UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 10, 2005
Relationserve Media, Inc.
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(Exact name of registrant as specified in its charter)
Nevada
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(State or Other Jurisdiction of Incorporation)
333-119632 43-2053462
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(Commission File Number) (IRS Employer Identification Number)
6700 N. Andrews Avenue, Fort Lauderdale, Florida 33309
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(Address of Principal Executive Offices)
(954) 202-6000
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(Registrant's Telephone Number, Including Area Code)
Chubasco Resources Corp.
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
/_/ Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
/_/ Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14-12)
/_/ Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
/_/ Pre-commencement communications pursuant to Rule 13-e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On June 10, 2005, our Board of Directors authorized the merger (the
"Merger") of our wholly-owned subsidiary Reland Acquisition, Inc. ("Reland"), a
Delaware corporation, with Relationserve, Inc., a Delaware corporation
("Relationserve") and entered into an Agreement of Merger and Plan of
Reorganization (the "Merger Agreement"). On June 13, 2005, a Certificate of
Merger was filed with the Secretary of State of the State of Delaware in order
to complete the Merger, and on June 15, 2005 we changed our name to
Relationserve Media, Inc. Following the Merger, Relationserve (Delaware)
continued its existence as the surviving corporation to such Merger and the
business of Relationserve (Delaware) became our primary business.
ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
On June 13, 2005, the Merger described in Item 1.01 was completed.
In connection with the Merger we acquired all of the issued and
outstanding capital stock of Relationserve in exchange for 13,326,000 shares
(the "Merger Stock") of our common stock, par value $0.001 per share (the
"Common Stock"), and certain holders agreed to cancel 6,800,000 outstanding
shares of our Common Stock following the Merger. Under the terms of the Merger
Agreement, each share of Relationserve common stock outstanding prior to the
Merger and each Relationserve warrant was converted into one share of our Common
Stock or warrant to purchase one share of our Common Stock, respectively,
following the Merger. As a result, Relationserve's former stockholders became
our majority stockholders and Relationserve became our wholly-owned subsidiary.
We also converted warrants to purchase 6,550,000 shares of common stock of
Relationserve into warrants to purchase 6,550,000 shares of our Common Stock and
we assumed obligations under a $700,000 promissory note due in May 2007 incurred
by Relationserve in connection with an acquisition. The description of the
Merger is qualified in its entirety by reference to the Merger Agreement, a copy
of which is annexed hereto as Exhibit 2.1 and incorporated herein by reference.
After giving effect to the Merger and the cancellation of 6,800,000
shares of Common Stock, we had outstanding 16,542,500 shares of Common Stock and
had granted warrants to purchase 6,550,000 shares of Common Stock. Following the
Merger certain purchasers acquired 3,203,000 shares of our freely-tradable
Common Stock in privately negotiated transactions with the former holders of
such shares who retained 13,500 shares of Common Stock. Following these
transactions, 3,216,500 shares of Common Stock currently represent our
freely-trading "public float." On June 16, 2005 we notified the National
Association of Securities Dealers, Inc., ("NASD") of our name change and
requested that our Common Stock be approved for trading under a new symbol which
is expected to be effective within 10 days. Until effective, our Common Stock
will continue to be quoted on the automated quotation service maintained by the
NASD (OTC Bulletin Board) under our existing symbol "CHBO.OB".
Relationserve was formed in March 2005 for the purpose of acquiring
Internet marketing assets through acquisitions. During May 2005 Relationserve
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purchased the assets and assumed certain liabilities of Omni Point Marketing,
LLC ("Omni Point"), and acquired Friendsand LLC ("Friendsand") by merger. These
companies were acquired for a combination of cash payments and newly-issued
stock. These businesses are owned through two separate wholly-owned
subsidiaries. Following the Merger, we intend to continue to pursue acquisitions
of similar businesses, including businesses that offer online and offline
marketing programs such as permission based email advertising, email database
append services, online surveys, and Internet compiled direct mail lists.
REGISTRATION RIGHTS. In connection with the formation of
Relationserve, Relationserve agreed to file a "resale" registration statement
(the "Registration Statement") with the Securities and Exchange Commission
("SEC") in certain circumstances. Following the Merger, we assumed all of
Relationserve's obligations under these registration provisions applicable to
our shares issued pursuant to the Merger.
We are obligated to file 30 days following demand, a registration
statement covering 10 million shares of our Common Stock held by certain
founders of Relationserve. We are obligated to use our best efforts to cause the
registration statement to be declared effective within 180 days following
filing. In the event that either of these periods are not met we are obligated
to pay liquidated damages equal to $28,800 per month and issue 80,000 additional
warrants for each month that the Registration Statement has not been declared
effective, or filed. In addition, these shares also have been granted
"piggyback" registration rights in connection with any registration of our stock
in connection with a public offering of our securities for cash.
In addition, Relationserve granted "piggyback" registration rights
in connection with the purchase of Omni Point and Friendsand which requires that
upon the filing of any registration statement covering our Common Stock the
holders of 8,000,000 shares of our Common Stock issued as partial consideration
for such acquisitions may exercise the right to have their shares included in
such registration statement.
The description of registration rights applicable to shares issued
in connection with the Merger with Relationserve and the Omni Point and
Friendsand acquisitions is qualified in its entirety by reference to the Note
Purchase Agreement, Asset Purchase Agreement for Omni Point, and Agreement and
Plan of Merger for Friendsand, copies of which are annexed hereto as Exhibits
2.5, 2.3, and 2.4, respectively, and incorporated herein by reference.
LOCK-UP AGREEMENTS. Certain shares of Common Stock issued pursuant
to the Merger are subject to lock-up provisions in the Asset Purchase Agreement
for Omni Point that provide restrictions on the future sale of Common Stock by
certain holders. These lock-up provisions provide, in general, that Omni Point
and its members, or their transferees (the "Sellers"), are required for a period
of thirty (30) months after the Merger, to first offer for sale their Common
Stock to JH Associates at a price per share equal to fifty (50%) percent of the
closing price on the last trading day immediately preceding the date they
provide notice of their intention to sell.
Subject to satisfaction of the rights of JH Associates, sales are
not permitted prior to the five (5) year anniversary of the Omni Point Asset
Purchase Agreement, except that up to 175,000 shares may be sold, in each of the
twelve full consecutive calendar months immediately following the termination of
JH Associates right of first refusal.
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CHANGE IN BUSINESS RESULTING FROM THE MERGER. Prior to the Merger we
had been an exploration stage company engaged in the business of mineral
exploration incorporated in Nevada as Chubasco Resources, Inc. ("Chubasco" or
the "Corporation"). Since our formation on August 2, 2004, we had been primarily
engaged in exploration activities through our wholly-owned subsidiary Chub
Exploration Ltd., a British Columbia corporation. We believe that prior to our
change in control and in connection with the Merger that our former agent, Mr.
Marvin A. Mitchell, P. Eng. exercised an option that divested us of Chub and our
exploration claims and rights, and terminated all of our exploration activities.
We had not realized material revenues from our exploration activities. Following
the Merger, we intend to carry on Relationserve's business as our sole business.
We have relocated our principal executive offices to those of
Relationserve located at 6700 N. Andrews Ave., Ft. Lauderdale, FL 33309. For
more information regarding Relationserve see the section entitled, "Business
Summary" below.
BUSINESS SUMMARY
OVERVIEW
Relationserve (our current subsidiary) was incorporated on March 29,
2005 in the State of Delaware for the purpose of acquiring Internet marketing
assets through acquisitions. Prior to the Merger, Relationserve closed two
acquisitions during May 2005 and maintains two operating subsidiaries. We plan
to acquire the assets and certain liabilities of additional Internet marketing
or similar companies (the "Targeted Assets") and secure additional financing for
acquisitions and the operation of the Targeted Assets through one or more
additional private placements following the Merger.
