UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission file number:
MASON HILL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 650109088
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
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110 WALL STREET
NEW YORK, NEW YORK 10005
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 425-3000
PRIDE, INC., WATFORD METRO CENTRE - TOPITS LANE, WATFORD
HERTORDSHIRE, ENGLAND, WD1 8SB (Former name, former
address and former fiscal year, if changed since last
report)
Indicate by check 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 (or for such shorter period that registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
As of October 9, 1999, approximately 1,083,179 shares, $.002 par value per
share, of the Company were issued and outstanding.
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
TABLE OF CONTENTS
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PAGE
Consolidated Balance Sheets as of November 30, 1998 and
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August 31, 1999 3
Consolidated Condensed Statements of Operations for the nine months and
three months ended August 31, 1999 and August 31, 1998 4
Consolidated Condensed Statements of Comprehensive Income
(Loss) for the nine months and three months ended
August 31, 1999 and August 31, 1998 5
Consolidated Condensed Statements of Cash Flows for the nine
months ended August 31, 1999 and 1998 6
Notes to Interim Consolidated Condensed Financial Statements (Unaudited) 7 - 13
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PRIDE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
- -ASSETS-
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AUG 31, NOV 30,
1999 1998
ASSETS:
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Cash and cash equivalents .......................................... 2,301 54,953
Accounts Receivable ................................................ 2,033,077 1,571,983
Property, revenue producing vehicles and equipment-net ............. 1,355,683 21,599,835
INVESTMENT ......................................................... 5,241,460 4,048,460
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TOTAL ASSETS ...................................................... 8,632,521 27,275,231
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- -LIABILITIES AND SHAREHOLDERS EQUITY-
LIABILITIES:
Bank Line of credit ............................................... 40,629 6,264,245
Accounts payable .................................................. 157,473 558,314
Accrued liabilities and expenses ............................ 3,988,941 1,738,304
Bank debt ................................................... 3,757,579 685,428
Obligations under hire purchase contracts ......................... 906,666 15,231,850
Loans payable ............................................... 34,610 34,610
Other liabilities ................................................. 22,208 249,842
ACQUISITION DEBT PAYABLE .................................... -- 1,686,000
TOTAL LIABILITIES ................................................. 8,908,106 26,448,593
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MINORITY INTEREST ................................................ 0 370,043
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS EQUITY
Preferred stock, $.001 par value, 5,000,000 shares
authorized none issued or outstanding
Common stock, $0.002 par value, 500,000,000 shares authorized
1,995,357 shares issued and outstanding ....................... 4,353 3,991
Additional paid-in capital ........................................ 12,139,931 8,332,895
Retained Earnings (deficit) ........................................ (13,097,772) (7,903,830)
Deferred financing costs ........................................... 0 (44,734)
FOREIGN CURRENCY TRANSLATION ....................................... 677,903 68,273
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TOTAL SHAREHOLDERS EQUITY ......................................... (275,585) 456,595
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TOTAL LIABILITIES AND SHAREHOLDERS EQUITY ......................... 8,632,521 27,275,231
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PRIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
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FOR THE NINE MONTHS FOR THE THREE MONTHS
ENDED AUG 31 ENDED AUG 31
1999 1998 1999 1998
REVENUE $ $ $ $
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Contract hire income ....................... 554,134 7,344,650 107,034 2,442,991
Sale of vehicles ........................... 15,907,479 2,733,244 907,663 1,128,885
FLEET MANAGEMENT AND OTHER INCOME .......... 621,550 726,254 449,173 171,511
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17,083,163 10,804,148 1,463,870 3,743,387
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Cost of Sales .............................. 19,493,039 4,736,208 1,406,329 1,813,871
Depreciation ............................... 242,278 3,510,813 63,019 1,257,969
General and adminstration expenses ......... 1,185,481 1,321,386 294,189 430,776
Amortization of goodwill ................... 0 473,038 -- 157,679
