearly escalations, subject to adjustment
by PAG's board of directors. Pursuant to the terms of his employment agreement,
Mr. Lubinsky will devote all his business time to the affairs of PAG and the
Company. Pursuant to the agreement, Mr. Lubinsky received stock options under
PAG's Senior Management Incentive Plan to purchase 100,000 shares at $5.50 per
share. These options vest at the rate of 33 1/3% per annum commencing
12
<PAGE>
August 1996. The agreement restricts Mr. Lubinsky from competing with PAG for a
period of one year after the termination of his employment.
Ivan Averbuch entered into an employment agreement with PAG in
September 1995, for a term of 24 months, commencing December 1, 1995. The
agreement is automatically extendable for an additional 24 months, subject to
cancellation by either PAG or Mr. Averbuch on 90 days written notice. Pursuant
to the terms of the agreement, Mr. Averbuch is to receive an annual salary of
$55,000 per annum, with an annual increase of 10% per annum, subject to review
by PAG's board of directors.
1994 Stock Option Plan
During 1994, the Company adopted the Company's 1994 Stock Option Plan
(the "Plan"). The Board believes that the Plan is desirable to attract and
retain executives and other key employees of outstanding ability. Under the
Plan, 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.
The Board of Directors is charged with administration of the Plan, the
Board is generally empowered to interpret the Plan, prescribe rules and
regulations relating thereto, determine the terms of the option agreements,
amend them with the consent of the optionee, determine the employees to whom
options are to be granted, and determine the number of shares subject to each
option and the exercise price thereof. The per share exercise price for
incentive stock options ("ISOs") will not be less than 100% of the fair market
value of a share of the Common Stock on the date the option is granted (110% of
fair market value on the date of grant of an ISO if the optionee owns more than
10% of the Common Stock of the Company).
Options will be exercisable for a term determined by the Board which
will not be less than one year. Options may be exercised only while the original
grantee has a relationship with the Company or a subsidiary of the Company which
confers eligibility to be granted options or up to ninety (90) days after
termination at the sole discretion of the Board. In the event of termination due
to retirement, the Optionee, with the consent of the Board, shall have the right
to exercise his option at any time during the thirty-six (36) month period after
such retirement. Options may be exercised up to thirty-six (36) months after
death or total and permanent disability. In the event of certain basic changes
in the Company, including a change in control of the Company (as defined in the
Plan) in the discretion of the Board, each option may become fully and
immediately exercisable. ISOs are not transferable other than by will or the
laws of descent and distribution. Options may be exercised during the holder's
lifetime only by the holder, his or her guardian or legal representative.
Options granted pursuant to the Plan may be designated as ISOs, with
the attendant tax benefits provided under Section 421 and 422A of the Internal
Revenue Code of 1986. Accordingly, the Plan provides that the aggregate fair
market value (determined at the time an ISO is granted) of the Common Stock
subject to ISOs exercisable for the first time by an employee during any
calendar year (under all plans of the Company and its subsidiaries) may not
exceed $100,000. The Board may modify, suspend or terminate the Plan; provided,
however, that certain material modifications affecting the Plan must be approved
by the shareholders,
13
<PAGE>
and any change in the Plan that may adversely affect an optionee's rights under
an option previously granted under the Plan requires the consent of the
optionee.
On December 28, 1994, 60,000 and 5,000 options were granted to Alan
Lubinsky and Alan Berkun, respectively, to purchase shares of Common Stock at a
purchase price of $1.65 per share. These options are exercisable commencing one
year from the date of grant until five years from the date of grant.
On February 14, 1995, 110,000 and 5,000 options were granted to Alan
Lubinsky and Alan Berkun, respectively, to purchase shares of Common Stock at a
purchase price of $0.90 per share. These options are exercisable commencing one
year from the date of grant until five years from the date of grant.
On July 21, 1995, 75,000 options were granted to Alan Lubinsky to
purchase shares of Common Stock at a purchase price of $0.50 per share. 25,000
of these options are exercisable each July 21 commencing July 21, 1996 until
five years from the date of grant.
On May 8, 1996, 175,000, 50,000 and 20,000 options were granted to Alan
Lubinsky, Ivan Averbuch and Peter Dixon, respectively, to purchase shares of
Common Stock at a purchase price of $0.48 per share. These options are
exercisable one year from the date of grant until five years from the date of
grant.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 13, 1994, the Company entered into an Agreement and Plan of
Reorganization with PMS and the shareholders of PMS. The Company issued
9,000,000 (pre 10 for 1 reverse stock split) shares of Common Stock to the
stockholders of PMS for all the shares of PMS, thereby making PMS a wholly-owned
subsidiary of the Company. On September 20, 1994, the Company effected a 1 for
10 reverse stock split of its issued and outstanding shares of Common Stock,
thereby reducing the issued and outstanding shares of Common Stock from
12,205,355 shares to 1,220,537 shares.
