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, 1998
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, 1998.
<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, 1998
(Unaudited) and November 30, 1997 3.
Consolidated Condensed Statements of Operations (Unaudited) -
Three Months Ended February 28, 1998 and 1997 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Three Months Ended February 28, 1998 and 1997 5.
Notes to Interim Consolidated Condensed Financial Statements (Unaudited) 6.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9.
PART II. Other Information 12.
SIGNATURES 13.
EXHIBITS:
Exhibit 27 - Financial Data Schedule 14.
</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,
1998 1997
(Unaudited)
ASSETS:
<S> <C> <C> <C>
Cash and cash equivalents $ ........................................................... 24,064 $ 85,065
Accounts receivable -
net of allowance for doubtful accounts 4,142,728 1,959,355
Inventories 179,268 1,248,360
Property, revenue producing vehicles and equipment - net (Note 2) 25,570,847 27,882,350
Intangible assets - net (Note 3) ...................................................... 8,739,117 8,912,087
Investment ............................................................................ 1,800,000 --
------------ ------------
TOTAL ASSETS $40,456,024 $40,087,217
- LIABILITIES AND SHAREHOLDERS' EQUITY -
LIABILITIES (Note 4):
Bank overdraft line of credit $ .................................................... 5,489,924 $ 6,976,699
Accounts payable ....................................................................... 1,572,408 1,767,166
Accrued liabilities and expenses 724,115 865,977
Bank debt ............................................................................... 677,900 695,782
Obligations under hire purchase contracts............................................. 8,441,373 18,341,778
Acquisition debt payable ...................................................... 1,686,000 4,198,500
Loans payable 88,151
Other liabilities 191,937 109,978
TOTAL LIABILITIES ....................................................................... 28,871,808 32,955,880
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES (Note 5) ................................ 5,584,887 3,473,242
------------ ------------
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 ................................................ 7,996,886 8,063,111
Retained earnings (deficit) ............................................. (1,772,643) (4,019,828)
Deferred financing costs ................................................... (65,748) (75,178)
Foreign currency translation ........................................................ (163,157) (314,001)
------------ ------------
5,999,329 3,658,095
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $40,456,024 $40,087,217
</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,
1998 1997
-------------- --------
REVENUES:
<S> <C> <C>
Contract hire income ............................................... $ 2,441,864 $ 1,652,484
Sale of contract hire vehicles ..................................... 817,112 1,731,816
Fleet management and other income .................................. 322,101 355,542
----------- -----------
3,581,077 3,739,842
----------- -----------
EXPENSES:
Cost of sales ....................................................... 2,552,543 3,124,121
General and administrative expenses ................................. 491,056 762,635
Amortization of goodwill and acquisition costs ...................... 157,679 158,296
Interest expense and other .......................................... 575,810 357,693
Research and development ............................................ -- 81,912
----------- -----------
3,777,088 4,484,657
----------- -----------
LOSS BEFORE MINORITY INTERESTS .......................................... (196,011) (744,815)
Minority interests in net loss of consolidated subsidiaries (Note 5) 91,232 438,843
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES .................................. (104,779) (305,972)
Provision for income taxes .......................................... -- --
----------- -----------
NET LOSS ................................................................ $ (104,779) $ (305,972)
=========== ===========
LOSS PER COMMON SHARE (Note 6):
Net loss before minority interest ................................... $ (.10) $ (.37)
Minority interests in net loss of subsidiary ........................ .05 .22
----------- -----------
LOSS PER COMMON SHARE ................................................... $ (.05) $ (.15)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (Note 6) ......................................... 1,995,357 1,995,357
=========== ===========
</TABLE>
See notes to interim consolidated condensed financial statements.
Page 4.