Interest and other financing costs ......... 1,611,579 1,693,560 49,788 591,829
Loss on Sale of Investment ................. 1,271,893 -- 1,271,893 --
Write down of Investment ................... 7,789,945 -- 7,789,945 --
WRITE OFF OF GOODWILL ON CONSOLIDATION ..... 6,443,232 -- 6,443,232 --
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38,037,447 11,735,005 17,318,395 4,252,124
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LOSS BEFORE MINORITY
INTERESTS .................................. (20,954,284) (930,857) (15,854,525) (508,737)
Minority interests in net loss of
CONSOLIDATED SUBSIDIARIES .................. 370,043 425,371 0 231,465
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LOSS BEFORE PROVISION FOR
INCOME TAXES ............................... (20,584,241) (505,486) (15,854,525) (277,272)
PROVISION FOR INCOME TAXES ................. -- -- -- --
NET LOSS ................................... (20,584,241) (505,486) (15,854,525) (277,272)
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LOSS PER COMMON SHARE(NOTE 5)
Net Loss before minority interest .......... $ (10.17) $ (.47) $ (7.66) $ (.25)
MINORITY INTERESTS IN NET LOSS OF SUBSIDIARY 0.18 0.22 0 0.11
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$ (9.99) $ (.25) $ (7.66) $ (.14)
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING ................................ 2,059,185 1,995,357 2,070,118 1,995,357
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PRIDE,INC AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
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FOR THE NINE MONTHS FOR THE THREE MONTHS
ENDED AUG 31, ENDED AUG 31,
1999 1998 1999 1998
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NET LOSS ................................ (20,584,241) (505,486) (15,854,525) (277,272)
OTHER COMPREHENSIVE INCOME
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS 461,129 385,199 (155,852) (15,539)
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COMPREHENSIVE (LOSS) INCOME ............. (20,123,112) (120,287) (16,010,377) (292,811)
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PRIDE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
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FOR THE NINE MONTHS ENDED
AUG 31,
1999 1998
OPERATING ACTIVITIES
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Net (Loss) ............................................ (20,584,241) (505,486)
Adjustments to reconcile net loss to net cash
(utilized) by operating activities :
Minority interests in net loss of subsidiaries (370,043) (425,371)
Depreciation and amortization ................ 242,278 3,510,813
Amortization of goodwill ..................... -- 473,038
Deferred finance costs ....................... -- 26,830
Net Loss on disposal of fixed assets ......... 1,699,698 202,891
Loss on sale of investment ................... 1,271,893 27,006
Write down of investment ..................... 7,789,945 --
Write off of Goodwill on consolidation ....... 6,443,232
Changes in assets & liabilities
(increase) in accounts receivable ............ (461,094) (308,545)
Decrease in inventories ...................... -- 132,369
Increase in accounts payable, accrued expenses
AND OTHER CREDITORS ................. 1,622,162 54,826
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NET CASH (UTILIZED) PROVIDED FROM OPERATING ACTIVITIES (2,346,170) 3,188,371
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INVESTING ACTIVITIES
Purchase of revenue-producing assets .................. -- (6,393,018)
Proceeds from sale of fixed assets .................... 18,825,876 2,813,533
Proceeds from sale of investments ..................... 475,000 109,555
PROCEEDS FROM SALE OF SHARES .......................... 8,162 --
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NET CASH PROVIDED (UTILIZED) BY INVESTING ACTIVITIES .. 19,309,038 (3,469,930)
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FINANCING ACTIVITIES
(Decrease) increase in Bank lines of credit ........... (6,223,616) 888,481
Increase in bank debt ................................. 4,160,000 --
Principal payments in long term debt .................. (1,087,849) (1,281)
Proceeds from hire purchase contract funding .......... -- 6,492,373
PRINCIPAL REPAYMENTS OF HIRE PURCHASE CONTRACT FUNDING (14,325,184) (7,512,487)
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NET CASH (UTILIZED) BY FINANCING ACTIVITIES ........... (17,476,649) (132,914)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH ................. 461,129 385,199
NET (DECREASE) IN CASH
AND CASH EQUIVALENTS .................................... (52,652) (29,274)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .......... 54,953 84,227
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CASH AND CASH EQUIVALENTS, END OF PERIOD ................ 2,301 54,953
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PRIDE, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements are presented in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-QSB and item 310 under subpart A of
Regulation S-B. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended August 31, 1999 are not necessarily
indicative of the results that may be expected for the year ended November 30,
1999.
