SCHEDULE 14C
(RULE 14C-101)
Information Statement Pursuant to Section 14(c) of the Securities Exchange
Act of 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Definitive Information Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
PRIDE AUTOMOTIVE GROUP INC.
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the Appropriate Box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which the transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
PRIDE AUTOMOTIVE GROUP INC.
Pride House
Watford Metro Centre, Tolpits Lane
Watford Hertfordshire
WD1 8SB England
PRELIMINARY INFORMATION STATEMENT
PURSUANT TO SECTION 14
OF THE SECURITIES EXCHANGE ACT OF 1934
AND REGULATION 14C AND SCHEDULE 14C THEREUNDER
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE NOT REQUESTED TO SEND US A PROXY
INTRODUCTION
This information statement has been mailed on May 25, 1999 to the
stockholders of record on May 10, 1996 of Pride Automotive Group, Inc., a
Delaware corporation (the "Corporation") in connection with certain actions to
be taken by the Corporation pursuant to the written consent by the majority
stockholders of the Corporation, dated April 30, 1999. The action to be taken
pursuant to the written consent shall be taken on June 16, 1999. The principal
executive offices of the Corporation are located at Pride House, Watford Metro
Centre, Tolpits Lane, Watford Hertfordshire, WD1 8SB England. The Corporation's
telephone number is (800) 698-6590.
THIS IS NOT A NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS AND NO
STOCKHOLDER MEETING WILL BE HELD TO CONSIDER ANY MATTER
WHICH WILL BE DESCRIBED HEREIN.
Alan Lubinsky
President
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NOTICE OF ACTION TO BE TAKEN PURSUANT THE WRITTEN CONSENT OF
A MAJORITY STOCKHOLDER IN LIEU OF A SPECIAL MEETING OF THE
STOCKHOLDERS ON JUNE 16, 1999
To Our Shareholders:
NOTICE IS HEREBY GIVEN that the following actions will be taken pursuant
the written consent of a majority of stockholders in lieu of a special Meeting
of the stockholders a special meeting of shareholders of Pride Automotive Group
Inc. (the "Company") on June 16, 1999:
1. The adoption of a Share Exchange Agreement (the "Agreement"), dated as
of March 31, 1999, between Pride and the shareholders of Digital Mafia
Entertainment, LLC ("DME"), providing for the acquisition of DME by Pride on the
terms and conditions contained in such Agreement, a copy of which is attached as
Exhibit A to the accompanying Information Statement;
2. The adoption of an amendment to the Certificate of Incorporation of
Pride to (I) increase the number of authorized shares of common stock of Pride
from 10,000,000 to 30,000,000 shares; and (ii) change the name of the Company to
DME Interactive Holdings, Inc.;
3. The election of the directors set forth herein to serve as directors of
Pride for the ensuing year;
4. The sale of substantially all of Pride's remaining assets, namely its
16% interest in AC Automotive Group, Inc. and its 100% interest in Pride
Management Services, PLC to Pride, Inc., the parent corporation of Pride and the
holder of approximately 50.4% of its outstanding capital stock, for nominal
consideration; and
5. The selection of Mitchell & Titus, LLP as the Company's independent
accountants for the fiscal year ended November 30, 1999.
The Board of Directors has fixed the close of business on May 10, 1999 as
the record date for determining the shareholders entitled to notice of the
foregoing.
By order of the
Board of Directors,
Alan Lubinsky
Secretary
May 25, 1999
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OUTSTANDING SHARES AND VOTING RIGHTS
As of the Record Date, the Company's authorized capitalization consists
of 10,000,000 shares of Common Stock, par value $.001 per share and 2,000,000
shares of Preferred Stock, par value $.01 per share, which may be issued in one
or more series at the discretion of the board of directors. As of the Record
Date, there were 3,135,500 shares of Common Stock outstanding, all of which were
fully paid, non-assessable and entitled to vote. Holders of Common Stock of the
Company have no preemptive rights to acquire or subscribe to any of the
additional shares of Common Stock.
Each share of Common Stock entitles its holder to one vote on each
matter submitted to the stockholders. However, because shareholders holding at
least a majority of the Common Stock issued and outstanding as at the Record
Date, namely Pride, Inc. and Alan Lubinsky have voted in favor of the following
proposals by Resolution dated April 30, 1999; and having sufficient voting power
to approve such Proposals through their ownership of the Company's Common Stock,
no other shareholder consents will be solicited in connection with this
Information Statement.
Pursuant to Rule 14c-2 under the Exchange Act, the proposals will not
be adopted until a date at least twenty (20) days after the date on which this
Information Statement has been mailed to the Shareholders. As this Information
Statement is being sent to the beneficial owners of the Common Stock on May 21,
1999, which is more than twenty (20) days before the date of the Meeting, the
Company anticipates that the actions contemplated herein will be effected on or
about the close of business on the date of the Meeting.
The Company has asked brokers and other custodians, nominees and
fiduciaries to forward this Information Statement to the beneficial owners of
the Common Stock held of record by such persons and will reimburse such persons
for out-of-pocket expenses incurred in forwarding such material.
This Information Statement will serve as written notice to stockholders
pursuant to Section 228 of the Delaware Business Corporation Law.