On May 16, 2005 Relationserve acquired certain Internet marketing
assets from Omni Point Marketing, LLC, a Florida limited liability company
("Omni Point"), and the Internet social networking community, Friendsand.com
LLC, a Delaware limited liability company from its owners, and will continue to
operate those businesses. The acquisition of Omni Point and Friendsand resulted
in issuance of 8,000,000 shares of Relationserve Common Stock, a two-year
promissory note in the principal amount of $700,000, and an agreement for the
payment of $550,000 of cash ($150,000 of which was paid at closing and $400,000
of which is required to be used to satisfy certain outstanding obligations).
We currently plan to continue our efforts to acquire businesses
engaged in or related to Internet marketing and advertising. We may issue
additional shares of Common Stock, preferred stock, warrants to acquire shares
of our Common Stock, or make cash payments, or a combination thereof, in
connection with such acquisitions.
Prior to the Merger, Relationserve raised $1.125 million from the
sale of equity, and will seek to raise up to an additional $10 - $20 million in
additional equity financing for working capital, operations, and growth within
12 months.
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INTERNET MARKETING BUSINESS
We intend to pursue the acquisition of additional businesses that
are providers of cost-effective search engine marketing services. These targeted
businesses should offer advertisers integrated online and offline marketing
programs including permission based email advertising, email database append
services, online surveys, and Internet compiled direct mail lists or related
services and service the nation's advertising agencies, large consumer marketers
and direct marketers. Our strategy is to undertake a roll-up of several similar
businesses operating in the described markets in order to satisfy our objective
of operating a number of Internet marketing concerns.
The Internet marketing business acquired from Omni Point by
Relationserve during May 2005 is a leading provider of cost-effective search
engine marketing services. The business offers advertisers integrated online and
offline marketing programs including permission based email advertising, email
database append services, online surveys, and Internet compiled direct mail
lists. We service advertising agencies, large consumer marketers and direct
marketers. Through a team of direct sales representatives and innovative
marketing techniques, we pursue a highly aggressive direct sales strategy.
We have acquired various proprietary software technologies which
enable us to effectively deliver email broadcast and email data append products.
We are able to deliver in excess of 100 million pieces of permission-based email
in a day, and our technologies allow us to accurately process and append
electronic data to traditional databases.
PRODUCTS
TARGETED OPT-IN EMAIL
We have over 50 million opt-in subscribers. We believe we possess
more owned names than any known industry competitor. We own and manage hundreds
of targeted lists and a network of permission-based websites, with access to
hundreds more via list brokers relationships. Our data sources include:
Allsportpage.com CellSavvy
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Doyouwanttowin.com Greeting-cards.com
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Freecatalogs4you.com IntelliaantX Technology
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Funforchildren.net Neoplanet.com
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Healthandnutritiontips.com Pagoo.com
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Plantentertaiment.net Paltalk.com
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Reduceyourbills.net allaboutb2accounting.com
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Refmacneandmortgages.com Allabout2blegal.com
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Weddingsweeps.com Allabout2bprinting.com
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Winthekeys.com Allabout2bfinance.com
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Wintotravel.com Allabout2bHR.com
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African-American Consumers Allabout2binsurance.com
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America's Biggest Spenders Allabout2bshipping
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Asian-American Consumers Allabout2bconsulting.com
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Confirmed Smokers opmbooks.com
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Creditworthy Homeowners opmautos.com
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Golfers online opmmovies.com
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Latin American Consumers opmmusic.com
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Nurses Online opminternet.com
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Online Gamblers opmapperal.com
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Pet Owners opmsports.com
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Retired.com opmoffice.com
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US Hispanic Consumers opmtravel.com
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Confirmed online shoppers thetribunetwork.com
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Brian Tracy Online Subscribers allaboutb2b.com
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Business.com opmmall.com
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EMAIL APPEND
Our email append solution allows marketers to augment their existing
customer database with our permission-based email data. When a match is
confirmed the customer's email address is added to the client's file. This
dramatically increases the value of its client's database and allows the client
to save time and money through email marketing. Our append clients also gain the
ability to the market more efficiently through multi-channel campaigns.
ONLINE REGISTRATION (CO-REG)
Our co-registration service is a product that can build an in-house
database of new prospective clients. Through key strategic alliances, we are the
front end registration solution for a variety of products and services. These
include product registration sites, online newsletter registration and
trial-software download sites. Custom co-registrations can also be created for
lead generation requirements.
LEAD GENERATION
We offer lead generation programs to assist a variety of businesses
with customer acquisition. We pre-screen the leads through online surveys to
meet client's specified criteria. We currently generate leads for the following
industries: mortgage; debt reduction/debt consolidation; auto sales;
telecommunications; insurance and investment agents.
DIRECT MAIL AND POSTAL LIST
We have compiled an Internet responders' postal mailing list. This
list is sourced from online registration and individuals who have responded to
online campaigns. These consumers are responders to offers and may have
purchased products and services through online and offline channels. We offer a
wide variety of demographic and psycho-graphic criteria for customers list
selection.
ONLINE MARKET RESEARCH
We believe that we have developed the most complete online consumer
survey at www.omnisurveyusa.com. We offer a variety of targeted leads generated
from our ongoing survey responses. We also offer marketers the opportunity to
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add specific questions to the consumer surveys. We then sell the response
information to the marketer on a cost-per-response basis. If a marketer or a
market research company needs a full survey completed, the survey responders
offer an ideal survey panel and are highly responsive to all types of market
research. We will broadcast its client's survey to a designated responder list
on a cost-per-thousand basis.
MARKETS
Our products and services can be marketed to a vast array of
companies. Our potential clients comprise virtually any business that depends on
consumer advertising. Our sales department currently focuses on adding new
clients to our operating business. The following is an overview of our three
primary channels through which we market our products and services:
DIRECT SALES:
Through our direct marketing sales team and business development
executives, we pursue major consumer marketers and direct marketers through
telesales efforts, direct marketing, presences at various trade shows, and
on-site client presentations.
ADVERTISING AGENCIES:
We offer our products and services at a discounted rate to
traditional advertising agencies and online marketing agencies. These valuable
resellers offer our products and services to their clients as a stand-alone
marketing effort or as part of a large multi-channel marketing campaign.
LIST BROKERS:
We offer our products and services at a discounted rate to a network
of list brokers. These organizations, which have years of experience marketing
postal lists, can expand their product line and revenue potential by offering
our email marketing lists. We reach many direct marketers through affiliate list
brokers.
COMPETITION
We compete with a variety of different online marketers and data
processing services.
We also compete with those who sell performance-based advertising or
search marketing services to merchants, aggregate or optimize advertising
inventory for distribution through search engines, product shopping engines,
directories, Web sites or other outlets, or provide destination Web sites or
other distribution outlets that reach end users or customers of the merchants.
Our industry (defined by the sale of online advertising and
marketing services) is highly competitive. Although overall Internet advertising
expenditures have increased in the last few years, the advertising industry has
suffered in certain respects as many online businesses have ceased operations
and many traditional businesses have scaled back their advertising budgets. We
believe that today's typical Internet advertiser is becoming more sophisticated
regarding the different forms of Internet advertising, how to purchase Internet
advertising in a cost-effective manner, and return on investment measurement.
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The competition for this pool of advertising dollars has also put downward
pressure on pricing points, and online advertisers have demanded more effective
means of reaching customers. We believe that these factors have contributed to
the growth of performance-based advertising relative to certain other forms of
online advertising and marketing, and as a result this sector has attracted many
competitors and will continue to attract competitors.
Due to the long-term growth trends in online advertising,
competitors, real and potential, range in size and focus. Our competitors may
include such diverse participants as small referral companies, established
advertising agencies, inventory resellers, search engines, and destination Web
sites. Furthermore, we may also compete with traditional offline media such as
television, radio and print and direct marketing companies.