On September 20, 1994 and October 18, 1994, the Company issued to New
World Finance, Ltd., the Company's principal shareholder, 281,250 and 114,285
shares of Common Stock, respectively, in exchange for the cancellation by New
World Finance, Ltd. of debt of approximately $1,125,000 and $400,000,
respectively.
In October 1994, the Company sold an additional 114,285 shares of its
common stock (post Reverse- split) at a price of $1.75 per share to foreign
investors pursuant to Regulation S of the Securities Act of 1933. Woodbury
Capital Assets, Inc. received a commission in connection with such transaction.
In December 1994, the Company granted 60,000 and 5,000 Options to Alan
Lubinsky and Alan Berkun, respectively, to purchase shares of the Company's
Common Stock at $1.65 per share.
14
<PAGE>
In February 1995, the Company granted 110,000 and 5,000 Options to Alan
Lubinsky and Alan Berkun, respectively, to purchase shares of the Company's
Common Stock at $0.90 per share.
In March 1995, the Company formed Pride Automotive Group, Inc. ("PAG")
in the State of Delaware and reorganized its corporate structure by exchanging
all of its shares of PMS for 1,500,000 shares of the Company's Common Stock,
making PMS a wholly owned subsidiary of PAG.
In March 1995, PAG issued 60,000 shares of its Common Stock to Lampert
& Lampert, counsel to PAG for fees and expenses of $60,000.
In July 1995, PMS entered into a loan agreement with PAG's president,
whereby PMS borrowed approximately $232,500. The loan is payable on demand and
accrues interest at the rate of 2.5% over the Midland Bank base rate. The
principal balance of such loan was $123,668 as of November 30, 1995. The
principal amount of the loan, including accrued interest thereon, will be paid
from the proceeds of PAG's Offering. "Use of Proceeds."
In December 1995, PAG consummated a private placement offering, whereby
PAG sold 20 units, each unit comprised 25,000 shares of Common Stock at a
purchase price of $6,000 per unit.
In April 1996, PAG consummated an initial public offering, whereby PAG
sold 950,000 shares of its common stock at a purchase price of $5.00 per share
and 2,000,000 redeemable common stock purchase warrants at a price of $0.10 per
warrant. The warrants are exercisable at a price of $5.75 per share, subject to
adjustment, beginning April 24, 1997 and expiring April 23, 2001. In connection
therewith, PAG also granted to the underwriter of the offering a warrant to
purchase 95,000 shares of PAG's common stock at a purchase price of $5.00 and
200,000 redeemable common stock purchase warrants, each warrant exercisable to
purchase one share of common stock at a purchase price of $7.50 per share. Other
than with respect to the exercise price, the terms of the warrants granted to
the underwriter are identical to those described above. PAG's securities are
currently traded on the Nasdaq SmallCap Stock Exchange and the Boston Exchange.
In November 1996, PAG, through its subsidiary AC Car Group Limited,
purchased all the assets of AC Cars Limited and Autokraft Limited.
For a description of the Company's employment agreements, see "Executive
Compensation - Employment Agreements."
15
<PAGE>
II. PROPOSAL TO AMEND THE CORPORATION'S
1994 STOCK OPTION PLAN
TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK ISSUABLE UNDER SUCH PLAN
FROM 500,000 SHARES TO 1,000,000
The Board of Directors has unanimously approved, subject to shareholder
approval, an amendment to the Corporation's 1994 Stock Option Plan (the "Plan")
to increase the number of shares issuable under such Plan from 500,000 shares to
1,000,000 shares. The Plan, as originally adopted by shareholders is described
under "Executive Compensation and Related Matters -- 1994 Stock Option Plan".
The Amendment to the Plan is necessary by reason of the fact that, of
the original 500,000 shares authorized under the Plan, all 500,000 shares under
said plan have been issued, whereby there are no shares available under the
Plan. The absence of shares authorized under the Plan for distribution has
rendered the Board of Directors helpless to provide for additional awards to
attract and retain key executive management personnel and to provide incentive
to management personnel to maximize the value of the Corporation for all of its
shareholders. The Plan was designed to augment the Corporation's existing
compensation programs and is intended to enable the Corporation to have its
executives, key employees and consultants participate in the growth and success
of the Corporation through awards under the Plan.
The affirmative vote of the holders of a majority of the shares of the
Corporation's Common Stock issued and outstanding on the record date is required
for the approval of this proposal. The directors and officers of the Corporation
and other principal stockholders owning of record, beneficially, directly and
indirectly, an aggregate of approximately shares of the Corporation's Common
Stock constituting approximately % of such shares outstanding on the record
date, have agreed to vote in favor of approval of this proposal.