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OWNERSHIP OF SECURITIES
The following table sets forth, as of the Record Date, the number of
shares of Common Stock of the Company owned by (i) each person who is known by
the Company to own of record or beneficially five percent (5%) or more of the
Company's outstanding shares, (ii) each director of the Company, (iii) each of
the executive officers, and (iv) all directors and executive officers of the
Company as a group. The shareholders listed in the table have sole voting and
investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
Number of Percentage of
Name Shares Share Ownership
<S> <C> <C>
Pride, Inc. 1,425,000 45.4%
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertfordshire
WD1 8SB England
Alan Lubinsky (1) 1,613,000 51.4%
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertfordshire
WD1 8SB England
Ivan Averbuch - *
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertfordshire
WD1 8SB England
Allan Edgar - *
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertfordshire
WD1 8SB England
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Ian Satill - *
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertfordshire
WD1 8SB England
All officers and
Directors as a group
(4 persons) (1)(2)(3) 1,613,000 51.4%
</TABLE>
(1) New World Finance, Limited, which is wholly owned by a trust of which
family members of Mr. Lubinsky are the beneficiaries, owns approximately 50.4%
of the outstanding shares of Pride, Inc. and may be considered the beneficial
owner of the shares of the Company owned by Pride, Inc. The trustee is Elfin
Trust Company Limited, located on the Island of Guernsey, Channel Islands.
Although Mr. Lubinsky disclaims beneficial ownership of the shares owned by New
World Finance, Limited, it may be expected that such entity will vote its
respective shares in favor of proposals espoused by Mr. Lubinsky. Mr. Lubinsky
also owns 188,000 shares of the Company's common stock individually, which he
received in lieu of compensation owed to him in the amount of $94,000.
(2) Excludes shares issuable upon the exercise of options granted to Mr.
Lubinsky (i) pursuant to the terms of his employment agreement.
(3) Excludes the effects on total outstanding shares which would result
from exercise of stock purchase options.
APPROVAL REQUIRED
The approval of a majority of the outstanding stock entitled to vote is
necessary to approve the following proposals. However, as discussed above, the
Company's Board of Directors has obtained the necessary approval for these
proposals from stockholders with voting authority for stock constituting in
excess of 50% of the total outstanding shares of the Company's Common Stock
entitled to vote. As such, the Board of Directors does not intend to solicit any
proxies or consents from any other stockholders in connection with these
actions.
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BACKGROUND AND RECENT DEVELOPMENTS
Pride Automotive Group, Inc., a Delaware corporation (the "Company")
was formed by Pride, Inc. ("PRYD"), 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"), in a transaction which was accounted for
as a reorganization (the "Reorganization"). Prior to the Reorganization, PMS was
a wholly owned subsidiary of PRYD. These companies jointly engaged in the
business of leasing new automobiles to businesses, servicing such automobiles
during the lease term and remarketing the automobiles upon the expiration of the
lease term, which arrangement is described as a "contract hire."
In November 1998, PMS and its subsidiaries entered into an agreement
with Newcourt Automotive Services, Ltd. ("Newcourt) to sell it substantially all
of their leasing portfolios for the sum of approximately $14,943,000. The
portfolio sold had been carried on the books of the Company at a value of
approximately (pound)18,098,000 ($29,499,740). PMS currently maintains leases on
approximately 100 vehicles, although it intends to discontinue its leasing
operations by the end of calendar year 1999. The sale of such assets was deemed
necessary by PMS due to pressure from its lenders. The sale of the leasing
portfolios and operating losses has reduced the Company net tangible assets to a
level below the minimum required by Nasdaq to maintain its NASDAQ SmallCap
listing. The Company's securities have been delisted by Nasdaq and the Boston
Stock Exchange (the "BSE") and are expected to trade on the OTC Bulletin Board
in the near future. The Company cannot predict whether its securities will trade
on the BSE. As at the Record Date, the Company's securities were still the
subject of a Nasdaq imposed trading halt, which was imposed on February 19,
1999.
PMS is winding down its operations and has a negative net worth. The
Company has proposed selling PMS to its parent company, PRYD, for nominal
consideration (ie, $1.00) The Company is of the opinion that PMS is of no
commercial value and is agreeing to dispose of same to PRYD to allow PRYD to
sell off the remaining assets and attempt to minimize any additional losses to
lenders of PMS. Management of the Company is of the belief that disposing of PMS
will increase the Company's net tangible assets.
In light of the foregoing, Management had been searching for a business
opportunity for the Company. The opportunity to acquire Digital Mafia
Enterprises, LLC ("Digital") was presented to the Company by Mason Hill. Mason
Hill has agreed to act as the Company's investment bankers in connection with
such acquisition opportunity and will be compensated therefor. On February 19,
1999, the Company entered into a letter of intent to acquire 100% of the capital
stock of Digital in exchange for 7,400,000 shares of the Company's common stock.
Since the execution of the Letter of Intent, the Company and Digital
renegotiated the terms of same in light of the Nasdaq notification of delisting.