We are also affected by the competition among destination Web sites
that reach users or customers of search services. Several large media and search
engine companies dominate this end of the transaction channel, although
thousands of other smaller outlets are available to customers as well. User
traffic among the media and search engine companies is concentrated among such
larger participants as AOL, Google, Microsoft through MSN Search, and Yahoo!
through FAST, Inktomi, Overture and Yahoo! Search. The online search industry
continues to experience consolidation of major Web sites and search engines,
which has the effect of increasing the negotiating power of these parties in
relation to smaller providers.
MANAGEMENT OF RELATIONSERVE
Danielle Karp, currently our President, Secretary, and sole
director, earned a Bachelors of Arts Degree in accounting from Washington and
Jefferson University and a MAIS with a Masters of Business Administration (MBA)
concentration from The George Mason University. She obtained her CPA license in
Virginia and is no longer practicing. She previously was employed by KPMG Peat
Marwick, Center for International Business Travel (CBIT), Naviant, Inc. and Omni
Point.
Scott Hirsch presently serves as Chief Operating Officer of
Relationserve. Previously he founded Naviant, Inc. which was sold to Equifax,
Inc. in August 2002. Mr. Hirsch was also Chief Operating Officer of Naviant,
Inc. Before founding Naviant, Mr. Hirsch was the Chief Marketing Officer at
Seisint, Inc., a leading data information services. Mr. Hirsch was also formerly
the Chairman and Chief Executive Officer of the Internet Video Group, an online
entertainment business. Mr. Hirsch also served as the Vice President and Chief
Operating Officer of Lens Express. Mr. Hirsch is a nationally recognized expert
in Internet marketing and direct marketing and has been featured in many
national publications.
INDEMNIFICATION
Our Articles of Incorporation provide that the liability of
directors and officers of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Nevada Revised Statutes ("NRS"). If the NRS is
amended to further eliminate or limit or authorize corporate action to further
eliminate or limit the liability of directors or officers, the liability of our
directors and officers shall be eliminated or limited to the fullest extent
permitted by the NRS, as so amended from time to time.
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In addition to any other rights of indemnification permitted by the
laws of the State of Nevada or as may be provided for by us in our bylaws or by
agreement, the expenses of officers and directors incurred in defending any
threatened, pending, or completed action, suit or proceeding (including without
limitation, an action, suit or proceeding by or in the right of ours), whether
civil, criminal, administrative or investigative, involving alleged acts or
omissions of such officer or director in his or her capacity as an officer or
director of ours or member, manager, or managing member of a predecessor limited
liability company or affiliate of such limited liability company or while
serving in any capacity at our request as a director, officer, employee, agent,
member, manager, managing member, partner, or fiduciary of, or in any other
capacity for, another corporation or any partnership, joint venture, trust, or
other enterprise, shall be paid by us or through insurance purchased and
maintained by us or through other financial arrangements made by us, as they are
incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the officer or
director to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by us.
To the extent that an officer or director is successful on the merits in defense
of any such action, suit or proceeding, or in the defense of any claim, issue or
matter therein, we shall indemnify him or her against expenses, including
attorneys' fees, actually and reasonably incurred by him or her in connection
with the defense. Notwithstanding anything to the contrary contained herein or
in the bylaws, no director or officer may be indemnified for expenses incurred
in defending any threatened, pending, or completed action, suit or proceeding
(including without limitation, an action, suit or proceeding by or in the right
of ours), whether civil, criminal, administrative or investigative, that such
director or officer incurred in his or her capacity as a stockholder, including,
but not limited to, in connection with such person being deemed an Unsuitable
Person.
Any repeal or modification of these provisions approved by our
stockholders shall be prospective only, and shall not adversely affect any
limitation on the liability of a director or officer of ours existing as of the
time of such repeal or modification.
We also are permitted to and have applied for insurance on behalf of
any director, officer, employee or other agent for liability arising out of his
actions, whether or not the NRS would permit indemnification.
In addition, pursuant to the Merger Agreement, if Relationserve is
entitled to indemnification, for any reason, including but not limited to a
breach of a representation or warranty, we may become obligated to issue to
Relationserve's stockholders additional shares of our Common Stock in an
aggregate amount equal to the amount of damages divided by the fair market value
of our Common Stock.
EMPLOYEES
We currently have 37 full time employees, and currently anticipate
hiring additional employees in sales, marketing, and technology.
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OUR INDUSTRY OVERVIEW
Management believes Internet searching and online advertising are
sectors poised for tremendous growth and the growth in Internet searching has
led many advertisers to dramatically increase their level of advertising
investment in search-based promotional methods.
This growth is fueled by the increased acceptance of the Internet as
a commerce/marketing medium, the rapid expansion of early stage international
markets, the growth of overall Internet usage and broadband Internet access, and
by the advertiser's realization of the cost effectiveness of Internet search
advertising. This growth will create significant future opportunities to
generate profits from search engine related marketing.
KEY GROWTH DRIVERS
o INCREASED E-COMMERCE - The growth in Internet search revenues has
been proportional to growth in e-commerce. As consumers migrate to
Internet based purchasing, advertisers seek to promote their
products or services using Internet methods, the most effective of
which has proven to be Internet searching Search.
o GROWTH OF THE INTERNET AND BROADBAND ACCESS - The organic growth of
the Internet has created a massive domestic audience rivaling the
use of television. This large audience provides an almost
unparalleled source of potential customers for merchants and a
massive source of advertising and marketing dollars for those firms
interested in search engine marketing. This audience is not only
growing in size but increasing its time spent on the Internet.
o Increased Acceptance of Internet Searching as a Powerful Marketing
Channel - Although once considered only a method for Internet users
to locate information, its potential as a marketing tool has been
quickly realized. The massive growth of those companies offering
search engine marketing services is demonstrative of the realization
among advertisers of the power of Search as a business acquisition
medium.
o INTERNATIONAL MARKET EXPANSION - Most international Internet markets
are still in the very early stages of development. As the
international market begins to approach the domestic market in terms
of penetration, massive monetization opportunities are expected to
be created, including strong e-commerce and search engine marketing
opportunities.
o COST EFFECTIVENESS/HIGH RETURN ON INVESTMENT - Due to its relatively
low cost and high conversion rates, Internet searching based
marketing offers advertisers a very high return on investment
compared to traditional marketing vehicles.
OPPORTUNITY
Despite the massive growth in Search, several problems in the
industry have not been addressed adequately by the majority of search engine
marketing companies including:
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o Placement competition due to the concentration of Search traffic is
leading to quickly rising costs of effective paid listing keywords,
limiting smaller businesses access to paid listings;
o Difficulty maintaining high rankings in unpaid listings, which
represent a large portion of search traffic;
o Low return on investment due to excessive CPC charges from
uninterested searchers; and
o Poor conversion/low close rates due to low quality traffic.
FUTURE MARKET TRENDS
Management believes that we should be uniquely positioned to benefit
from four major trends that will shape the future of the search engine world.
The recent success of Overture and Google has proven that search listings can be
translated into significant revenue streams generating high levels of
advertising satisfaction and return on investment for customers.
Our search engine marketing service will benefit significantly from
any future increases in volume and prices of search advertising, particularly in
the small business segment.
INTERNATIONAL MARKET DEVELOPMENT
International Internet traffic is already significantly larger in
volume than domestic Internet traffic, with approximately 400 million Internet
users abroad compared to close to 160 million in the United States. In addition,
currently there are approximately 305 million searches occurring outside of the
United States daily, growing at an annual rate of 20%. At this pace, the
international market for search marketing services may soon eclipse the size of
the domestic opportunity. This trend is amplified by the major portals and
Internet companies adopting international models offering increased search and
Internet services abroad.
Although this market does not currently have the monetization
potential of the domestic opportunity, the growth rate of monetization in the
international markets is much faster than in the United States. Currently the
largest international Internet markets are Japan, Germany, Korea, United
Kingdom, France, Italy, and Spain. However, it is likely that within the next
decade China, India and Latin America will provide opportunities that shall
exceed the current largest international markets in size.