THE BOARD OF DIRECTORS DEEMS THIS PROPOSAL TO BE IN THE BEST INTEREST
OF THE CORPORATION AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR"
APPROVAL THEREOF.
16
<PAGE>
FINANCIAL INFORMATION
ENCLOSED HEREIN ARE THE AUDITED FINANCIAL STATEMENTS OF THE COMPANY FOR
THE YEAR ENDED NOVEMBER 30, 1996 AND THE UNAUDITED FINANCIAL STATEMENTS FOR THE
THREE MONTHS ENDED FEBRUARY 28, 1997. A COPY OF THE CORPORATION'S ANNUAL REPORT
ON FORM 10-KSB FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996 AND THE QUARTERLY
REPORT ON FORM 10-QSB FOR THE QUARTER ENDED FEBRUARY 28, 1997, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT THE ACCOMPANYING
EXHIBITS TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR SENT TO
PRIDE, INC., WATFORD METRO CENTRE, TOLPITS LANE, WATFORD HERTORDSHIRE, ENGLAND
WD1 8SB. EACH SUCH REQUEST MUST SET FORTH A GOOD FAITH REPRESENTATION THAT AS OF
APRIL 18, 1997 THE PERSON MAKING THE REQUEST WAS THE BENEFICIAL OWNER OF COMMON
SHARES OF THE CORPORATION ENTITLED TO VOTE AT THE ANNUAL MEETING OF
STOCKHOLDERS.
IV. OTHER BUSINESS
As of the date of this proxy statement, the only business which the
Board of Directors intends to present, and knows that others will present, at
the Annual Meeting is that herein above set forth. If any other matter or
matters are properly brought before the Annual Meeting, or any adjournments
thereof, it is the intention of the persons named in the accompanying form of
proxy to vote the proxy on such matters in accordance with their judgment.
Stockholder Proposals
Proposals of stockholders intended to be presented at the
Corporation's 1997 Annual Meeting of Stockholders must be received by the
Corporation on or prior to January 2, 1998 to be eligible for inclusion in the
Corporation's proxy statement and form of proxy to be used in connection with
the 1997 Annual Meeting of Stockholders.
By Order of the Board of Directors,
Alan Lubinsky
Secretary
May 1, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE AND
RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF
IT IS MAILED IN THE UNITED STATES OF AMERICA.
17
<PAGE>
PRIDE, INC.
Annual Meeting of Stockholders - May 30, 1997
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Alan Lubinsky and Ivan
Averbuch and each of them, proxies, with full power of substitution to each, to
vote all shares of Common Stock of Pride, Inc. owned by the undersigned at the
Annual Meeting of Stockholders of Pride, Inc. to be held on May 30, 1997 and at
any adjournments thereof, hereby revoking any proxy heretofore given. The
undersigned instructs such proxies to vote:
I. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary below) listed below |_|
(Instruction: To withhold authority for any individual nominee, strike a
line through the nominee's name in the list below)
Alan Lubinsky Ivan Averbuch Allan Edgar
II. To authorize an amendment to the Corporation's 1994 Stock Option Plan
to increase the number of shares of Common Stock authorized and available for
issuance thereunder to 1,000,000 shares.
|_| FOR |_| AGAINST
and to vote upon any other business as may properly come before the meeting
or any adjournment thereof, all as described in the Proxy Statement dated May 1,
1997, receipt of which is hereby acknowledged.
(Continued and to be signed on the reverse side)
18
<PAGE>
Either of the proxies or their respective substitutes, who
shall be present and acting shall have and may exercise all the powers hereby
granted.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE
ELECTION OF FIVE DIRECTORS UNLESS CONTRARY INSTRUCTIONS ARE GIVEN.
Said proxies will use their discretion with respect to any
other matters which properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
PLEASE SIGN AND RETURN THE PROXY IN THE ENCLOSED ENVELOPE.
Dated:___________________________, 1997
- ---------------------------------------
- ---------------------------------------
(Please date and sign exactly as name appears at left. For joint accounts,
each joint owner should sign, Executors, administrators, trustees, etc., should
also so indicate when signing.)
19
<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.