In essence, all share issuance to noteholders and creditors were doubled as were
the shares intended to be issued to Digital shareholders and Mason Hill. In
addition, whereas the Company originally agreed to grant an option to PRYD to
allow PRYD to acquire the Automotive shares owned by the Company for the sum of
$4,048,460, which is the value that such shares are carried on the Company's
books,
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together with a proxy to vote same for a period of ten years, the Company has
now agreed to sell such shares to PRYD for the sum of $1.00.
The Company's assets currently consist of its ownership interest of PMS
and its ownership of approximately 16% of the capital stock of AC Automotive
Group, Inc. ("Automotive"). The Agreement provides that PRYD will acquire the
Automotive stock and PMS for the sum of $1.00 each on the closing of the
Acquisition.
The Agreement further requires that noteholders of not more that
$400,000 of debt must convert their notes to equity pursuant to an offering
which was effected by the Company. As at the date hereof, holders of $1,235,000
of debt had agreed to convert their debt to common stock of the Company at the
rate of $.95 principal amount of debt for 2 shares of common stock (i.e. $.475
per share). Holders of the remaining $380,000 of debt have until May 12, 1999 to
convert their debt to common shares. The conversion does not become effective
until the closing of the acquisition.
The Company is also currently effecting a private offering of up to
1,500,000 shares at $1.00 per share. The offering is being effected on a
$100,000 minimum/$1,500,000 maximum basis. The proceeds of the offering are
being loaned to Digital for its working capital purposes. The Company closed on
$125,000 of subscriptions as at the date hereof. Mason Hill is acting as
placement agent for such offering and is receiving a fee therefor.
In addition, approximately 728,000 shares of common stock are being
issued by the Company in lieu of debt and costs of $364,000 and 740,000 shares
of common stock being issued to Mason Hill for its investment banking services
in connection with the Digital Transaction. 188,000 of the 728,000 shares
issuable in exchange for debt were issued on April 30, 1999 to Alan Lubinsky,
the president of the Company, in lieu of past due compensation of $94,000. Mr.
Lubinsky voted all of such shares in favor of adoption of the matters set forth
herein. The remaining 540,000 shares issuable in exchange for debt will be
issued on May 11, 1999.
Although the Company had filed a Registration Statement for the offer
and sale of additional securities to raise capital and pay down loans to Note
Holders and creditors, the Company did not believe that such Offering would be
completed because of the limited operations of the Company and its current
financial condition. Accordingly, the Company withdrew its Registration
Statement in April 1999.
THE ADOPTION OF A SHARE EXCHANGE AGREEMENT (THE "AGREEMENT"),
DATED AS OF MARCH 31, 1999, BETWEEN PRIDE AND THE SHAREHOLDERS OF
DIGITAL MAFIA ENTERTAINMENT, LLC
On February 19, 1999, the Company entered into a letter of intent to
acquire 100% of the capital stock of Digital in exchange for 7,400,000 shares of
the Company's common stock.
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On March 31, 1999 the Company executed a definitive Share Exchange Agreement
with Digital 1on revised terms, pursuant to which it has agreed to issue
14,800,000 shares of its common stock to the shareholders of Digital in exchange
for 100% of the capital stock of Digital. The increase in the number of shares
being issued to Digital shareholders is a result of the Nasdaq notification that
it was delisting Pride securities. In addition, all share issuances to
noteholders and creditors were doubled from the amounts originally agreed upon.
Furthermore, whereas the Company had an option to acquire the Automotive shares
owned by the Company for the sum of $4,048,460 and a proxy to vote same for a
period of ten years, the Company is now selling such shares to Pride for the sum
of $1.00.
The Company does not believe that Delaware law requires shareholder
approval of the foregoing transaction, although same was approved by a majority
of Pride shareholders pursuant to the terms of the Agreement. Upon completion of
the Digital Acquisition, Digital will become a wholly-owned subsidiary of the
Company.
The Company's assets currently consist of its ownership interest of PMS
and its ownership of approximately 16% of the capital stock of AC Automotive
Group, Inc. ("Automotive"). The Agreement provides that PRYD will acquire the
Automotive stock and PMS for the sum of $1.00 each on the closing of the
Acquisition.
The Agreement further requires that noteholders of at least $1,215,000
of debt must convert their notes to equity pursuant to an offering which was
effected by the Company. As at the date hereof, holders of $1,377,500 of debt
had agreed to convert their debt to common stock of the Company at the rate of
$.95 principal amount of debt for 2 shares of common stock (i.e. $.475 per
share). Holders of the remaining $380,000 of debt have until May 12, 1999 to
convert their debt to common shares. The conversion does not become effective
until the closing of the acquisition.
Business - Digital Mafia Enterprises, LLC
General
Digital Mafia Entertainment, LLC ("DME" or "Digital"), was formed as a
privately held company in August, 1995. DME specializes in the creation of
digital products and services. DME's capabilities include website development,
maintenance, turnkey custom electronic sales solutions and billing packages
("E-Tail" sm), on-line advertising, and software development.
DME is of the opinion that the technology community had ignored the
urban minority market (African American and Hispanic) for computer and
information related services. In recognition of this trend, DME decided to
concentrate its efforts on (I) the development of interactive new media content
for African American and Hispanic consumers; and (ii) becoming a provider of
personal computers to African American and Hispanic Consumers.