Our services are easily expandable to an international customer base
and would benefit from increased use of search engines and e-commerce at a
multinational level.
BUSINESS STRATEGY
Our business strategy focuses on the addition of new clients by the
company's sales force. As new clients are added, they either pre-fund accounts
with the Company for a pre-determined amount of traffic or pay a flat fee to
have content added to their site or a new site build for them to own. In
addition, there will be a focus on continuing to develop out more content which
will drive future ad revenues.
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INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We seek to protect our intellectual property through existing laws
and regulations and by contractual restrictions. It relies upon trademark,
copyright law, trade secret protection and confidentiality or license agreements
with our employees, customers, partners and others to help protect intellectual
property. We do not have any patents or patent-pending technology.
GOVERNMENT REGULATION
We are subject to governmental regulation much like many other
companies. There are still relatively few laws or regulations specifically
addressed to the Internet. As a result, the manner in which existing laws and
regulations should be applied to the Internet in general, and how they relate to
our businesses in particular, is unclear in many cases. Such uncertainty arises
under existing laws regulating matters, including user privacy, defamation,
pricing, advertising, taxation, gambling, sweepstakes, promotions, content
regulation, quality of products and services, and intellectual property
ownership and infringement.
To resolve some of the current legal uncertainty, we expect new laws
and regulations to be adopted that will be directly applicable to our
activities. Any existing or new legislation applicable to us could expose us to
substantial liability, including significant expenses necessary to comply with
such laws and regulations, and could dampen the growth in use of the Internet in
general.
Several new federal laws that could have an impact on our business
have already been adopted. The Digital Millennium Copyright Act is intended to
reduce the liability of online service providers for listing or linking to third
party Web sites that include materials that infringe copyrights or rights of
others. The Children's Online Protection Act and the Children's Online Privacy
Protection Act are intended to restrict the distribution of certain materials
deemed harmful to children and impose additional restrictions on the ability of
online services to collect user information from minors. In addition, the
Protection of Children from Sexual Predators Act requires online services
providers to report evidence of violations of federal child pornography laws
under certain circumstances.
The foregoing legislation may impose significant additional costs on
our business and subject us to additional liabilities, if we were not to comply
fully with their terms, whether intentionally or not. If we did not meet the
safe harbor requirements of the Digital Millennium Copyright Act, we could be
exposed to copyright actions, which could be costly and time-consuming. The
Children's Online Protection Act and the Children's Online Privacy Protection
Act impose fines and penalties to persons and operators that are not fully
compliant with their requirements. The federal government could impose penalties
on those parties that do not meet the full compliance practices of the
Protection of Children from Sexual Predators Act. We intend to fully comply with
the laws and regulations that govern its industry, and intend to employ internal
resources and incur outside professional fees to establish, review and maintain
policies and procedures to reduce the risk of noncompliance.
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We post our privacy policy and practices concerning the use and
disclosure of any user data on its Web sites. Any failure to comply with posted
privacy policies, Federal Trade Commission requirements or other domestic or
international privacy-related laws and regulations could result in proceedings
by governmental or regulatory bodies that could potentially harm our business,
results of operations and financial condition. In this regard, there are a large
number of legislative proposals before the U.S. Congress and various state
legislative bodies regarding privacy issues related to our businesses. It is not
possible to predict whether or when such legislation may be adopted, and certain
proposals, if adopted, could harm our business through a decrease in user
registrations and revenue. These decreases could be caused by, among other
possible provisions, the required use of disclaimers or other requirements
before users can utilize our services.
COMPANY HISTORY - TERMINATED ACQUISITION WITH CENUCO, INC.
Omni Point was formed as a Florida limited liability company in
February 2002.
During 2004 Omni Point agreed to the acquisition of Omni Point by
Cenuco, Inc. (AMEX:ICU) under an Asset Purchase Agreement dated October 25, 2004
for $22,500,000 payable $5,400,000 cash, and $17,100,000 in shares of Cenuco
common stock. Following public announcement of the transaction, on December 20,
2004, Cenuco announced that it had terminated the agreement because its board of
directors and management had come to a decision that pursuing the transaction
was no longer in the best interests of Cenuco and its stockholders. In
connection with the termination of the transaction, Omni Point agreed to
terminate the acquisition agreement and to pay a fixed sum to Cenuco.
CERTAIN TRANSACTIONS
Our bridge loan holders received 6,000,000 five-year warrants in
connection with their organizational and formation efforts for Relationserve and
for providing the bridge loan advances, advisory services, and negotiating the
Company's initial acquisitions of Omni Point and Friendsand. The exercise price
of the warrants issued to bridge loan holders is $0.25 per share.
Prior to its acquisition by Relationserve, Friendsand reported no
significant revenue, substantially all of which had been reported as income of
Omni Point. Following the date of the Merger, Friendsand and Omni Point may
continue to report consolidated revenues and other transactions.
Scott Hirsch, presently the Chief Operating Officer of our
subsidiary Relationserve, was an indirect majority owner and President of Omni
Point, the seller of the Omni Point assets to Relationserve. Stacy McCall, the
wife of Scott Hirsch, received a $700,000 promissory note in connection with the
sale of Friendsand, and Danielle Karp, our President, Secretary, and sole
director, is sister to Scott Hirsch.
CERTAIN LEGAL PROCEEDINGS
During December 2004 federal search warrants were served on Omni
Point and certain of its executives and owners, including Scott Hirsch. Our
management believes that the search warrants relate to allegations that Omni
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Point had used certain software owned by L-Soft Software beginning in January
2004. However, Omni Point (and its owners) are not presently aware of the basis
upon which the federal search warrant was issued and the allegations may be
based upon other facts or claims. Omni Point believes it has turned over to the
Federal Bureau of Investigation the servers subject to the search warrants. It
is not possible to assess if or to what extent these matters would impact us or
the business or operations of Relationserve. Management believes that these
events were the primary reason for termination by Cenuco of the Cenuco
acquisition.
RISK FACTORS
RISKS RELATING TO THE COMPANY
OUR LIMITED OPERATING HISTORY MAKES EVALUATION OF OUR BUSINESS DIFFICULT.
Relationserve was incorporated in March 2005 and has limited
historical financial data upon which to base planned operating expenses or
forecast accurately future operating results. Further, our limited operating
history will make it difficult for investors and securities analysts to evaluate
our business and prospects. An investor must consider our prospects in light of
the risks, expenses and difficulties we may face as an early stage company with
a limited operating history. We are completely reliant upon the former
management of Omni Point and personnel expected to be hired from additional
Targeted Assets which have not yet been identified, who have joined or will join
our company as management.
WE MAY BE UNABLE TO EFFECTIVELY INTEGRATE OMNI POINT OR ADDITIONAL TARGETED
ASSETS OR INCORRECTLY ASCERTAIN THE MERITS OR RISKS OF OUR OR SUCH TARGETED
ASSETS OPERATIONS.
We will be affected by numerous risks inherent in our operations and
the operations of additional Targeted Assets. Although our management will
endeavor to evaluate the risks inherent in our business, other targeted
businesses, and the industry generally, we cannot assure that we will properly
ascertain or assess all of the significant risk factors.
WE MAY REQUIRE ADDITIONAL FUNDING TO SUPPORT OUR OPERATIONS AND CAPITAL
EXPENDITURES, WHICH MAY NOT BE AVAILABLE AND WHICH LACK OF AVAILABILITY COULD
ADVERSELY AFFECT OUR BUSINESS.
We may need additional funds to support our growth, fund future
acquisitions, to pursue business opportunities, to react to unforeseen
difficulties or to respond to competitive pressures. There can be no assurance
that any financing arrangements will be available in amounts or on terms
acceptable, if at all. Furthermore, the sale of additional equity or convertible
debt securities may result in further dilution to existing stockholders. If we
raise additional funds through the issuance of debt, we will be required to
service that debt and we are likely to become subject to restrictive covenants
and other restrictions contained in the instruments governing that debt, which
may limit our operational flexibility. If adequate additional funds are not
available, we may be required to delay, reduce the scope of, or eliminate
material parts of the implementation of our business strategy, including the
possibility of additional acquisitions or internally developed businesses.
