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 May 31,1999
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 May 31,1999
<PAGE>
PRIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, November 30,
1999 1998
unaudited
--------- ---------
ASSETS
<S> <C> <C>
Cash and cash equivalents ....................................................... $ 2,653 54,953
Accounts receivable ............................................................. 1,653,243 1,571,983
Property revenue producing vehicles and equipment-net ........................... 3,511,237 21,599,835
Investment ...................................................................... 4,048,460 4,048,460
------------ ------------
TOTAL ASSETS ............................................................................. $ 9,215,593 27,275,231
============ ============
LIABILITIES AND SHAREHOLDERS EQUITY
LIABILITIES
Bank line of credit ............................................................. 64,599 6,264,245
Accounts payable ................................................................ 531,623 558,314
Accrued liabilities and expenses ................................................ 4,387,303 1,738,304
Bank debt ....................................................................... 4,851,109 685,428
Obligations under hire purchase contracts ....................................... 1,401,069 15,231,850
Acquisition debt payable ........................................................ 1,686,000 1,686,000
Loans Payable ................................................................... 34,610 34,610
Other liabilities ............................................................... 31,299 249,842
------------ ------------
TOTAL LIABILITIES ........................................................................ 12,893,612 26,448,593
============ ============
MINORITY INTERESTS ....................................................................... 0 370,043
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS EQUITY
Preferred stock, $.001 par value, 5000,000 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 ...................................................... 8,332,894 8,332,894
Retained earnings(deficit) ...................................................... (12,633,519) (7,903,830)
Deferred financing costs ........................................................ (26,984) (44,734)
Foreign Currency Translation .................................................... 551,599 68,273
------- ------
TOTAL SHAREHOLDERS EQUITY ................................................................ (3,678,019) 456,595
========== =======
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY ................................................ 9,215,593 27,275,231
========= ==========
</TABLE>
Page-1
<PAGE>
PRIDE, INC AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Six months For the three months
ended May 31, ended May 31,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
REVENUE $ $ $ $
<S> <C> <C> <C> <C>
Contract hire income ...................................... 447,100 4,901,659 119,602 2,459,795
Sale of vehicles .......................................... 14,999,816 1,604,359 177,829 787,247
Fleet management and other income ......................... 172,377 554,743 99,270 232,642
----------- ----------- ----------- -----------
15,619,293 7,060,761 396,701 3,479,684
=========== =========== =========== ===========
EXPENSES
Cost of sales ............................................. 18,086,710 2,922,537 301,675 1,441,950
Depreciation .............................................. 179,259 2,252,844 84,547 1,180,888
General and administration expense ........................ 891,292 890,610 270,074 399,554
Amortization of goodwill .................................. 0 315,359 0 157,680
Interest and other financing costs ........................ 1,561,791 1,101,731 75,324 525,921
----------- ----------- ----------- -----------
20,719,052 7,483,081 731,620 3,705,993
=========== =========== =========== ===========
LOSS BEFORE MINORITY INTERESTS ..................................... (5,099,759) (422,320) (334,919) (226,309)
Minority interests in net loss of consolidated subsidiaries 370,043 193,906 0 102,674
LOSS BEFORE PROVISION FOR INCOME TAXES ............................ (4,729,716) (228,414) (334,919) (123,635)
Provision for income taxes ................................ 0 0 0 0
NET (LOSS) ......................................................... (4,729,716) (228,414) (334,919) (123,635)
LOSS PER COMMON SHARE (Note 5A)
Net Loss before minority interests ........................ $ (2.56) $ (.21) $ (.17) $ (.11)
Minority interests in net loss of subsidiary .............. .19 .10 0 .05
----------- ----------- ----------- -----------
$ (2.37) $ (.11) $ (.17) $ (.06)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (Note 5a) .............................................. 1,995,357 1,995,357 1,995,357 1,995,357
=========== =========== =========== ===========
</TABLE>
Page-2
<PAGE>
PRIDE,INC AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the six months For the Three Months
Ended May 31, Ended May 31,
1999 1998 1999 1998
---- ---- ---- ----
$ $ $ $
<S> <C> <C> <C> <C>
NET LOSS ...................................................... (4,729,716) (228,414) (334,919) (123,635)