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DME is of the further opinion that few firms have made any effort to
develop websites targeted to minorities, and that even fewer understand the
cultural demands and interests of the urban market. Examples, such as African
American Voices, NetNoir, or Microsoft (through its alliance with the Black
Entertainment Television Network) have provided "niche" internet communications
services at best. No internet provider has created a "portal strategy" that is a
successful point of entry to cyberspace for minority on-line users. More
significantly, despite a boom in personal computer ownership, the "Digital
Divide" was not being addressed for minority consumers.
In addition to its own array of internet and software development
services, DME is attempting to strategically align itself with key players in
the world of advertising, music, entertainment, fashion and other sectors
touching upon urban consumer demand. DME is actively involved in negotiations
with both hardware providers and internet access companies that recognize the
need to reach the untapped urban minority technology market. DME is of the
belief that establishment of such a contractual agreement would position DME in
a superior vantage point to reach this large concentrated market. DME believes
that it has strengthened its own foothold as a conduit to and trusted marketing
arm within the urban consumer and business marketplace, due to its aggressive
approach to promoting and marketing other companies' products and services on
the internet.
In addition, DME's management team has led to relationships with major
Fortune 500 companies such as HBO, Sony, Microsoft and BMG North America. DME
has additionally established relationships with companies including LaFace
Records, Motown Records, BMG North America, Black Entertainment Television,
Action Pay Per View, Microsoft, HBO Homevideo, Def Jam Records, Big City Bagels,
LilMan Records, and Queen Latifahs Flavor Unit Records. Moreover, DME has
established strategic alliances with important advertising and marketing players
to the urban minority market, including The Radio One Network, Vibe Magazine,
The Source Magazine, Telemundo Television, Black Entertainment Television, The
African American College Alliance.
DME is of the belief that a dramatic change is occurring in the
personal computer industry as PC manufacturers realize that declining prices and
lower demand require new alliances with related industries. Just as companies
like Compaq and Hewlett-Packard have entered into agreements with internet
service providers to create revenue sharing opportunities, DME is of the belief
that PC manufactures will align with marketers (like DME) to deliver products to
a targeted customer segment.
DME is of the further belief that by partnering with a PC manufacturer,
DME will have the ability to develop the entire electronic commerce suite --
including hardware, software, and content -- under the powerful icon of the
Urban Branded PC. Although the details and feature functionality of an Urban
Branded PC have yet to be developed, one model for consideration may be
analogous to the "quick - access features" being used to give internet service
providers prominent placement on PC keyboards.
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African Americans and Hispanics lag far behind the national average,
with only 19% of minority households owning PCS. Thus, the percentage of on-line
use lags even further behind for the minority market. With the buying power of
African Americans rising from $308 Billion in 1990 to $533 Billion in 1999, with
PC Manufactures like Compaq and Hewlett-Packard facing sinking prices and slower
demand, and with minority consumption behavior focused on fashion, music, and
entertainment, DME believes that it is well-positioned as a reputable, capable,
and recognized minority firm that can deliver an "Urban Branded PC."
The Selig Center projects that the nation's African American buying
power will rise from $308 billion in 1990 to $533 billion in 1999, up by 72.9%
in nine years -- a compound annual rate of growth of 6.3 percent. This gain
outpaces the gain for the general market ( 56.7%). It is expected that African
American buying power will grow more than two-and-one-half times as fast as
inflation. In 1999, the national share of total buying power that is African
American is expected to be 8.2%, up from 7.4% in 1990.
DME is of the belief that substantially above-average growth in African
American buying power creates tremendous opportunities for businesses that
concentrate on such markets. Moreover, the nation's Hispanic buying power is
expected to rise from $211 billion in 1990 to an estimated $ 400 billion in 1999
based on a compound annual growth of 7.5%. For the U.S. as a whole, in 1997, the
shares of total buying power that is Hispanic will be 6.1%, up from 5.2% in
1990. Despite such rapid growth, Hispanic consumers' share in 1997 will be less
than the 8.2% controlled by African American purchasers.
The Hispanic population is growing more rapidly than the total
population, a trend that is projected to continue. This reflects both higher
rates of natural increase and strong immigration. This is a relatively young
population group, in early stages of career development, which suggests even
greater future gains in buying power for this segment.
The most notable gaps continue in African American and Hispanic
markets. While the ownership of PCS has grown significantly for minority groups
since 1994, African Americans and Hispanics still lag far behind the national
average. White households are more than twice as likely (40.8%) to own a
computer than African American (19.3%) or Hispanic (19.4%) of households. This
gap holds across income levels even at incomes greater than $75,000. At this
income level Whites, are more likely to have a PC (76%) while African Americans
are at (64%) penetration at this income level. The same issues apply to On Line
Access, where Whites have penetration rates of 22% (1997), contrasted with
penetration rates of 7.7% and 8.7% respectively for African American and
Hispanics. While there are disparities in the levels of demand reported by the
various studies, they are all consistent in reflecting the recurring trend of
lower PC and On-line consumption in minority markets.