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WE MAY MAKE ADDITIONAL ACQUISITIONS, WHICH COULD DIVERT MANAGEMENT'S ATTENTION,
CAUSE OWNERSHIP DILUTION, AND BE DIFFICULT TO INTEGRATE.
Our business strategy depends in part upon our ability to identify,
structure, and integrate acquisitions, in addition to Omni Point and Friendsand,
that are complementary with our business model. Acquisitions, strategic
relationships and investments in the technology and Internet sectors involve a
high degree of risk. We may also be unable to find a sufficient number of
attractive opportunities, if any, to meet our objectives. Although many
technology and Internet companies have grown in terms of revenue, few companies
are profitable or have competitive market share. Our potential acquisitions,
relationships, investment targets and partners may have histories of net losses
and may expect net losses for the foreseeable future.
Acquisition transactions are accompanied by a number of risks that
could harm us and our business, operating results and financial condition:
o We could experience a substantial strain on our resources, including
time and money, and may not be successful;
o Our management's attention may be diverted from our ongoing business
concerns including the management of Omni Point and Friendsand;
o While integrating new companies, we may lose key executives or other
employees of these companies;
o We could experience customer dissatisfaction or performance problems
with an acquired company or technology;
o We may become subject to unknown or underestimated liabilities of an
acquired entity or incur unexpected expenses or losses from such
acquisitions; and
o We may incur possible impairment charges related to goodwill or
other intangible assets or other unanticipated events or
circumstances, any of which could harm our business.
Consequently, we might not be successful in integrating any acquired
businesses, products or technologies, and might not achieve anticipated revenue
and cost benefits.
WE MAY BE UNABLE TO EFFECT AN ADDITIONAL ACQUISITION OR INCORRECTLY ASCERTAIN
THE MERITS OR RISKS OF AN ADDITIONAL ACQUIRED COMPANY.
To the extent we complete an acquisition in addition to the Omni
Point and Friendsand acquisitions, we may be affected by numerous risks inherent
in its business operations. Although our management will endeavor to evaluate
the risks inherent in a business or industry, we cannot assure an investor that
we will properly ascertain or assess all of the significant risk factors.
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WE MAY BE UNABLE TO ATTRACT AND RETAIN KEY EMPLOYEES.
Failure to attract and retain necessary technical personnel and
skilled management could adversely affect our business. Our success depends to a
significant degree upon our ability to attract, retain and motivate highly
skilled and qualified personnel. If we fail to attract, train and retain
sufficient numbers of these highly qualified people, our prospects, business,
financial condition and results of operations will be materially and adversely
affected. Our success also depends on the skills, experience and performance of
key members of our management team, currently consisting primarily of members of
management and employees formerly associated with Omni Point. The loss of any
key employee, could have an adverse effect on our prospects, business, financial
condition, and results of operations.
The lack of experience of our management team puts us at a
competitive disadvantage. Our management team lacks public company experience,
which could impair our ability to comply with legal and regulatory requirements
such as those imposed by Sarbanes-Oxley Act of 2002. The individuals who now
constitute management have never had responsibility for managing a publicly
traded company. Such responsibilities include complying with federal securities
laws and making required disclosures on a timely basis. There can be no
assurance that our management will be able to implement and affect programs and
policies in an effective and timely manner that adequately respond to such
increased legal, regulatory compliance, and reporting requirements. Our failure
to do so could lead to penalties and further result in the deterioration of our
business.
WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR GROWTH.
Our strategy envisions continuing to grow our business. If we fail
to effectively manage growth, our financial results could be adversely affected.
Additional growth may place a strain on management systems and resources. We
must continue to refine and expand our business development capabilities, our
systems and processes and our access to financing sources. As we grow, we must
continue to hire, train, supervise, and manage new employees. We may not be able
to:
o meet our capital needs;
o expand our systems effectively or efficiently or in a timely manner;
o allocate our human resources optimally;
o identify and hire qualified employees or retain valued employees; or
o incorporate effectively the components of additional business that
we may acquire in our effort to achieve growth.
If we are unable to manage our growth or our operations, our
financial results could be adversely affected.
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THE LOSS OF OUR SENIOR MANAGEMENT COULD HARM OUR CURRENT AND FUTURE OPERATIONS
AND PROSPECTS.
We are heavily dependent on the continued services of members of our
senior management team and will be heavily dependent upon the management teams
of acquired businesses. We do not have employment agreements with any members of
senior management. Each of those individuals without employment agreements may
voluntarily terminate employment with us at any time upon short notice.
IF WE ARE UNABLE TO OBTAIN ADEQUATE INSURANCE, OUR FINANCIAL CONDITION COULD BE
ADVERSELY AFFECTED IN THE EVENT OF UNINSURED OR INADEQUATELY INSURED LOSS OR
DAMAGE. OUR ABILITY TO EFFECTIVELY RECRUIT AND RETAIN QUALIFIED OFFICERS AND
DIRECTORS COULD ALSO BE ADVERSELY AFFECTED IF WE EXPERIENCE DIFFICULTY IN
OBTAINING ADEQUATE DIRECTORS' AND OFFICERS' LIABILITY INSURANCE.
We may not be able to obtain insurance policies on terms affordable
to us that would adequately insure our business and property against damage,
loss, or claims by third parties. To the extent our business or property suffers
any damages, losses, or claims by third parties which are not covered or
adequately covered by insurance, our financial condition may be materially
adversely affected.
We may be unable to secure or maintain insurance as a public company
to cover liability claims made against our officers and directors. If we are
unable to adequately insure our officers and directors, we may not be able to
retain or recruit qualified officers and directors.
CERTAIN LEGAL PROCEEDINGS.
As described above under "Legal Proceedings" there is presently
uncertainty regarding the impact that a search warrant served on Omni Point and
certain of its affiliates in December 2004 could have, or the alleged legal
matters underlying such warrant could have, on us and the continued availability
of certain key management members, including Scott Hirsch. No assurance can be
given as to the outcome of such matters, nor the impact that such matters may
have, on us, Scott Hirsch, or other persons associated with Omni Point.
IF WE DO NOT MAINTAIN AND GROW A CRITICAL MASS OF MERCHANT ADVERTISERS, OUR
OPERATING RESULTS COULD BE ADVERSELY AFFECTED.
Our success depends, in part, on our and any additional acquired
business's maintenance and growth of a critical mass of merchant advertisers and
a continued interest in our and any additional acquired business's
performance-based advertising and search marketing services. If, through our or
any additional acquired business, we are unable to achieve a growing base of
merchant advertisers, we may not successfully develop or market technologies,
products or services that are competitive or accepted by merchant advertisers.
Any decline in the number of merchant advertisers could adversely affect our
operating results generally.
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WE WILL BE DEPENDENT UPON SEVERAL OF THE MAJOR SEARCH ENGINES TO CONTINUE TO
PROVIDE US TRAFFIC THAT MERCHANT ADVERTISERS DEEM TO BE OF VALUE, AND IF THEY DO
NOT, IT COULD HAVE A MATERIAL ADVERSE EFFECT ON THE VALUE OF OUR SERVICES.
We will be dependent upon several of the major Internet search
engines namely Google, Yahoo!, MSN and AOL to provide traffic that merchant
advertisers deem to be of value. We will monitor the traffic delivered to our
merchant advertisers in an attempt to optimize the quality of traffic we
deliver. We will review factors such as non-human processes, including robots,
spiders, scripts (or other software), mechanical automation of clicking and
other sources and causes of low-quality traffic, including, but not limited to,
other non-human clicking agents. Even with such monitoring in place, there is a
risk that a certain amount of low-quality traffic will be provided to our
merchant advertisers, which, if not contained, may be detrimental to those
relationships. Low-quality traffic (or traffic that is deemed to be less
valuable by our merchant advertisers) may prevent us from growing our base of
merchant advertisers and cause us to lose relationships with existing merchant
advertisers or any additional acquired business.