<PAGE>
PRIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
February 28,
1998 1997
---------------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (104,779) $(305,972)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Minority interests in net loss of subsidiaries ..... (91,232) (438,843)
Depreciation and amortization ...................... 1,071,957 946,597
Amortization of goodwill ........................... 157,679 158,296
(Gain) loss on disposal of fixed assets ............ 42,193 (28,470)
Deferred financing costs ........................... 17,750 --
Changes in assets and liabilities:
Decrease in accounts receivable .................... 14,297 74,930
(Increase) in inventories .......................... (46,899) (282,889)
Increase in accounts payable,
accrued expenses and other liabilities ............ 436,179 344,646
---------- ----------
Net cash provided by operating activities .......... 1,497,145 468,295
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of revenue producing assets ................ (3,104,557) (2,918,307)
Proceeds from sale of fixed assets ................... 909,207 517,139
Net cash (utilized) by investing activities ........ (2,195,350) (2,401,168)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from hire purchase contract funding ......... 3,154,590 3,701,474
Principal repayments of hire purchase contract funding (2,748,385) (3,701,474)
Principal payments of long-term debt ................. (17,882) (6,679)
Loans received from (repaid to) officers ............. -- 34,610
Net proceeds from subsidiary's sale of stock ......... -- 78,862
Net proceeds from bank lines of credit ............... 192,237 1,501,618
Payment of acquisition debt .......................... -- (810,800)
---------- ----------
Net cash provided by financing activities .......... 580,560 1,408,427
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .................. 57,482 298,769
---------- ----------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS .............. (60,163) (225,677)
Cash and cash equivalents, at beginning of year ...... 84,227 255,283
---------- ----------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD .............. $ 24,064 $ 29,606
========== ==========
</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 was recorded using
the purchase method of accounting. On February 12, 1998, the
Board of Directors of AC Automotive Group, Inc. authorized the
issuance of 6,130,000 shares of its common stock to Erwood
Holdings, Inc., a company affiliated with Alan Lubinsky, the
President and Chief Executive Officer and director of the
Company and AC Automotive Group, Inc., for aggregate
consideration of $6,130. In addition, 441,300 shares were issued
to other unrelated parties for aggregate consideration of $443.
The foregoing issuance of shares has reduced the ownership of AC
Automotive Group, Inc.
by the Company to approximately 16%.
Accordingly, PAG's investment in AC Automotive Group, Inc., is
being reported under the cost method of accounting.
Page 6.
<PAGE>
PRIDE, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - DESCRIPTION OF COMPANY (Continued):
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, 1997, 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, 1998 and the results of its operations and cash
flows for the three month periods ended February 28, 1998 and
1997.
The results of operations for the three month periods ended
February 28, 1998 and 1997 are not necessarily indicative of the
results to be expected for the full year.
NOTE 2 - FIXED ASSETS:
<TABLE>
<CAPTION>
Fixed assets consists of the following:
February 28, November 30,
1998 1997
(unaudited)
<S> <C> <C>
Building and improvements $ 784,599 $ 820,160
Revenue producing vehicles 29,551,013 27,612,291
Furniture, fixtures and machinery 544,112 4,670,067
-------------- --------------
30,879,724 33,102,518
Less: accumulated depreciation 5,308,877 5,220,168
------------- -------------
$25,570,847 $27,882,350
=========== ===========
</TABLE>
Page 7.
<PAGE>
PRIDE, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
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.
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, 1998, are amounts in
the aggregate of $10,807,390 which are not due and payable until
after February 28, 1999. 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%. In November 1996, PAG
completed a private placement of 17 units, each unit consisting
of a 10% promissory note in the amount of $95,000 and 10,000
shares of the Company's common stock for the aggregate price of
$100,000. The effect of this placement has reduced the Company's
investment in PAG to 46.87%. The minority interests liabilities
represent the minority shareholders' portion of the equity in
this subsidiary.
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 8.
<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. This offering reduced the Company's
ownership interest to 53.32%. In November 1996, PAG completed
a private placement of 17 units, each unit consisting of a 10%
promissory note in the amount of $95,000 and 10,000 shares of
the Company's common stock for the aggregate price of
$100,000. The effect of this placement has reduced the
Company's investment in PAG to 46.87%.
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. On February 12,
1998, the Board of Directors of AC Automotive Group, Inc.,
authorized the issuance of 6,130,000 shares of its common
stock to Erwood Holdings, Inc., a company affiliated with Alan
Lubinsky, the President and Chief Executive Officer and
director of the Company and AC Automotive Group, Inc., for
aggregate consideration of $6,130. In addition, 441,300 shares
were issued to other unrelated parties for aggregate
consideration of $443. The foregoing issuance of shares has
reduced the ownership of AC Automotive Group, Inc., by PAG to
approximately 16%. Accordingly, PAG's investment in AC
Automotive Group, Inc., is being reported under the cost
method of accounting.
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.
Page 9.
<PAGE>
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, 1998
and November 30, 1997; (ii) Consolidated Condensed Statements
of Operations for the Three Month Periods Ended February 28,
1998 and 1997 and (iii) Consolidated Condensed Statements of
Cash Flows for the Three Month Periods Ended February 28, 1998
and 1997.
