Talking tech and the stock market.
Darien Dash knows how to keep up with the burgeoning world of the Internet. The 28-year-old entrepreneur recently catapulted his company, DME (Digital Mafia Entertainment) Interactive Holdings Inc. (OTC:BB: DGMF), into the stock exchange arena, making it one of the first publicly traded African American Internet companies.
On June 22, DME announced its transformation from a five-year-old privately held Internet services concern into a publicly traded company on the Nasdaq. Englewood Cliffs, New Jersey-based DME provides network design, e-commerce, maintenance and advertising for clients such as HBO Home Video, the New York Knicks, Lugz and MSBET
Dash started DME in 1994 when he realized that large cable companies were not committed to bringing digital services to urban communities. While working as vice president of sales for Digital Music Xpress, which provided CD-quality music via a regular cable box, Dash was repeatedly turned down when he tried to bring the service to the inner cities. "Cable companies didn't want to underwrite the costs of the hardware because they didn't believe in the profit potential," says Dash.
Shortly thereafter he left the company and formed DME with a mission to expand the hardware and software infrastructure in minority communities. While a laudable goal, getting inner cities wired was not the quickest way to revenues. To pay the bills, DME began consulting with companies on how best to leverage mutimedia and Internet technology. "Our Web development business allowed us to have the cash flow to pay employees and develop relationships with major corporations," says Dash.
DME grossed $250,000 in 1998 and topped $1 million in revenues last year. As a result of his company's Internet savvy and Dash's commitment to the inner cities, he was tapped to be on the board of directors of Heaven, a New York City-based nonprofit organization that goes into schools and trains students in Internet use and development. Being on the Heaven board helped Dash make important business connections, since it includes technology heavyweights such as Ted Leonsis, president of America Online's Interactive Properties Group. However, Dash needed something more than connections and a few accounts to grow the business and continue the mission. He needed cash--or so he thought.
For Dash, going public was more a necessity than an option. "I spoke to angel investors, venture capital firms and institutional investors. Either they wanted too much equity or too much control of the business," says Dash, who funded the company with the proceeds from Roc-A-Blok Records a joint venture deal with Columbia Records. After hearing of Dash's dilemma, Chris Kinsley, president of the Manhattan-based investment firm Mason Hill & Co. Inc., suggested Dash raise capital by taking the company public through a reverse merger.
A reverse merger differs from the traditional initial public offering (IPO) in that the company that is interested in going public acquires the assets of an existing public company. "Reverse mergers are much quicker and more economical than the IPO route, which can cost over $100,000 in accounting costs alone," says Kinsley, whose firm was the lead underwriter for DME's acquisition of Pride Automotive Group, which was a publicly traded automotive leasing company.
At the time of DME's acquisition of Pride, the company was little more than a shell. All of the company's assets had been sold, yet the company was still a publicly traded entity. Rather than being delisted and receiving no more value for the company, Pride gave DME a controlling interest in exchange for a minority stake in the newly public DME Interactive. "For Pride it made more sense to have a small piece of something than 100% of nothing," explains Kinsley. In a cashless transaction, DME acquired a majority of Pride's 14.9 million outstanding shares, at $2.31 to $2.44 per share, and thrust itself onto the public market. According to Thomson Financial Securities Data, a financial information firm in Newark, New Jersey, although the number of reverse mergers decreased from 75 in 1997 to 41 in late 1999, the dollar value of these transactions has increased from $30.4 billion to $115.8 billion.
Once Pride was acquired, DME promptly changed the company name and symbol. DME now holds 66% of the company's shares and approximately 66% of individual voting control. At press time DME's stock was trading around 50 cents, giving the company a $12.5 million valuation for its 23 million outstanding shams. "This will help us to acquire other Internet companies that are either in start-up mode or have existing operations that are looking to grow," says Dash.
DME's second acquisition was Manhattan-based Kathoderay late last year. The three-year-old multimedia consulting firm brought its clients and employees in exchange for stock in DME. "We were complementary in so many ways that it just made sense," says Kathleen McQuaid Packard, former CEO and founder of Kathoderay and now senior vice president of interactive services for DME. In September of last year, DME opened a second office in downtown Manhattan to accommodate a staff that has grown from fewer than 10 employees a year ago to over 30.
Now Dash has his sights on other companies that can help make his vision a reality. "Our mission of expanding the hardware and software infrastructure within minority communities has been a long, hard road so far,' says Dash. With his newfound acquisition power, Dash is in a better position than ever to do good while doing well.
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|Article Type:||Brief Article|
|Date:||Jan 1, 2000|
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