WE MAY BE SUBJECT TO LITIGATION FOR INFRINGING THE INTELLECTUAL PROPERTY RIGHTS
OF OTHERS.
Our success will depend, in part, on our ability to protect our
intellectual property and to operate without infringing on the intellectual
property rights of others. There can be no guarantee that any of our
intellectual property will be adequately safeguarded, or that it will not be
challenged by third parties. We may be subject to patent infringement claims or
other intellectual property infringement claims that would be costly to defend
and could limit our ability to use certain critical technologies.
During December 2004, Omni Point was informed that certain email
software it may have employed infringed certain patents held by L-Soft Software.
In December 2004, the Federal Bureau of Investigation secured and served a
search warrant upon Omni Point, Scott Hirsch, and certain other Omni Point
employees. Should such events lead to a criminal prosecution or civil action
these events could have a significant negative impact on our business and
operations.
Any additional patent litigation could negatively impact our
business by diverting resources and management attention from other aspects of
the business and adding uncertainty as to the ownership of technology and
services that we view as proprietary and essential to our business. In addition,
a successful claim of patent infringement against us and our failure or
inability to license the infringed or similar technology on reasonable terms, or
at all, could have a material adverse effect on our business.
WE MAY BE INVOLVED IN LAWSUITS TO PROTECT OR ENFORCE ANY PATENTS THAT WE
CURRENTLY HOLD OR MAY BE GRANTED, WHICH COULD BE EXPENSIVE AND TIME CONSUMING.
We may initiate patent litigation against third parties to protect
or enforce our patent rights, although we presently do not own any patents, and
we may be similarly sued by others. We may also become subject to interference
proceedings conducted in the patent and trademark offices of various countries
to determine the priority of inventions. The defense and prosecution, if
necessary, of intellectual property suits, interference proceedings and related
legal and administrative proceedings is costly and may divert our technical and
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management personnel from their normal responsibilities. We may not prevail in
any of these suits. An adverse determination of any litigation or defense
proceedings could put our patents at risk of being invalidated or interpreted
narrowly and could put our patent applications at risk of not being issued.
Furthermore, because of the substantial amount of discovery required
in connection with intellectual property litigation, there is a risk that some
of our confidential information could be compromised by disclosure during this
type of litigation. In addition, during the course of this kind of litigation,
there could be public announcements of the results of hearings, motions or other
interim proceedings or developments in the litigation. If securities analysts or
investors perceive these results to be negative, they could have an adverse
effect on the trading price of our Common Stock.
RISKS RELATING TO OUR INDUSTRY
IF WE ARE UNABLE TO COMPETE IN THE HIGHLY COMPETITIVE PERFORMANCE-BASED
ADVERTISING AND SEARCH MARKETING INDUSTRIES, WE MAY EXPERIENCE REDUCED DEMAND
FOR OUR PRODUCTS AND SERVICES.
We expect to operate in a highly competitive environment. We
principally will compete with other companies in the following main areas:
o sales to merchant advertisers of performance-based advertising; and
o services that allow merchants to manage their advertising campaigns
across multiple networks and track the success of these campaigns.
Although we expect to pursue a strategy that allows us to
potentially partner with all relevant companies in the industry, there are
certain companies in the industry that may not wish to partner with us.
We expect competition to intensify in the future because current and
new competitors can enter our market with little difficulty. The barriers to
entering such markets are relatively low. In fact, many current Internet and
media companies presently have the technical capabilities and advertiser bases
to enter the search marketing services industry. Further, if the consolidation
trend continues among the larger media and search engine companies with greater
brand recognition, the share of the market remaining for us and other smaller
search marketing services providers could decrease, even though the number of
smaller providers could continue to increase. These factors could adversely
affect our competitive position in the search marketing services industry.
Some of our competitors, as well as potential entrants into our
market, may be better positioned to succeed in this market. They may have:
o longer operating histories;
o more management experience;
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o an employee base with more extensive experience;
o a better ability to service customers in multiple cities in the
United States and internationally by virtue of the location of sales
offices;
o larger customer bases;
o greater brand recognition; and
o significantly greater financial, marketing and other resources.
In addition, many current and potential competitors can devote
substantially greater resources than we can to promotion, web site development
and systems development. Furthermore, there are numerous larger, more
well-established and well-financed entities with which we will compete and that
could acquire or create competing companies and/or invest in or form joint
ventures in categories or countries of interest to us, all of which could
adversely impact our business. Any of these trends could increase competition
and reduce the demand for any of our services.
IF WE ARE NOT ABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE CHARACTERISTIC
OF OUR INDUSTRY, OUR PRODUCTS AND SERVICES MAY NOT BE COMPETITIVE.
The market for our services is characterized by rapid change in
business models and technological infrastructure, and we will need to constantly
adapt to changing markets and technologies to provide competitive services. We
believe that our future success will depend, in part, upon our ability to
develop our services for both our target market and for applications in new
markets. We may not, however, be able to successfully do so, and our competitors
may develop innovations that render our products and services obsolete or
uncompetitive.
OUR TECHNICAL SYSTEMS WILL BE VULNERABLE TO INTERRUPTION AND DAMAGE THAT MAY BE
COSTLY AND TIME-CONSUMING TO RESOLVE AND MAY HARM OUR BUSINESS AND REPUTATION.
A natural or man-made disaster or other cause could interrupt our
services for an indeterminate length of time and severely damage our business,
prospects, financial condition, and results of operations. Our systems and
operations will be vulnerable to damage or interruption from fire, floods,
network failure, hardware failure, software failure, power loss,
telecommunications failures, break-ins, terrorism, war or sabotage, computer
viruses, denial of service attacks, penetration of our network by unauthorized
computer users and "hackers," and other similar events, and other unanticipated
problems.
We presently may not posses and may not have developed or
implemented adequate protections or safeguards to overcome any of these events.
We also may not have anticipated or addressed many of the potential events that
could threaten or undermine our technology network. Any of these occurrences
could cause material interruptions or delays in our business, result in the loss
of data, render us unable to provide services to our customers, expose us to
material risk of loss or litigation and liability, materially damage our
reputation and our visitor traffic may decrease as a result. In addition, if a
person is able to circumvent our security measures, he or she could destroy or
20
misappropriate valuable information or disrupt our operations which could cause
irreparable damage to our reputation or business. Similar industry-wide concerns
or events could also damage our reputation or business. Our insurance, if
obtained, may not be adequate to compensate us for all losses that may occur as
a result of a catastrophic system failure or other loss, and our insurers may
not be able or may decline to do so for a variety of reasons.
If we fail to address these issues in a timely manner, we may lose
the confidence of our merchant advertisers, our revenue may decline and our
business could suffer.
WE WILL RELY ON THIRD PARTY CO-LOCATION PROVIDERS, AND A FAILURE OF SERVICE BY
THESE PROVIDERS COULD ADVERSELY AFFECT OUR BUSINESS AND REPUTATION.
We will rely upon third party co-location providers to host our main
servers. In the event that these providers experience any interruption in
operations or cease operations for any reason or if we are unable to agree on
satisfactory terms for continued hosting relationships, we would be forced to
enter into a relationship with other service providers or assume hosting
responsibilities ourselves. If we are forced to switch hosting facilities, we
may not be successful in finding an alternative service provider on acceptable
terms or in hosting the computer servers ourselves. We may also be limited in
our remedies against these providers in the event of a failure of service. In
the past, short-term outages have occurred in the service maintained by
co-location providers which could recur. We also may rely on third party
providers for components of our technology platform, such as hardware and
software providers, credit card processors, and domain name registrars. A
failure or limitation of service or available capacity by any of these third
party providers could adversely affect our business and reputation.