The African American middle-class has discretionary income, and the
choices they make boost African American household expenditures above average
for numerous goods and services. DME is of the belief that companies with strong
brands will target these markets in the next century. These consumers are in age
groups that are projected to grow the fastest in the next
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decade, according to the Census Bureau. The Number of African Americans aged
14-17 and 18-24 is projected to increase 16% and 15%, respectively between 1996
and 2000. That is faster than the average of 12% for all non-Hispanic African
Americans. The U.S. could have 1.6 million non-Hispanic African Americans age 14
to 17 and 4 million age 18 to 24 by year 2000.
African American and Hispanic buying power is increasing at a rate
faster than the general population. These large Urban minority groups are
concentrated in a manageable number of States allowing for marketing economies
of scale. Urban minorities are under represented in their use of PCS and On Line
Services Entertainment and Music in particular are significant components of
minority consumption behavior. DME is of the belief that opportunities exist for
capitalizing on the convergence of lower cost PC technology, Minority Consumer
Demographics and Minority consumption behavior. DME is of the further belief
that significant growth in minority business ownership creates more opportunity
for application of E commerce solutions for business to business and business to
consumer.
Digital Mafia Entertainment offers business and consumer solutions. DME
provides businesses with Web Site design, development and maintenance. DME
believes that it is unique in its execution of Internet advertising campaigns
and E-commerce solutions that allow companies to promote their brands, develop
an online consumer presence and deliver sales results in urban minority markets
("E - Tail"). Digital Mafia Entertainment currently offers 5 core services: Web
Site Solutions, Advertising Solutions, E - Commerce (a.k.a. E-tail), Multi -
media CD production, Internet program tracking and analysis.
Web Site Solutions is made up of the following major elements:
Development and design of Websites according to customer marketing objectives
and target customer characteristics. Maintenance and technology consulting.
Development of turnkey E-commerce sales solutions. On-Line Advertising for
Websites Software Development is robust from a web site development perspective.
DME is currently working on the development of proprietary capabilities
associated with E-Commerce Transaction Processing and Tracking. These
capabilities are expected to provide a competitive advantage over competing
services. The first service developed by Digital Mafia Entertainment was a
website development agreement with Sony Music Corp., which was introduced in
1995 to support marketing of Artists recording under the MJJ Record Label for
Kriss Kross, Da Brat and Exscape. DME was chosen as the developer for another
Sony Music subsidiary label, SO SO Def Recording Company. DME has also developed
sites for LaFace Records and multi - platinum recording artists Toni Braxton,
TLC, The Tony Rich Project and OutKast. In addition, DME has entered into an
agreement with Def Jam Records to develop an interactive product for the
recording artist and television star LL Cool J. This interactive product is a
new type of audio CD called the Enhaced CD or CD Plus. This product combines
traditional CD tracks with computer based CD ROM data, such as video, lyrics,
photographs, text, Quicktime VR and a host of other technologies. This format
allows for a single CD to be played on any CD audio player or a multimedia
Personal Computer. DME has signed a fourth year
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renewal development agreement with Time Warner Company - HBO Home Video
Inc. calling for the development of a website.
This arrangement establishes a precedent for DME in the arena of
generating ancillary revenues from the internet via its clients. The success of
the HBO relationship has led DME to develop electronic catalogues for an HBO
home video E-Tail store. DME's successful development agreement with Motown
recordings has led to a renewal of the development agreement through the year
2000.
DME provides high quality products that enhance the sales, productivity
and competitiveness of its clients. Services range from development of cutting
edge Web Sites to the development of the latest in business networking
solutions. DME creative professionals capture the strategic goals of clients and
translate them into feasible and market relevant strategies. Digital Mafia
Entertainment believes that it is one of the most recognized minority Web
Development firms in Silicon Alley. The combination of its core competencies in
new media technology, advertising, and linkages with compelling and relevant
urban content benefit firms targeting urban minority markets. DME is also unique
in its creative application of advertising and promotional campaigns along with
Web Sites. These combined capabilities provide customers with integrated
marketing campaigns that effectively reach urban markets. From the clients
perspective this results in: lower marketing & distribution costs, increased
efficiency of marketing expenditures as a result of improved targeting and
increased sales due to better targeting and reach in urban markets.
Major benefits of the combination of all Digital Mafia Entertainment
services are relevance in the target markets -- precise targeting because of
site appeal to target markets --delivering impressions and transactions yielding
measured sales results for clients. New Service & Product Development The Web
Site development business is in its growth phase. Urban PC, Internet Portal and
E- Commerce projects are in the conceptual design and feasibility stages. DME
believes that infusion of capital will enable DME to expand staff and associated
capacity to take on more web development business. Currently the Website
Solutions component of the business is operating near capacity because of
limited personnel. DME has been careful to throttle demand for its services to
ensure continued delivery of quality service to its existing client base. It is
the opinion of DME management that additional staffing is required to expand
capacity to achieve economies of scale and exploit increasing sales
opportunities.
New Services and Businesses under development are natural extensions of
the DME core. These include the development of an Urban Branded PC to facilitate
(i.e. Creating Market Push) expansion of Advertising and E-Commerce
opportunities in Urban Markets. This is to be combined with development of a
branded urban portal ("Creating Market Pull") with compelling and minority
relevant content and retail offerings.
Digital Mafia Entertainment plans to continually develop new services
and enhance existing services. These new services are in the requirement stage
of development with some
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early prototypes having been developed. Commercialization of these new
services is targeted for 2nd and 3rd quarter 1999.