The balance sheet at November 30, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-KSB for the
year ended November 30, 1998.
NOTE 2 -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 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 Sportfest, Inc. to Pride, Inc. and 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 9,000,000 (pre-reverse split) shares
represented 89% of the 10,155,350 (pre-reverse split) shares of common stock
outstanding immediately after the acquisition. The 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
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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
recapitilization 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
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. 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 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 Group, 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 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 event of which Loan B of $2,964,245
will be forgiven. ln the event that Loan A is not repaid by July 31,1999, the
full amount outstanding on the loans is repayable on demand. This arrangement
has now being extended to 31 December 1999. 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.
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On February 19, 1999, it was announced that the PAG had executed a Letter of
Intent to acquire 100% of the capital stock 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. 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 and began trading on the NASD bulletin board
on May 17, 1999.
Due to this change in ownership in PAG, completed on June 18,1999, the Company's
interest has been reduced to approximately 6%. Accordingly, consolidation is no
longer be appropriate and the Company's investment in PAG is 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 of $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 a nominal consideration of $1.
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 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 also raised approximately $1,000,000 from a private offering of its common
stock, the majority of the proceeds from the offering having been 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. to reflect the new business direction of PAG.
On May 4,1999, the Company issued 100,000 shares of common stock to Mitchell
Lampert as compensation for services rendered, valued at $8000, as counsel to
the Company.
On June 23,1999, the Company issued 81,000 shares at par to Mason Hill &
Co, Inc. as compensation for its services to be rendered as investment bankers.
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On August 3, 1999, the Company executed a definitive agreement to acquire all
the issued and outstanding capital of Mason Hill+Co, Inc. in exchange for the
issuance of 15,886,618 shares of Pride Common Stock.
On July 30, 1999, the Company executed a definitive agreement to acquire all the
issued and outstanding capital of Mason Hill & Co, Inc. in exchange for the
issuance of 15,886,618 shares of Pride Common Stock.
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 the Company's financial position as of August
31, 1999 and the results of its operations for the three month periods ended
August 31, 1999 and 1998 and the cash flows for the nine month periods ended
August 31, 1999 and 1998.
NOTES 3-FIXED ASSETS
Fixed assets consists of the following:
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August 31, November 30,
1999 1998
(unaudited)
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Building and improvements - 784,599
Revenue producing vehicles 1,390,933 26,954,977
FURNITURE,FIXTURES AND MACHINERY 576,270 576,270
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1,967,203 28,315,846
LESS: ACCUMULATED DEPRECIATION 611,520 6,716,011
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1,355,683 21,599,835
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NOTE 4-LIABILITIES
Included in liabilities as of August 31,1999, are amounts in the aggregate
of $ 378,941 which are not due and payable until after August 31,2000.This
amount comprises equipment notes payable.
NOTE 5-MINORITY INTERESTS IN SUBSIDIARIES
The minority interest in subsidiary has been written down to zero since the
subsidiary had negative equity.
Transactions effecting the minority owned subsidiary are as follows:
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In April 1996, PAG successfully completed an initial public offering of its
common stock, as a result of which the Company's investment was reduced to
56.45%.
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 PAG's
common stock for the aggregate price of $100,000. The effect of the placement
reduced the Company's inverstment in PAG to 53,33%.
During August 1998, the Company sold 70,000 shares of PAG common stock for net
proceeds of $235,870, realizing a book loss of $57,236.
As a result of this transaction, the Company held 1,425,000 shares of PAG common
stock.
Following the further restructure of PAG during the quarter ended 31 May, 1
999, the Company controlled 50.71 % of the voting rights in the issued common
stock of PAG.
NOTE 6-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 eamings (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).
NOTE 7-SUBSEQUENT EVENTS
On October 1, 1999, Pride consummated its acquisition of all of the issued and
outstanding stock of Mason Hill & Co., in exchange for the issuance of
15,886,618 shares of Common Stock of the Company. The transaction was completed
in accordance with the terms of the stock purchase agreement, dated as of July
30, 1999, between the Company, Mason Hill & Co. and the shareholders of Mason
Hill & Co.