OUR QUARTERLY RESULTS OF OPERATIONS MIGHT FLUCTUATE DUE TO CHANGES IN THE SEARCH
ENGINE BASED ALGORITHMS, WHICH COULD ADVERSELY AFFECT OUR REVENUE AND IN TURN
THE MARKET PRICE OF OUR COMMON STOCK.
Our revenue will be heavily dependent on how search engines treat
our content in their indexes. In the event search engines determine that our
content is not high quality, such search engines may not rank our content as
highly in their indexes resulting in a reduction in our traffic, which may cause
lower than expected revenues. We are greatly dependent on a small number of
major search engines, namely Google, Yahoo!, MSN, and AOL. Search engines tend
to adjust their algorithms periodically and each adjustment tends to have an
impact on how our content ranks in their indexes. These constant fluctuations
could make it difficult for us to predict future revenues.
WE ARE SUSCEPTIBLE TO GENERAL ECONOMIC CONDITIONS, AND A DOWNTURN IN ADVERTISING
AND MARKETING SPENDING BY MERCHANTS COULD ADVERSELY AFFECT OUR OPERATING
RESULTS.
Our operating results will be subject to fluctuations based on
general economic conditions, in particular those conditions that impact
merchant-consumer transactions. If there were to be a general economic downturn
that affected consumer activity in particular, however slight, then we would
expect that business entities, including our merchant advertisers and potential
merchant advertisers, could substantially and immediately reduce their
advertising and marketing budgets. We believe that during periods of lower
consumer activity, merchant spending on advertising and marketing is more likely
to be reduced, and more quickly, than many other types of business expenses.
These factors could cause a material adverse effect on our operating results.
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WE DEPEND ON THE GROWTH OF THE INTERNET AND INTERNET INFRASTRUCTURE FOR OUR
FUTURE GROWTH AND ANY DECREASE OR LESS THAN ANTICIPATED GROWTH IN INTERNET USAGE
COULD ADVERSELY AFFECT OUR BUSINESS PROSPECTS.
Our future revenue and profits, if any, depend upon the continued
widespread use of the Internet as an effective commercial and business medium.
Factors which could reduce the widespread use of the Internet include:
o possible disruptions or other damage to the Internet or
telecommunications infrastructure;
o failure of the individual networking infrastructures of our merchant
advertisers and distribution partners to alleviate potential
overloading and delayed response times;
o a decision by merchant advertisers to spend more of their marketing
dollars in offline areas;
o increased governmental regulation and taxation; and
o actual or perceived lack of security or privacy protection.
In particular, concerns over the security of transactions conducted
on the Internet and the privacy of users may inhibit the growth of the Internet
and other online services, especially online commerce. In order for the online
commerce market to develop successfully, we, and other market participants, must
be able to transmit confidential information, including credit card information,
securely over public networks. Any decrease or less than anticipated growth in
Internet usage could have a material adverse effect on our business prospects.
WE ARE EXPOSED TO RISKS ASSOCIATED WITH CREDIT CARD FRAUD AND CREDIT PAYMENT,
AND WE MAY SUFFER LOSSES AS A RESULT OF FRAUDULENT DATA OR PAYMENT FAILURE BY
MERCHANT ADVERTISERS.
We may suffer losses as a result of payments made with fraudulent
credit card data. Our failure to adequately control fraudulent credit card
transactions could reduce any gross profit margin. In addition, under limited
circumstances, we extend credit to merchant advertisers who may default on their
accounts payable to us.
GOVERNMENT REGULATION OF THE INTERNET MAY ADVERSELY AFFECT OUR BUSINESS AND
OPERATING RESULTS.
We may be subject to additional operating restrictions and
regulations in the future. Companies engaging in online search, commerce and
related businesses face uncertainty related to future government regulation of
the Internet. Due to the rapid growth and widespread use of the Internet,
legislatures at the federal and state levels are enacting and considering
various laws and regulations relating to the Internet. Furthermore, the
application of existing laws and regulations to Internet companies remains
somewhat unclear. Our business and operating results may be negatively affected
by new laws, and such existing or new regulations may expose us to substantial
compliance costs and liabilities and may impede the growth in use of the
Internet.
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The application of these statutes and others to the Internet search
industry is not entirely settled. Further, several existing and proposed federal
laws could have an impact on our business:
o The Digital Millennium Copyright Act and its related safe harbors,
are intended to reduce the liability of online service providers for
listing or linking to third-party web sites that include materials
that infringe copyrights or other rights of others.
o The CAN-SPAM Act of 2003 and certain state laws are intended to
regulate interstate commerce by imposing limitations and penalties
on the transmission of unsolicited commercial electronic mail via
the Internet.
With respect to the subject matter of each of these laws, courts may
apply these laws in unintended and unexpected ways. As a company that provides
services over the Internet, we may be subject to an action brought under any of
these or future laws governing online services. Many of the services of the
Internet are automated and companies, such as ours, may be unknowing conduits
for illegal or prohibited materials. It is not known how courts will rule in
many circumstances. For example, it is possible that courts could find strict
liability or impose "know your customer" standards of conduct in certain
circumstances in which case we could be liable for actions by others.
We may also be subject to costs and liabilities with respect to
privacy issues. Several Internet companies have incurred costs and paid
penalties for violating their privacy policies. Further, it is anticipated that
new legislation will be adopted by federal and state governments with respect to
user privacy. Additionally, foreign governments may pass laws which could
negatively impact our business or may prosecute us for our products and services
based upon existing laws. The restrictions imposed by, and costs of complying
with, current and possible future laws and regulations related to our business
could harm our business and operating results.
FUTURE REGULATION OF SEARCH ENGINES MAY ADVERSELY AFFECT THE COMMERCIAL UTILITY
OF OUR SEARCH MARKETING SERVICES.
The Federal Trade Commission ("FTC") has recently reviewed the way
in which search engines disclose paid placements or paid inclusion practices to
Internet users. In 2002, the FTC issued guidance recommending that all search
engine companies ensure that all paid search results are clearly distinguished
from non-paid results, that the use of paid inclusion is clearly and
conspicuously explained and disclosed and that other disclosures are made to
avoid misleading users about the possible effects of paid placement or paid
inclusion listings on search results. Such disclosures if ultimately mandated by
the FTC or voluntarily made by us may reduce the desirability of any paid
placement and paid inclusion services that we offer. We believe that some users
may conclude that paid search results are not subject to the same relevancy
requirements as non-paid search results, and will view paid search results less
favorably. If such FTC disclosure reduces the desirability of our paid placement
and paid inclusion services, and "click-throughs" of our paid search results
decrease, the commercial utility of our search marketing services could be
adversely affected.
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GOVERNMENT REGULATIONS AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET AND
ONLINE COMMERCE COULD NEGATIVELY IMPACT OUR INTERNET BUSINESS.
Online commerce is relatively new and rapidly changing, and federal
and state regulations relating to the Internet and online commerce are evolving.
Currently, there are few laws or regulations directly applicable to the Internet
or online commerce on the Internet, and the laws governing the Internet that
exist remain largely unsettled. New Internet laws and regulations could dampen
growth in use and acceptance of the Internet for commerce. In addition,
applicability to the Internet of existing laws governing issues such as property
ownership, copyrights and other intellectual property issues, libel, obscenity,
and personal privacy is uncertain. The vast majority of those laws were adopted
prior to the advent of the Internet and related technologies and, as a result,
do not expressly contemplate or address the unique issues presented by the
Internet and related technologies. Further, growth and development of online
commerce have prompted calls for more stringent consumer protection laws, both
in the U.S. and abroad. The adoption or modification of laws or regulations
applicable to the Internet could have a material adverse effect on our Internet
business operations. We also will be subject to regulation not specifically
related to the Internet, including laws affecting direct marketers and
advertisers.