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustments ............. 616,981 400,738 ( 16,844) 343,256
------- ------- ------ -------
COMPREHENSIVE (LOSS) INCOME ................................... (4,018,735) 172 324 (351,763) 219,621
========== ======== ======== =======
</TABLE>
Page-3
<PAGE>
<TABLE>
<CAPTION>
PRIDE,INC AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended May 31,
1999 1998
---- ----
<S> <C> <C>
Net (loss) ................................................................. (4,729,716) (228,414)
Adjustments to reconcile net (loss) to cash
(utilized) provided by operating activities:
Minority interests in net loss of subsidiaries
(370,043) (193,906)
Depreciation and amortization ..................................... 179,259 2,252,844
Amortization of goodwill .......................................... -- 315,358
Deferred financing costs .......................................... 17,750 17,400
Loss on disposal of fixed assets .................................. 1,580,370 129,634
Changes in assets and liabilities
(Increase) in accounts receivable ................................. (81,260)
Increase (Decrease) in accounts payable, accrued expenses and other
liabilities ....................................................... 2,403,765 (189,177)
--------- --------
Net cash (utilized) provided from operating activities ..................... (999,875) 1,976,325
INVESTING ACTIVITIES
Purchase of revenue producing assets ....................................... 0 (5,492,212)
Proceeds from sale of fixed assets ......................................... 16,317,110 2,147,269
---------- ---------
Net cash provided (utilized) by investing activities .............. 16,317,110 (3,344,943)
---------- ----------
FINANCING ACTIVITIES
Increase( Decrease) in bank lines of credit ....................... (6,261,592) 391,515
Increase in bank debt ............................................. 4,160,000 0
Principal payment of long term debt ............................... (54,143)
Proceeds from hire purchase contract funding ...................... 0 5,255,114
Principal repayments of hire purchase funding ..................... (13,830,781) (4,713,853)
----------- ----------
Net cash(utilized) provided from financing activities ...................... (15,986,516) 896,503
----------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .................................... 616,981 400,738
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ....................... (52,300) (71,377)
Cash and cash equivalents, beginning of year ...................... 54,953 84,227
------ ------
CASH AND CASH EQUIVALENTS END OF YEAR ...................................... 2,653 12,850
===== ======
</TABLE>
Page-4
<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 Sportfest, Inc. in the state of Delaware on September 11,1988. The
Company was a development stage company with no operations though January
13,1994.On the 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 Sportfest, 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 acquirer in a
reverse acquisition.
Pursuant to the acquisition, the Company issued an aggregate of 9,000,000
(900,000 shares-post Reverse stock split) shares of its common stock to the
stockholders of PMS in the acquisition. The 9000,0000 (pre-reverse split) shares
represented 89% of the 10,155,350 (pre-reverse split) shares of common stock
outstanding immediately after the acquisition. The 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, 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.
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
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 the Company's common stock 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. Following further
restructure and the forgoing issuance of shares, the ownership of AC Automotive
Group, Inc. by PAG has been reduced to 16%. Due to the change in ownership
percentage, PAG does not believe that it still has the ability to exercise
significant influence over AC Automotive, Inc. Accordingly, consolidation is not
considered appropriate. PAG's investment in AC Automotive Group, Inc. is
therefore being reported under the cost method of accounting.
On December 11,1998, PAG ,though its subsidiary, Pride Management Services Plc,
completed the sale of substantially all its leasing assets, leaving
approximately 13% of its revenue producing vehicles after the sale. The
consideration paid was $14,763,680 against balance sheet value of $17,851,023.
As a condition of sale, hire purchase creditors were paid $14,537,000 in full
and final settlement of the debt outstanding on the leased assets sold against a
balance sheet value of $13,127,303 at an early settlement penalty of $1,409,697.
In addition, the bank was restructured as follows. Upon completion of the sale,
$1,815,000 was repaid to the bank. The balance of $4,449,245 has been converted
into two loans; Loan A for $1,485,000 and Loan B for $2,964,245. Loan A of
$1,485,000 is repayable by July 31,1999, in the event of which Loan B of
$2,964,245 will be forgiven. In the event that Loan A is not repaid by July
31,1999, the full amount outstanding on the two loans is repayable on demand. As
a result of the sale, PAG wrote off its related goodwill, which had a carrying
value of $8,444,147, at November 30,1998.