<PAGE>
As part of the completed transaction, Pride has (i) changed its name to Mason
Hill Holdings, Inc. ("Mason Hill Holdings"); and (ii) reduced its authorized
capital from 500,000,000 shares of common stock to 20,000,000 shares of common
stock. In addition, the officers of the Company have resigned and have been
replaced by officers of Mason Hill & Co.
In addition to the foregoing, Pride's subsidiaries have been reorganized
such that its AC Investments Inc. and PMS Investments, Inc. subsidiaries have
become wholly-owned subsidiaries of AC Holdings, Inc., a wholly-owned subsidiary
of Pride. Pride will now cause its AC Holdings, Inc. subsidiary to be spun-off
to its shareholders.
Pride has also agreed to cause (i) 743,000 shares of DME Interactive Holdings,
Inc. common stock that it owns to be spun-off to its shareholders, (ii) 350,000
shares DME Interactive Holdings, Inc. common stock that it owns to be delivered
to AC Holdings, Inc. as a contribution to its capital, and (iii) at least
100,000 DME Interactive Holdings, Inc. common stock which it owns to be retained
by Pride.
Lastly, simultaneous with the closing of the agreement, Mason Hill Holdings'
stock underwent a 1 for 2 reverse split.
Pride, under its new name, Mason Hill Holdings, will be engaged, through its new
wholly-owned subsidiary, Mason Hill & Co., in commercial brokerage operations,
particularly retail and institutional securities sales of securities, trading
and market making activities, and investment and merchant banking. In addition,
Mason Hill & Co. intends to engage in other aspects of the securities business,
such as the purchase and sale of United States Government obligations, money
market instruments, mortgage related securities, municipal and tax exempt
securities, options and foreign exchange commodities.
Mason Hill Holdings' common stock is now traded on the Over The Counter Bulletin
Board under the new Symbol "MHLL".
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Statements in this Quarterly Report on Form 10-QSB concerning the
Company's outlook or future economic performance, anticipated profitability,
gross billings, expenses or other financial items, and statements concerning
assumption made or exceptions to any future events, conditions, performance or
other matter are "forward looking statements," as that term is defined under the
Federal Securities Laws. Forward-looking statements are subject to risks,
uncertainties, and other factors which would cause actual results to differ
materially from those stated in such statements. Such risks, uncertainties, and
other factors which would cause actual results to differ materially from those
stated in such statements. Such risks, and uncertainties and factors include,
but are not limited to: (i) changes in external competitive market factors or
trends in the Company's results of operation; (ii) unanticipated working capital
or other cash requirements; and (iii) changes in the Company's business strategy
or an inability to execute its competitive factors that may prevent the Company
from competing successfully in the marketplace.
BACKGROUND
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 through January
13, 1994. On that date, the Company acquired Pride Management Services Plc
("PMS") as a wholly-owned subsidiary, by acquiring 100% of the issued and
outstanding common stock of PMS. For accounting purposes the acquisition was
treated as a recapitalization of Pride Management with PMS as the acquirer in a
reverse acquisition. PMS is a holding company of six subsidiaries, in the United
Kingdom, engaged in the leasing of motor vehicles primarily on contract hire to
local authorities and selected corporate customers throughout the United
Kingdom. Simultaneously with the acquisition, the Company changed its name from
International Sportfest, Inc. to Pride, Inc. The Company's corporate offices are
located in Watford, England and New York, New York.
Pursuant to the acquisition, the Company issued an aggregate of 9,000,000 shares
of its common stock (900,000 shares, post reverse stock split) to the
stockholders of PMS. The 9,000,000 shares (pre-reverse split) represented 89% of
the 10,155,350 shares of common stock (pre-reverse split) outstanding
immediately after the acquisition. The number of shares of common stock to be
issued by the Company 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 was the percentage of stock which would
be owned by the new control groups after the issuance thereof, rather than any
traditional valuation formulas.
In March 1995, 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.