The DME approach to Urban Content development has allowed DME to
position itself as a recognized minority Web Development firm in Silicon Alley.
DME offers its clients the opportunity to produce marketing and commerce
solutions that exploit the emerging capabilities of the internet and navigate
the complexities and nuances associated with profitable execution of marketing
campaigns in the urban market and more specifically programs that reach today's
Generation X / Hip - Hop culture. As a Web development firm, DME provides a full
array of Web development, electronic commerce, interactive marketing and
promotional services for small, mid size and large corporations that are
currently doing business in Urban America or are trying to reach this lucrative,
ever changing and elusive market.
In order to properly address the target markets, deliver new digital
technologies, and develop brand awareness, DME must build its management team
rapidly. Most of DME's management team is already in place. Collectively, their
backgrounds account for 20 years of experience. Currently, there is a
significant need for a Director of E-Commerce Strategy; this position is
intended to be filled by the 2nd Quarter 1999. In addition, DME is planning to
hire approximately 10 employees to perform various functions associated with
website development, design, content preparation, operations and marketing. The
job titles may include Project Manager, Programmer, Designer, Content Writer,
and Research Director.
Properties
Digital Mafia maintains its principal offices at 519 Palisades Avenue,
Englewood Cliffs, New Jersey 07632.
Litigation
Digital Mafia has advised the Company that it is not a party to any
litigation.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF THE COMPANY
Background
On March 31, 1999, the Company's Board of Directors unanimously authorized,
an amendment to the Company's Certificate of Incorporation (i) increasing the
number of authorized shares from 10 million to 30 million shares of Common
Stock; and (ii) changing the name of the Company to "DME Interactive Holdings,
Inc." The amendment was approved by a majority of the shareholders of the
Company on April 30, 1999.
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Each of these proposed amendments is discussed in greater detail below.
Additionally, a proposed form of Certificate of Amendment of the Certificate of
Incorporation of the Company is included as Exhibit B to this Information
Statement. A Certificate in substantially the form of Exhibit B will be filed
with the Delaware Secretary of State promptly after completion of the
Acquisition of Digital.
The Board of Directors has determined that the adoption of the proposed
amendments will be in the best interests of the Company.
Reasons for the Authorized Actions
(i) The Company's Board of Directors believes that it is in the best interests
of the Company to increase the number of authorized shares of Common Stock from
10 million to 30 million shares of Common Stock in order to effect the
Acquisition of Digital Mafia Enterprises. As of the date of the Record Date, the
Company had 3,135,500 shares issued and outstanding. The Company additionally
has reserved for issuance 2,300,000 shares of common stock issuable upon
exercise of outstanding Warrants and shares of common stock issuable upon
exercise of employee stock options. Taking into account the shares being issued
to Digital Shareholders, noteholders and creditors, the Company would have
inadequate authorized capital to effect such transactions.
Following the adoption of the stock amendment and upon completion of
the Digital Acquisition, there will be at least 21,815,500 shares of common
stock issued and outstanding (assuming no further conversion of notes and no
further sales of common stock under the private placement) and possibly as many
as 23,990,500 shares of common stock issued and outstanding (assuming full
conversion of notes and the sale of all 1,500,000 shares of common stock under
the private placement). The balance of the authorized but unissued shares of
common stock will be issuable at any time and from time to time by action of the
Board of Directors without further authorization from the Company's
shareholders, except as otherwise required by applicable law or rules and
regulations to which the Company may be subject, to such persons and for such
consideration (but not less than the par value thereof) as the Board of
Directors determines. Holders of Common Stock of the Company have no preemptive
rights to acquire or subscribe to any of the additional shares of Common Stock.
Issuance of additional Common Stock, directly or upon exercise of
warrants or options if issued, has potentially dilutive effects on each of the
shareholders to the extent that any of the authorized but unissued shares are
subsequently issued. The issuance of such shares of Common Stock (or even the
potential issuance) may have a depressive effect on the market price of the
Company's securities. Moreover, an increase in the number of authorized shares
would have a dilutive effect on the voting power of the outstanding Common Stock
of the Company. Finally, the issuance of any of the additional shares of Common
Stock, or options to purchase shares at prices below the current market price
would also have a dilutive effect on stockholder's equity in the Company.
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(ii) The Company's Board of Directors believes that it is in the best
interests of the Company to change the name of the Company to "DME Interactive
Holdings, Inc." to reflect the new business direction of the Company. The
Company has decided to redirect its business from the leasing of automobiles to
the business of web design and related services. See "Business of Digital." To
this end, the Company sold substantially all of its leasing assets in November
1998 and is proposing to sell its remaining leasing business (PMS) to PRYD and
its ownership in AC Automotive to PRYD. The Company believes that its name will
be an integral part of its present and future development, in terms of public
recognition of its corporate strategy and product development.
Required Vote
The adoption of the above described amendments to the Certificate of
Amendment of the Certificate of Incorporation requires the affirmative vote of
not less than a majority of the votes entitled to be cast by all shares of
Common Stock issued and outstanding on the Record Date. As discusses above, the
Company's majority shareholder has approved the foregoing amendment.