Page-5
<PAGE>
PRIDE, INC AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
On February 19,1999, it was announced that the PAG had executed a Letter of
Intent to acquire 100% of the capital stock of Digital Mafia Entertainment, LLC
in exchange for 7,400,000 shares of that Company's common stock. On March 31,
1999 PAG executed a definitive Share Exchange agreement with Digital on revised
terms to which it agreed to issue 14,800,000 shares of its common stock to
shareholders of Digital. The increase in the number of shares issued is a result
of the NASDQ notification on March 12, 1999 that the PAG's securities had been
delisted for among other things, failure to maintain tangible book value of at
least $ 2,000,000. Subsequently PAG's common stock and the warrants were listed
on the NASD Bulletin Board and began trading on May 7, 1999.
Due to this change in ownership in PAG, completed on June 18,1999 the Company's
interest will have been reduced to approximately 6%. Accordingly consolidation
will no longer be appropriate and the Company's investment in PAG will be
reported under the cost method of accounting.
In addition, PAG announced that it was selling its wholly owned subsidiary,
Pride Management Services Plc to the Company for a nominal consideration f $ 1.
PMS has a negative net worth and is winding down its operations. In addition,
PAG's 16% interest in AC Automotive Group, Inc. valued at $4,048,460 was also
sold to the Company for as nominal consideration of $ 1. The sale of the
Automotive interest to the Company is coupled with the sale by PAG of its
interest to the Company for the sum of $ 1.
As part of the above transactions, Noteholders holding in PAG of approximately $
1,425,000 principal of debt have agreed to convert their notes to common stock
in PAG
PAG will also raise gross proceeds of approximately $ 1,000,000 from a private
offering of common stock, the majority of the proceeds from the offering being
loaned to Digital Mafia.
The above transactions closed on June 18, 1999
It is the intention of the newly appointed board of directors of Digital Mafia
to change the name of Pride Automotive Group, Inc. to DME Interactive Holdings,
Inc.
In the opinion of management, the accompanying unaudited interim consolidated
condensed financial statements of Pride Inc. and its subsidiaries, contain all
adjustments necessary to present fairly the Company's financial position as of
May 31,1999 and the results of its operations for the six and three month
periods ended May 31,1999 and 1998 and cash flows for the six month periods
ended May 31,1999 and 1998.
NOTES 2-FIXED ASSETS
Fixed assets consists of the following:
May 31, November 30,
1999 1998
(unaudited)
$ $
Building and improvements 784,599 784,599
Revenue producing vehicles 3,306,532 26,880,979
Furniture, fixtures and machinery 576,270 576,270
------- -------
4,667,401 28,241,848
Less: accumulated depreciation 1,156,164 6,706,761
--------- ---------
3,511,237 21,535,087
========= ==========
Page-6
<PAGE>
NOTE 3-LIABILITIES
Included in liabilities as of May 31,1999, are amounts in the aggregate of
$1,258,777 which are not due and payable until after May 31,2000. This amount
consists of amounts due to loans payable and equipment notes payable.
NOTE 4-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 56.45%.
In November 1996,PAG completed a private placement of 17units, 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 reduced the Company's investment in PAG to 53,33%.
In August 1998, the Company sold 70,000 shares of PAG common stock for net
proceeds of $235,870, realizing a loss of $57,236.
As a result of this transaction, the Company now holds 1,425,000 shares of PAG
common stock. Following a further restructure of PAG during this quarter, The
Company controlled 50.71% of the voting rights in the issued common stock of PAG
Due to the fact that PAG has negative equity, the minority interest liability
has been reduced to nil
NOTE 5-NEW ACCOUNTING PRONOUNCEMENTS
(a) Earnings (Loss) per share
The Company has adopted SFAS 128 Earnings Per Share ( SFAS 128 ), which
is effective for periods ending after December 15, 1997 and has changed the
method of calculating earnings(loss) per share. SFAS 128 requires the
presentation of basic and diluted earnings(loss) per share on the face of the
income statement. Prior period earnings(loss) per share data has been restated
in accordance with SFAS 128. Loss per common share is computed by dividing the
net loss by the weighted average number of common shares outstanding during the
period.