MARBLE ARCH HOUSE
66-68 SEYMOUR STREET
LONDON W1H 5AF CIVVALS
UNITED KINGDOM FEBRUARY 14, 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 and 7) 18,681,638 9,924,318
Intangible assets - net (Note 2f) 11,534,509 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 5,369,073 -
----------------------------
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 8,824,392 12,126,311
Retained earnings (deficit) (1,585,855) (1,226,363)
Foreign currency translation (Note 2h) (356,405) 409,636
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 6,886,123 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) 284,595 -
--------------------------
LOSS BEFORE PROVISION FOR INCOME TAXES (359,492) (1,019,624)
Provision for income taxes (Notes 2g and 16) - -
--------------------------------
NET LOSS $ (359,492) $(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 subsidiary .14 -
------- ---
NET LOSS PER SHARE $(.18) $(.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) - - (3,307,739) - - (3,307,739)
Foreign currency translation adjustment - - - - (766,041) (766,041)
Net loss for the year ended
November 30, 1996 - - - (359,492) - (359,492)
BALANCE AT NOVEMBER 30, 1996 1,995,357 $3,991 $ 8,824,392 $(1,585,855) $(356,405) $ 6,886,123
</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) $ (359,492) $(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 (284,595) -
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)
Foreign currency translation (766,041) 312,446
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 (309,720) 2,762,880
------------- -------------
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)
------------- -------------
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 19) and by loans. The acquisition has
been recorded using the purchase method of accounting.
.
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:
<TABLE>
<CAPTION>
1996 1995
------------- ------
<S> <C> <C>
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
========== =======
</TABLE>
(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 $2,006,995.
This amount was assigned to the brand name and various contracts
with suppliers and customers and is to be amortized over 20 years
on a straight-line basis.
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):
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
(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:
<TABLE>
<CAPTION>
1996 1995
-------------- ---------
<S> <C> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
1996 1995
----------------- ---------
<S> <C> <C>
Buildings and improvements $ 1,719,415 $ 1,719,415
Revenue producing vehicles 17,282,095 11,989,192
Furniture, fixtures, plant and equipment 2,247,430 519,753
Aircraft 1,331,493 -
---------------------------
22,580,433 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
------------- -------------
$18,681,638 $ 9,924,318
=========== ============
</TABLE>
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:
<TABLE>
<CAPTION>
1996 1995
----------- --------
<S> <C> <C>
Taxes other than income taxes $418,082 $333,586
Miscellaneous accrued expenses 72,833 25,306
---------- ----------
$490,915 $358,892
</TABLE>
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 $2,965,000 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:
<TABLE>
<CAPTION>
As of November 30, 1996 acquisition debt payable (see Note 1) consisted of the following:
<S> <C>
Unsecured notes payable on demand after October 31, 1999;
interest payable quarterly at 8% per annum $1,678,000
Notes payable in 18 monthly installments of $46,611 plus
interest at 2% above the base rate 839,000
Other short-term notes payable (see Note 19) 2,581,470
-----------
$5,098,470
</TABLE>
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 $3,307,739 in order to
properly reflect the minority interest liability at $5,369,073
which represents 43.45% of the net assets of PAG.
PAG owns 70% of a newly formed subsidiary AC Automotive Group,
Inc., ("AC Group"). As of November 30, 1996 the minority interest
liabilities in AC Group were written down to zero since the
losses applicable to the minority shareholders exceeded their
interest in AC Group.
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:
<TABLE>
<CAPTION>
1996 1995
------------- --------
<S> <C> <C>
Current tax expense $ 760,350 $ 860,000
Deferred tax expense 174,650 -
Investment tax credits on vehicles (935,000) (860,000)
------------ ---------
$ - $ -
</TABLE>
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:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Operating loss carryforward $ 38,000 $ 51,000
Valuation allowance (38,000) (51,000)
-------- ----------
$ - $ -
</TABLE>
The Company has available operating losses carryforwards for tax
purposes aggregating approxi mately $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:
In December 1996, PAG completed a private placement of 16 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 $1,600,000 was used to
satisfy a portion of the debt owed re: the acquisition of AC Cars
(see Notes 1 and 10).
The Company also entered into a loan agreement with its bank for
$755,000 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.
F - 18
<PAGE>
PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
EXHIBIT 27
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATIONS S-X
The 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.
<TABLE>
<CAPTION>
<S> <C>
Period type 12 Mos.
Fiscal year end Nov. 30, 1996
Period start Dec. 01, 1995
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 22,580,430
Depreciation 3,898,795
Total assets 33,535,048
Current liabilities 0
Bonds 0
Common 3,991
Preferred mandatory 0
Preferred 0
Other SE 6,882,132
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 (359,492)
Income tax 0
Income continuing (359,492)
Discontinued 0
Extraordinary 0
Changes 0
Net income (359,492)
EPS primary (.18)
EPS diluted (.18)
</TABLE>
- Exhibit 27 -
<PAGE>
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>
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.
<TABLE>
<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
Preferred-mandatory 0
Preferred 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)
</TABLE>