No Right of Appraisal
Under Delaware Business Corporation Law, the state in which the Company
is incorporated, the increase in the number of authorized shares does not
require the Company to provide dissenting shareholders with a right of appraisal
and the Company will not provide shareholders with such right.
DIRECTORS AND EXECUTIVE OFFICERS
The following persons have been elected as directors by the majority
shareholder pursuant to its written consent, with such elections to become
effective upon the closing of the Digital Acquisition. Furthermore, the
following persons will be elected as officers effective upon the closing of the
Digital Acquisition:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Position with the Company
Darien Dash 27 President, Chief Executive Officer, Secretary
and Chairman of the Board of Directors
Malcolm D. Pryor 60 Director
Sandi Thomas 38 Director
Peter A. Levy 38 Director
</TABLE>
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Darien Dash is the founder of Digital Mafia, LLC. Mr. Dash has more than
seven (7) years experience in the recording and technologies industry. Prior to
founding Digital Mafia LLC, Mr. Dash was the Eastern Region Marketing and Sales
Director of Digital Music Express (DMX), a division of International
Cablecasting Technologies (ICT), the publicly held company whose majority shares
are owned and controlled by cable giant TCI. Prior to working at DMX, Mr. Dash
worked as a marketing consultant for a number of Fortune 500 companies,
designing new media marketing and promotion plans for their existing content.
Mr. Dash received a B.A. in Political Science and Leadership from the
University of Southern California. Mr. Dash was Black Student Union President
and an active member of his fraternity Alpha Phi Alpha, Inc.
Malcolmn D. Pryor is chairman and founding partner of Pryor, McClendon,
Counts & Co., Inc. (PMC), an investment banking firm established in 1981, and
the recently formed Pryor & Co., LLC. The firm is headquartered in Philadelphia,
PA with branch offices in six cities and affiliates in two African countries.
Malcolmn Pryor grew up in Spotsylvania, Virginia where he attended
elementary and secondary schools. He graduated from Howard University with a BA
in Marketing and Economics in 1968. After graduation, Mr. Pryor was employed as
a Labor Relations Assistant in the steel industry. He left this position to
attend the Wharton School of the University of Pennsylvania where he earned a
Masters of Business Administration degree in Finance in 1972.
Prior to establishing Pryor, Govan, Counts & Co., Mr. Pryor was an
institutional sales representative for Goldman, Sachs & Company. Based in
Philadelphia from 1972 to 1979, Mr. Pryor was responsible for establishing and
expanding the government and money market securities business. He subsequently
became a member of the Philadelphia Stock Exchange in 1981 where he traded
options on equity securities until 1983. His firm (PMC) has consistently been
ranked among the top minority-owned banking firms in the country. PMC has worked
with many large corporation and emerging companies in the private placement and
public offering of equity and debt securities.
Mr. Pryor is a member of Board of Directors for The Pep Boys (Manny, Moe, &
Jack), CAL Merchant Bank and the Securities Discount Company in Accra, Ghana,
Philadelphia Orchestra, Trustee Board of Lincoln University, Fox Chase Cancer
Center, Philadelphia Chamber of Commerce, National Association of Securities
Professionals, Corporate Council on Africa, Philadelphia Urban League, and
Afro-American Chamber of Commerce. He is active in many professional and civic
organizations and is the recipient of several awards in recognition of his
achievement and leadership.
Mr. Pryor is married to the former Jacqueline Mais and has five children.
He is an avid sports enthusiast, loves to read and coaches little league sports.
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Sandi Thomas is the Chief Operating Officer of MSBET. Sandi Thomas' current
responsibilities include managing the production, marketing, editorial and
advertising sales of MSBET's web site. MSBET is a jointly owned subsidiary of
Microsoft Corporation and BET (Black Entertainment Television) Holdings Inc. Ms.
Thomas assumed responsibility for MSBET after working as business development
manager focusing the on acquisition and development of online-programmming from
entertainment media companies. She has worked extensively with movie/television
studios, independent production companies, cable and broadcast networks. The
relationships spanned the range of co-operative marketing plans, licensing
agreements and establishing joint ventures, as is the case with BET. Previously,
Ms. Thomas was group product manager for Microsoft Works, where she was
responsible for product planning and marketing of the integrated product for
causal computer users on the Windows, MS-DOS and Macintosh platforms.
Prior to joining Microsoft, Ms. Thomas worked at Apple Computer Inc., where
she was the manager of Channel Marketing and Operations with world-wide
responsibilities for systems software marketing.
Prior to working at Apple, Ms. Thomas held several positions at Lotus
Development Corporation in Cambridge, MA including the management of Inside
Sales, Professional Development. Sandi Thomas also spent 3 years in the Far
East. Although based in Hong Kong and Singapore, she was tasked with driving
channel marketing and communications for Korea, Taiwan, Hong Kong, the
Philippines, Singapore, Malaysia, Thailand and Indonesia. Ms. Thomas returned to
the US in 1990 as director of marketing, Strategic Relationships. Sandi Thomas
began her career at IBM, holding a variety of sales and marketing management
positions in San Francisco and Dallas.