(b) Statement of Comprehensive Income
The Company has adopted SFAS 130 Reporting Comprehensive Income , which
is effective for the years beginning after December 15,1997 and early adoption
is permitted. Comprehensive income consists of net income or loss and other
comprehensive income (income, expenses, gains and losses that bypass the income
statement and are reported directly as a separate component of equity).
Page-7
<PAGE>
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 11,1998. 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) shares of its common stock to the
stockholders of PMS in the acquisition. The 9000,0000 (pre-reverse split) shares
represented 89% of the 10,155,350 (pre-reverse split) shares of common stock
outstanding immediately after the acquisition. The 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 December 1995, PAG consummated a private placement offering of common stock
of 500,000 shares, which reduced Pride's ownership interest to 72.8%. In April
1996, PAG completed an initial public offering of 592,500 shares of common stock
at $5.00 per share and 2,000,000 redeemable common stock warrants at a price of
$.10 each. The effect of the offering was to reduce Pride's ownership interest
to 56.55%.
In November 1996, PAG completed a private placement of 17 units, each 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 reduced the Company's investment in PAG to 46.87%.
In August 1998, the Company sold 70,000 shares of PAG common stock for net
proceeds of $235,870, realizing a loss of $57,236.As a result of this
transaction, the Company holds 1,425,000 shares of PAG common stock which
represents a 50.49% investment.
On November 29,1996, the Company, 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 the Company's common stock 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. Following further
restructure and the forgoing issuance of shares, the ownership of AC Automotive
Group, Inc. by the Company has been reduced to 16%. Due to the change in
ownership percentage, PAG does not believe that it still has the ability to
exercise significant influence over AC Automotive, Inc. Accordingly,
consolidation is not considered appropriate. PAG's investment in AC Automotive
Group, Inc. is therefore being reported under the cost method of accounting.
On December 11,1998, PAG, through its subsidiary, Pride Management Services Plc,
completed the sale of a large portion of its leasing assets (see Note 1).Pride
Management Services, through its subsidiaries, continues to service the
remaining contract hire agreements.
Page-8
<PAGE>
On February 19, 1999 it was announced that the PAG had executed a Letter of
Intent to acquire 100% of the Capital Stock of Digital Mafia Entertainment, LLC.
In exchange for 7,400,000 shares in that Company's common Stock. On March 31,
1999 PAG executed a definitive Share Exchange Agreement with Digital on revised
terms to which it agreed to issue 14,800,000 shares in its common stock to
shareholders of Digital. This increase in the number of shares issued is a
result of the NASDAQ notification on March 12,1999 that the PAG's securities had
been delisted for, among other things, failure to maintain tangible book value
of at least $ 2,000,000. Subsequently, PAG's common stock and warrants were
listed on the NASD Bulletin Board an began trading on May 17,1999. Due to this
change in ownership in PAG, completed on June 18, 1999 the Company's nterests
will have been reduced to approximately 6%. Accordingly, consolidation will no
longer be appropriate and the Company's investment in PAG will be reported under
the cost accounting method.
In addition, PAG announced that it was selling its wholly owned subsidiary,
Pride Management Services Plc to the Company for a nominal consideration of $
1.00. PMS has a negative net worth and is winding down its business. In
addition, PAG's 16% interest in AC Automotive Group, Inc. valued at $ 4,048,460
was sold to the Company at a nominal consideration of $ 1.00 The sale of the
Automotive interest to the Company is coupled with the sale by PAG of its
interest in PMS to the Company for the sum of $ 1.00.
As a part of the above transactions, Noteholders holding in PAG of approximately
$ 1,425,000 principal of debt have agreed to convert their notes to common stock
of PAG
PAG will also raise approximately $ 1,000,000 from a private offering of its
common stock the majority of the proceeds from the offering being loaned to
Digital Mafia.
The above transaction closed on June 18, 1999
It is the intention of the newly appointed board of directors of Digital Mafia
to change the name of Pride Automotive Group, Inc to DME interactive
Holdings,Inc. to reflect the new business direction of PAG
The financial information presented herein include: (I) Consolidated Condensed
Balance Sheets as of May 31,1999 and November 30,1998; (ii) Consolidated
Condensed Statements of Operations for the Six and Three Month periods Ended May
31,1999 and 1998; (iii) Consolidated Condensed Statements of Comprehensive
income (loss) for the Six and Three Month Periods Ended May 31,1999 and 1998;
(iv) Consolidated Condensed Statements of Cash Flows for the Six Month Periods
Ended May 31,1999 and 1998.