<PAGE>
On November 29, 1996, the Company, through PAG's newly formed majority
subsidiary, AC Automotive Group, Inc., a Delaware corporation, 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 (both registered in the United Kingdom). These two companies were
engaged in the manufacture and sale of specialty automobiles. AC Automotive
Group financed the purchase price of approximately $6,067,000 with the proceeds
of a private offering of PAG'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 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, ownership of AC Automotive
Group, Inc. 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 Group, 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, PMS, completed the sale of
substantially all its leasing assets, leaving approximately 13% of its revenue
producing vehicles after the sale. Consideration of $14,763,680 was paid against
a 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 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 loans is repayable on demand. This arrangement has now being extended to
December 31, 1999. 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.
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
("DME") in exchange for 7,400,000 shares of the Company's common stock. On March
31, 1999 PAG executed a definitive Share Exchange Agreement with DME on revised
terms, by which it agreed to issue 14,800,000 shares of its common stock to
shareholders of DME. 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 a minimum tangible book
value of $2,000,000. Subsequently, PAG's common stock and warrants were listed
on the NASD Bulletin Board and began trading on the NASD bulletin board on May
17, 1999.
<PAGE>
On May 4, 1999, the Company issued 100,000 shares of common stock to Mitchell
Lampert as compensation for services rendered, valued at $8000, as legal counsel
to the Company.
On June 23, 1999, the Company issued 81,000 shares to Mason Hill & Co.,
Inc. as compensation for its services to be rendered as investment bankers.
Due to the change in ownership in PAG, resulting from the reverse merger with
DME completed on June 18, 1999, the Company's interest in PAG was reduced to
approximately 6%. Accordingly, consolidation is no longer appropriate and the
Company's investment in PAG is been reported under the cost method of
accounting.
In addition, PAG announced the sale of its wholly owned subsidiary, PMS to the
Company for a nominal consideration of $1. PMS has a negative net worth and is
winding down its operations. PAG's 16% interest in AC Automotive Group, Inc.
valued at $4,048,460 was also sold to the Company for a nominal consideration 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 also raised approximately $1,000,000 from a private offering of its common
stock. The majority of the proceeds from the offering were loaned to DME. The
above transactions closed on June 18, 1999. It is the intention of the newly
appointed board of directors of DME to change the name of Pride Automotive
Group, Inc. to DME Interactive Holdings, Inc. to reflect PAG's new business
direction.
On July 30, 1999, the Company executed a definitive agreement to acquire all the
issued and outstanding capital of Mason Hill & Co., Inc., in exchange for the
issuance of 15,886,618 shares of Pride Common Stock.
On October 1, 1999, Pride consummated its acquisition of all of the issued and
outstanding stock of Mason Hill & Co., in exchange for the issuance of
15,886,618 shares of Common Stock of the Company. The transaction was completed
in accordance with the terms of the stock purchase agreement, dated as of July
30, 1999, between the Company, Mason Hill & Co. and the shareholders of Mason
Hill & Co.
As part of the completed transaction, Pride has (i) changed its name to Mason
Hill Holdings, Inc. ("Mason Hill Holdings"); and (ii) reduced its authorized
capital from 500,000,000 shares of common stock to 20,000,000 shares of common
stock. In addition, the officers of the Company have resigned and have been
replaced by officers of Mason Hill & Co.
In addition to the foregoing, Pride's subsidiaries have been reorganized
such that its AC Investments Inc. and PMS Investments, Inc. subsidiaries have
become wholly-owned subsidiaries of AC Holdings, Inc., a wholly-owned subsidiary
of Pride. Pride will now cause its AC Holdings, Inc. subsidiary to be spun-off
to its shareholders.
<PAGE>
Pride has also agreed to cause (i) 743,000 shares of DME Interactive Holdings,
Inc. common stock that it owns to be spun-off to its shareholders, (ii) 350,000
shares DME Interactive Holdings, Inc. common stock that it owns to be delivered
to AC Holdings, Inc. as a contribution to its capital, and (iii) at least
100,000 DME Interactive Holdings, Inc. common stock which it owns to be retained
by Pride.