Results of Operations
Contract Hire and Fleet Management income increased by
$1,000,502 when comparing the quarter ended February 28, 1998
to the quarter ended February 28, 1997. This 57% increase is
due to the net growth in the fleet of 379 vehicles over the
past year.
Vehicle sales decreased by $914,704 when comparing the two
quarters due to less contracts terminating and less sales of
vehicles.
During this quarter, 96 new contracts were written at an
average rental of $695 per vehicle compared with 117 new
contracts in the corresponding period in 1997 at an average
rental of $525 per vehicle. The average monthly rental is
dependent on the type of vehicle being rented and the terms of
the contract.
During the quarter, 37 vehicles were disposed on termination
of contracts at an average profit of $734 per vehicle. During
the corresponding quarter in 1997, 40 vehicles were disposed
of at an average profit of $2,363 per vehicle. The average
profit per vehicle on disposal is dependent on the type of
vehicle sold and current market value of vehicles.
As of February 28, 1998, 1,757 vehicles were under lease and
management compared to 1,492 vehicles as at February 28, 1997.
Cost of sales relating to sale of vehicle decreased from
$1,614,633 to $789,954 when comparing the quarter ending
February 28, 1998 with the quarter ending February 28, 1997.
The decrease is due to less contracts terminating and a
decrease in the sale of vehicles.
Cost of sales, including depreciation, relating to contract
hire and fleet management income increased from $1,228,578 to
$1,762,589 or 43% when comparing the two quarters ended
February 28, 1998 and 1997, respectively. This increase is in
line with the 57% increase in contract hire and fleet
management income. Cost of sales, including depreciation, as a
percentage of contract hire and fleet management income
decreased from 69.8% to 63.8% when comparing the two quarters.
This increase in gross margin of approximately 6% has enabled
the Company to absorb the increases in other overheads when
comparing the results of the two quarters ended February 28,
1998 and 1997, respectively.
Page 10.
<PAGE>
General expenses increased by $115,029 when comparing the
quarters ended February 28, 1998 and 1997, respectively. This
increase of 30% is in the line with the growth in contract
hire income of 57% over the part year and represents 13.67% of
revenue as against 10.77% for the corresponding period.
Interest expense increased by $296,499 when comparing the two
quarters ending February 28, 1998 and 1997, respectively. The
reason for this increase is due to this significant growth in
new business which requires increased funding, the cost of
increase in the bank overdraft line of credit utilized to fund
the AC Car operations and additional working capital
requirements to fund the growth.
For the three months ended February 28, 1998 and 1997, the
Company reported prior to amortization of goodwill ($157,680
and $157,679) a loss from operations of $38,322 and $7,829,
respectively from contract hire operations.
Liquidity and Capital Resources
In 1997, PAG completed a private placement of 18.5 units, each
unit consisting of a 10% promissory note in the amount of
$95,000 and 10,000 shares of 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 11.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote
None
ITEM 5. Other Information
None
ITEM 6. Exhibit and Reports on Form 8-k
(a) Exhibit 27 Financial Data Schedule
(b) None
Page 12.
<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 , 1998 PRIDE, INC.
By: /s/ Alan Lubinsky
Alan Lubinsky
Page 13.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
PRIDE, INC. AND SUBSIDIARIES
EXHIBIT 27
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
The schedule contains summary financial information extracted from the
consolidated financial statements for the three months ended February 28, 1998
and is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> nov-30-1998
<PERIOD-START> dec-01-1998
<PERIOD-END> feb-28-1998
<CASH> 24,064
<SECURITIES> 0
<RECEIVABLES> 4,142,728
<ALLOWANCES> 0
<INVENTORY> 179,268
<CURRENT-ASSETS> 0
<PP&E> 30,879,724
<DEPRECIATION> 5,308,877
<TOTAL-ASSETS> 40,456,024
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 3,991
<OTHER-SE> 5,995,338
<TOTAL-LIABILITY-AND-EQUITY> 40,456,024
<SALES> 3,581,077
<TOTAL-REVENUES> 3,581,077
<CGS> 2,552,543
<TOTAL-COSTS> 2,552,543
<OTHER-EXPENSES> 157,679
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 575,810
<INCOME-PRETAX> (104,779)
<INCOME-TAX> 0
<INCOME-CONTINUING> (104,779)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (104,779)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