Results of operations
During the six month period to May 31, 1999, the Company through PAG's
subsidiary, PMS, completed the sale of substantially all its leasing assets. 972
vehicles and their related contracts were disposed of at a book loss of
$3,087,343. This accounts for the large reduction in contract hire income and
increase in vehicle sales when comparing the six month period ending May 31,1999
and May 31,1998 respectively.
In addition to this sale, 44 additional vehicles were disposed of at a loss of
$149,363. During the corresponding quarter in 1998, 94 vehicles were disposed of
on termination of contracts at a profit of $98,351.
No new business was written during this quarter in line with the Company's
decision to reduce its leasing and fleet management assets. During the quarter
ended May 31,1998, 67 new contracts were written at an average rental of $667
per vehicle.
As of May 31, 1999, 54 vehicles were subject to contract.
Fleet management income has also reduced substantially due to the termination of
all contracts during the quarter.
Cost of sales has increased substantially as a result of the disposal of 1016
vehicles discussed above. This has resulted in a large reduction in depreciation
due to the reduction in the fleet when comparing the quarters ended May 31,1999
and May 31,1998 respectively.
Page-9
<PAGE>
General and administration remained unchanged when comparing the six months
ending May 31,1999 and May 31,1998. Although overheads have been reduced
substantially, the unchanged position is a result of a large write off of
uncollectable debts of approximately $250,000 and a provision for professional
fees of $100,000 relating to the Group restructure.
For the three months ended May 31, 1999 General and Administrative expenses
decreased by approximately 33% which is in line with the winding down of the
leasing operations.
Interest and financing costs increased by $450,000 when comparing the six months
ended May 31,1999, and May 31,1998, respectively. Interest costs reduced
substantially as a result of the reduction in Hire Purchase funding relating to
the substantial asset sale and restructure of the bank line of credit. However,
this was offset by the early settlement penalty of $1,410,000 relating to the
debt outstanding on the leased assets sold on December 11, 1998.
As a result of the sale of the leased assets, the intangibles were written off
at November 30,1998.
For the six months ended May 31,1999 and 1998, the Company reported, after
amortization of goodwill ($315,360 for 1998), a loss of ($4,729,716) and
($228,414) respectively.
For the three months ended May 31,1999 and 1998, the Company reported, after
amortization of goodwill ($157,680 for 1998), a loss of ($334,919) and
($123,635) respectively.
Liquidity and Capital Resources
Net cash (utilized) provided from operating activities for the six month periods
ended May 31,1999 and 1998 aggregated $(999,875) and $1,976,325 respectively.
The Company provided cash of $16,317,110 and $2,147,269 from the sale of fixed
assets for the periods ended May 31,1999 and 1998 respectively. For the six
month period ended May 31,1998, $5,492,212 was utilized to purchase revenue
producing assets. Net cash utilized by the Company from financing activities
amounted to $15,986,516 as against net cash provided of $896,503 for the six
month period ended May 31,1999 and 1998 respectively
Due to the continuing trading losses, doubts are raised about the Company's
ability to continue as a going concern.
Management's plans in regard to this matter were described in a press release
issued on February 19,1999, where it was announced that PAG had executed a
Letter of Intent to acquire all the issued and outstanding capital stock of
Digital Mafia Entertainment, LLC, in exchange for the issuance of 7,400,000
shares in Pride Automotive common stock. After receiving a notice of delisting
from NASDAQ, PAG renegotiated the terms of the acquisition and agreed to double
to number of shares to be issued to DME to 14,800,000.
PAG also announced that it will, at the same time, sell its ownership of Pride
Management Services as well as its 16% interest in AC Automotive group, Inc. to
the Company for nominal value ($1 each). The sale was completed on June 18, 1999
Management will raise capital through the sale of its PAG stock for the purpose
of meeting its financial obligations. If the raising of capital is unsuccessful,
then the company will not have sufficient cash on hand to meet its current
obligations. The financial statements do not include any adjustments that might
result from this uncertainty.
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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. None.
Page 11
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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: July 13, 1999
Pride, Inc.
by: \s\ Alan Lubinsky
Alan Lubinsky