Lastly, simultaneous with the closing of the agreement, Mason Hill Holdings'
stock underwent a 1 for 2 reverse split.
Pride, under its new name, Mason Hill Holdings, will be engaged, through its new
wholly-owned subsidiary, Mason Hill & Co., in commercial brokerage operations,
particularly retail and institutional securities sales of securities, trading
and market making activities, and investment and merchant banking. In addition,
Mason Hill & Co. intends to engage in other aspects of the securities business,
such as the purchase and sale of United States Government obligations, money
market instruments, mortgage related securities, municipal and tax exempt
securities, options and foreign exchange commodities.
Mason Hill Holdings' common stock is now traded on the Over The Counter Bulletin
Board under the new Symbol "MHLL".
RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1999 COMPARED TO THREE MONTHS ENDED AUGUST 31,
1998.
Revenues for the three months ended August 31, 1999 were $1,463,870, a 61%
decrease over prior year's revenues of $3,743,387.
Cost of sales for the three months ended August 31, 1999 were $1,406,329, a
22% decrease over prior year's cost of sales of $1,813,871.
Depreciation for the three months ended August 31, 1999 was $63,019, a
decrease of $1,194,950 over prior year's depreciation of $1,257,969.
General and administrative expenses for the three months ended August 31,
1999 were $294,189, a 32% decrease over prior year's general and administrative
expenses of $430,776.
Interest expense for the Company for the three months ended August 31, 1999
decreased to $49,788 from $591,829 for the three months ended August 31, 1998.
This decrease in interest expense is attributable to the pay down of obligations
under hire purchase contracts and the restructuring of the bank line of credit.
<PAGE>
The Company showed net loss for the three months ended August 31, 1999 of
$15,854,525 as compared to a net loss of $277,272 for the same period ended
August 31, 1998. The increase in the net loss was primarily a result of the
write down of investment of $7,789,945 and the write-off of goodwill on
consolidation of $6,443,232.
Loss per share for the three months ended August 31, 1999 were ($7.66)
compared to ($0.25) for the same period last year using the total shares
presently outstanding of 2,070,118 and 1,995,357, respectively.
The results of operations of the Company for the quarter ended August 31,
1999 described above, were primarily affected by the Company's completion of the
sale of substantially all its leasing assets. As a result, the following
applies:
o No new business was written during this quarter. Fleet management income
has also reduced substantially;
o During the quarter ended August 31, 1999, 85 vehicles were disposed of at
a loss of $416,569;
o During the quarter, the Company disposed of 232,000 DME Interactive
Holdings, Inc shares for a net proceeds of $ 475,000. This sale resulted in a
book loss of $1,271,893. The remaining 1,193,000 shares have been written down
to current market value of approximately $1. This has resulted in a write down
of the investment in DME Interactive Holdings, Inc shares of $7,789,945.
o The Company acquired the shares in PMS from PAG for $1. As a result of
this transaction, Goodwill on acquisition of the shares, amounting to
$6,443,232, has been written off.
NINE MONTHS ENDED AUGUST 31, 1999 COMPARED TO NINE MONTHS ENDED AUGUST 31, 1998.
Revenues for the nine months ended August 31, 1999 were $17,083,163, a 58%
increase over prior year's revenues of $10,804,148. This increase was due to the
sale and disposal of approximately 1,100 vehicles. Specifically, during the nine
month period ended August 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. In
addition to this sale, 129 additional vehicles were disposed of at a loss of
$565,932.
Cost of sales for the nine months ended August 31, 1999 were $19,493,039, a 312%
increase over prior year's cost of sales of $4,736,208. This increase was due to
the disposal of approximately 1,100 vehicles discussed above. This has resulted
in a large reduction of depreciation for the nine months ended August 31, 1999
to $242,278, a $3,268,535 decrease over prior year's depreciation of $3,510,813.
General and administrative expenses for the nine months ended August 31,
1999 were $1,185,481, a 10% increase over prior year's general and
administrative expenses of $1,321,386.