Sandi Thomas earned dual BA degrees from Stanford University in Political
Science and African/African-American studies. She is a single, 3rd generation
Californian and currently resides in Redmond, Washington and commutes to
Washington DC where MSBET is headquartered.
Peter A. Levy is an accomplished attorney, strategist, and business
executive. As Vice President and Chief Technology Counsel at Citibank, and as
Senior Attorney for AT&T's Business Multimedia and Electronic Commerce Group,
Peter Levy structured, negotiated and developed many deals affecting electronic
commerce. Mr. Levy was the legal architect for many of the Internet's landmark
agreements, including Disney Com, Microsoft's FrontPage, McGraw Hill's Networked
Publishing and the Hewlett Packard-AT&T Electronic Commerce Alliance.
As Director of AT&T's Advanced Consumer Enterprises, Peter A Levy received
the acclaimed Spirit of Communication Award. His efforts in converging Strategic
Planning and New Business Development led to break-through innovations in
consumer telephony and communications.
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Peter Levy served as legal counsel to the AT&T T Universal Card, launching
a Credit Card that altered the marketplace and became the fastest growing credit
card in U.S. history.
Mr. Levy concentrates his practice on partnering and strategic alliances,
advertising law, privacy, software licensing, non-profit fund development,
co-marketing, distribution techniques, and communications.
Mr. Levy's client list includes AT&T, Hewlett Packard, Easter Seals,
Century 21 Construction, Digital Mafia Entertainment, Internet Tradeline,
Worldwide Entertainment and Sports, Jannsen/Meyers Investment Bankers, Sobel and
Company, Sergeant Marketing, Jayton Publishing, and Special Olympics.
An honors graduate from Harvard University and a member of Phi Beta Kappa,
Peter Levy was the recipient of the John Harvard Scholarship For Academic
Achievement of the Highest Distinction. He graduated with honors from the
Cornell School of Law, and has an Executive MBA from the American Graduate
School of International Management.
The directors of the Company are elected annually by the stockholders and
hold office until the next annual meeting of stockholders, or until their
successors are elected and qualified. The executive officers are elected
annually by the board of directors, serve at the discretion of the board of
directors and hold office until their successors are elected and qualified.
Vacancies on the board of directors may be filled by the remaining directors.
As permitted under Delaware Corporation Law, the Company's Certificate of
Incorporation eliminates the personal liability of the directors to the Company
or any of its stockholders 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 stockholder litigation.
SALE OF PMS AND AUTOMOTIVE STOCK TO PRYD
As discussed above, the Company's Board of Directors and majority
shareholder have approved the sale of the Company's 16% interest in Automotive
to Pride for $1.00, notwithstanding the fact that such shares had a value on the
books of the Company of $4,048,460. The Company is selling such shares to Pride
as a result of negotiations with Digital and because Nasdaq has questioned the
value of such holdings.
The Company had originally agreed to grant an option to PRYD to allow PRYD
to acquire the Automotive shares owned by the Company for the sum of $4,048,460,
which is the value that such shares are carried on the Company's books. The
Company had additionally agreed to grant PRYD a proxy to vote same for a period
of ten years. However, when the Digital transaction was renegotiated, the
Company agreed to renegotiate the Automotive
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transaction, with the result that the Company has now agreed to sell PRYD the
Automotive stock for the sum of $1.00.
In addition, the Company is selling PMS to PRYD for the sum of $1.00 on the
closing of the Digital Acquisition. PMS is winding down its operations and has a
negative net worth. The Company has proposed selling PMS to its parent company,
PRYD for nominal consideration (ie, $1.00) because it is of the opinion that PMS
is of no commercial value. Moreover, the Company has agreed to dispose of same
to PRYD to allow PRYD to sell off the remaining assets and attempt to minimize
any additional losses to lenders of PMS. Management of the Company is of the
belief that disposing of PMS will increase the Company's net tangible assets.
Required Vote
The sale of the PMS and Automotive stock to PRYD would result in the sale
of substantially all of the remaining assets of the Company. Pursuant to Section
271 of the Delaware General Corporation Law, the sale of such assets has been
approved by the Board of Directors and by PRYD, the majority shareholder of the
Company. The Company has not received an appraisal or fairness opinion with
respect to the sale of such assets.
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Company's majority shareholder and Board of Directors have ratified the
selection of Mitchell & Titus, LLP, as the Company's independent accountants for
the fiscal year ended November 30, 1999. Mitchell & Titus, LLP has previously
been retained by Digital and is being retained by the Company for fiscal 1999
because of such relationship and the fact that the Company will be effecting its
operations through Digital during fiscal 1999.
ADDITIONAL INFORMATION
The Company's annual report on Form 10-KSB for the fiscal year ended
November 30, 1998 and Report on Form 10-QSB for the quarter ended February 28,
1999 and the exhibits filed therewith are hereby incorporated by reference. The
Company will furnish a copy of the Form 10-KSB or any exhibit thereto upon
request by a shareholder to Alan Lubinsky, Pride Automotive Group Inc., Pride
House, Watford Metro Centre, Tolpits Lane, Watford Hertfordshire, WD1 8SB
England. By Order of the Board of Directors,
PRIDE AUTOMOTIVE GROUP, INC.
Alan Lubinsky, Secretary
New York, New York
May 25, 1999
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