<PAGE>
Interest expense for the Company for the nine months ended August 31, 1999
decreased by approximately $80,000, to $1,611,579 from $1,693,560, for the nine
months ended August 31, 1998. Interest and financing costs were reduced
substantially by the reduction in hire purchase funding relating to the
substantial asset sale and restructure of bank lines of credit. However, this
has been offset by the early settlement penalty of $1,410,000 relating to the
debt outstanding on the leased assets sold on December 11, 1998.
The Company showed net loss for the nine months ended August 31, 1999 of
($20,584,241) as compared to a net loss of ($505,486) for the same period ended
August 31, 1998. The increase in the net loss was primarily a result of the loss
on the sale of investment of $1,271,893, the write down of investment of
$7,789,945 and the write-off of goodwill on consolidation of $6,443,232.
Loss per share for the nine months ended August 31, 1999 were ($10.17) compared
to ($0.47) for the same period last year using the total shares presently
outstanding of 2,059,185 and 1,995,357, respectively.
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
The Company has foreign currency translation losses of ($155,852) and ($15,539)
for the three months ended August 31, 1999 and 1998, respectively, and $461,129
and foreign currency gains of $385,199 for the nine months ended August 31, 1999
and 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a negative net change in cash of $52,652 for the nine months
ended August 31, 1999. The principal sources of cash were from the proceeds of
the sale of vehicles and investments ($19,300,876), and the principal uses of
cash were for the restucturing of debt ($17,476,649). In addition, cash used in
operating activities for the nine-month periods ended August 31, 1999 aggregated
$(2,346,170).
As a result of the Company's financial position as of August 31, 1999, doubts
are raised about the Company's ability to continue as a going concern. In order
to address the financial situation of the Company, in March 1999, the Company
completed the acquisition of all the issued and outstanding capital stock of
Digital Mafia Entertainment, LLC, in exchange for the issuance of 7,400,000
shares in PAG common stock. PAG also, at the same time, sold its ownership of
PMS, 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.
In addition to the foregoing, in July 1999, the Company executed an agreement to
acquire all the issued and outstanding capital of Mason Hill & Co., Inc. in
exchange for the issuance of 15,886,618 shares of Pride Common Stock. The
transaction was completed on October 1, 1999.
As a result of the foregoing, the Company has effectively discontinued its prior
operations, and has now emerged as a parent holding company for Mason Hill &
Co., Inc.
<PAGE>
YEAR 2000
The Company's review of its own operating systems does not indicate any year
2000 problems. However, the Company is highly dependent on third party vendors.
Failures and interruptions, if any, resulting from the inability of certain
computing systems of third party vendors, including the Company's clearing
broker to recognize the year 2000 could have material adverse effect on the
Company's results of operations. There can be no assurance that the year 2000
issue can be resolved by any of such third parties prior to the upcoming change
in the century. Although the Company may incur substantial costs, particularly
costs resulting from increased charges by its third party service providers, as
a result of such third party service providers correcting year 2000 issues, such
costs are not sufficiently certain to estimate at this time.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits filed herewith:
EXHIBIT
Exhibit 27: Financial Data Schedule
(B) Forms 8-K filed during quarter:
The Company did not file any reports on Form 8-K during the
three month period ended August 31, 1999.
<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.
MASON HILL HOLDINGS, INC.
BY: /S/ CHRISTOPHER J. KINSLEY
President
Dated: October 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> nov-30-1998
<PERIOD-END> aug-31-1999
<CASH> 2,301
<SECURITIES> 0
<RECEIVABLES> 2,033,077
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,035,378
<PP&E> 1,967,203
<DEPRECIATION> 611,520
<TOTAL-ASSETS> 8,632,521
<CURRENT-LIABILITIES> 8,908,106
<BONDS> 0
0
0
<COMMON> 4,353
<OTHER-SE> (279,938)
<TOTAL-LIABILITY-AND-EQUITY> 8,632,521
<SALES> 17,083,163
<TOTAL-REVENUES> 17,083,163
<CGS> 19,493,039
<TOTAL-COSTS> 38,037,447
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,611,579
<INCOME-PRETAX> (20,584,241)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,584,241)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,584,241)
<EPS-BASIC> (9.99)
<EPS-DILUTED> (9.99)
</TABLE>