In addition, in 1998, the Internet Tax Freedom Act was enacted,
which generally placed a three-year moratorium on state and local taxes on
Internet access and on multiple or discriminatory state and local taxes on
electronic commerce. This moratorium was recently extended until November 1,
2007. We cannot predict whether this moratorium will be extended in the future
or whether future legislation will alter the nature of the moratorium. If this
moratorium is not extended in its current form, state and local governments
could impose additional taxes on Internet-based transactions, and these taxes
could decrease our ability to compete with traditional retailers and could have
a material adverse effect on our business, financial condition, results of
operations, and cash flow.
In addition, several telecommunications carriers have requested that
the Federal Communications Commission ("FCC") regulate telecommunications over
the Internet. Due to the increasing use of the Internet and the burden it has
placed on the current telecommunications infrastructure, telephone carriers have
requested the FCC to regulate Internet service providers and impose access fees
on those providers. If the FCC imposes access fees, the costs of using the
Internet could increase dramatically. This could result in the reduced use of
the Internet as a medium for commerce, which could have a material adverse
effect on our Internet business operations.
WE MAY INCUR LIABILITIES FOR THE ACTIVITIES OF USERS OF OUR SERVICE, WHICH COULD
ADVERSELY AFFECT OUR SERVICE OFFERINGS.
The law relating to the liability of providers of online services
for activities of their users and for the content of their merchant advertiser
listings is currently unsettled and could damage our business, financial
condition, and operating results. Our insurance policies may not provide
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coverage for liability arising out of activities of our users or merchant
advertisers for the content of our listings. Furthermore, we may not be able to
obtain or maintain adequate insurance coverage to reduce or limit the
liabilities associated with our businesses. We may not successfully avoid civil
or criminal liability for unlawful activities carried out by consumers of our
services or for the content of our or their listings. Our potential liability
for unlawful activities of users of our services or for the content of our or
their listings could require us to implement measures to reduce our exposure to
such liability, which may require us, among other things, to spend substantial
resources or to discontinue certain service offerings.
RISKS RELATING TO OUR COMMON STOCK
APPLICABLE SEC RULES GOVERNING THE TRADING OF "PENNY STOCKS" LIMITS THE TRADING
AND LIQUIDITY OF OUR COMMON STOCK.
Our Common Stock is quoted on the OTC Bulletin Board, and currently
trades, and may continue to trade below $5.00 per share. Therefore, the Common
Stock is considered a "penny stock" and subject to SEC rules and regulations
which impose limitations upon the manner in which such shares may be publicly
traded. These regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the associated risks. Under these regulations, certain brokers who
recommend such securities to persons other than established customers or certain
accredited investors must make a special written suitability determination
regarding such a purchaser and receive such purchaser's written agreement to a
transaction prior to sale. These regulations have the effect of limiting the
trading activity of our Common Stock and reducing the liquidity of an investment
in our Common Stock.
THE MARKET PRICE OF OUR COMMON STOCK IS LIKELY TO BE HIGHLY VOLATILE AND SUBJECT
TO WIDE FLUCTUATIONS.
The market price of our Common Stock is likely to be highly volatile
and could be subject to wide fluctuations in response to a number of factors,
including:
o announcements of new products or services by our competitors;
o fluctuations in revenue attributable to changes in the search engine
based algorithms that rank the relevance of our content;
o quarterly variations in our revenues and operating expenses;
o announcements of technological innovations or new products or
services by us; and
o sales of our Common Stock by our founders or other selling
stockholders.
THERE MAY BE A LIMITED PUBLIC MARKET FOR OUR SECURITIES; AND WE MAY FAIL TO
QUALIFY FOR NASDAQ OR OTHER LISTING.
There can be no assurance if and when initial listing criteria could
be met or if such application would be granted, or that the trading of our
Common Stock will be sustained. In the event that our Common Stock fails to
25
qualify for initial or continued inclusion in the NASDAQ system or for initial
or continued listing on a registered stock exchange, trading, if any, in our
Common Stock, would then continue to be conducted on the NASD's "Electronic
Bulletin Board" in the over-the-counter market and in what are commonly referred
to as "pink sheets." As a result, an investor may find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of our
Common Stock, and our Common Stock would become substantially less attractive
for margin loans, for investment by financial institutions, as consideration in
future capital raising transactions, or other purposes.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, AND THESE FLUCTUATIONS MAY
CAUSE OUR COMMON STOCK PRICE TO FALL.
Our operating results will likely vary in the future primarily as
the result of fluctuations in our revenues and operating expenses. If our
results of operations do not meet the expectations of current or potential
stockholders, the price of our Common Stock may decline.
THERE MAY BE A LIMITED PUBLIC MARKET FOR SHARES OF OUR COMMON STOCK, WHICH MAY
MAKE IT DIFFICULT FOR STOCKHOLDER TO SELL THEIR SHARES.
An active public market for shares of our Common Stock may not
develop, or if one should develop, it may not be sustained. Therefore,
stockholders may not be able to find purchasers for their shares of Common
Stock.
COMMON STOCK IS CONTROLLED BY INSIDERS.
The founders of Relationserve and sellers of Omni Point and
Friendsand and their transferees beneficially own in excess of 50% of the
outstanding shares of our Common Stock. Such concentrated control may adversely
affect the price of our Common Stock. These principal stockholders may be able
to control matters requiring approval by our stockholders, including the
election of directors. Such concentrated control may also make it difficult for
our stockholders to receive a premium for their shares of Common Stock in the
event we were to have an opportunity to merge with a third party or enter into
different transactions which require stockholder approval. In addition, certain
provisions of Nevada law could have the effect of making it more difficult or
more expensive for a third party to acquire, or of discouraging a third party
from attempting to acquire control. Accordingly, these stockholders will have
the power to control the election of all of our directors and the approval of
actions for which the approval of our stockholders is required. A stockholder
may have no effective voice in our management.
WE DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE.
We currently intend to retain any future earnings to support the
development and expansion of our business and do not anticipate paying cash
dividends in the foreseeable future. Our payment of any future dividends will be
at the discretion of our board of directors after taking into account various
factors, including but not limited to our financial condition, operating
results, cash needs, growth plans, and the terms of any credit agreements that
we may be a party to at the time. Accordingly, stockholders must rely on sales
of their Common Stock after price appreciation, which may never occur, as the
only way to realize a return on their investment.
26
NEVADA ANTI-TAKEOVER LAWS.
Nevada Revised Statutes sections 78.378 to 78.379 provide state
regulation over the acquisition of a controlling interest in certain Nevada
corporations unless the articles of incorporation or bylaws of the corporation
provide that the provisions of these sections do not apply. Our articles of
incorporation and bylaws do not state that these provisions do not apply. The
statute creates a number of restrictions on the ability of a person or entity to
acquire control of a Nevada company by setting down certain rules of conduct and
voting restrictions in any acquisition attempt, among other things. The statute
is limited to corporations that are organized in the state of Nevada and that
have 200 or more stockholders, at least 100 of whom are stockholders of record
and residents of the State of Nevada; and does business in the State of Nevada
directly or through an affiliated corporation. Because of these conditions, the
statute currently does not apply to our Company.
DELAWARE REINCORPORATION.
We expect to submit a proposal to our stockholders that would
authorize a parent-subsidiary merger of our Company with our wholly-owned
subsidiary or similar action at which time the provisions of Nevada law
described herein will cease to apply to us and our stockholders. Following such
reincorporation, Relationserve (Delaware) would be the issuer of our securities
and provisions of Delaware law would apply to our management and operations.
CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Current Report on Form 8-K contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 that involve risks and uncertainties, many of which are beyond he
Company's control. Our actual results could differ materially and adversely from
those anticipated in such forward-looking statements as a result of certain
factors, including those set forth below and elsewhere in this Report. Important
factors that may cause actual results to differ from projections include, but
are not limited to, for example:
o adverse economic conditions;
o inability to raise sufficient additional capital to implement our
business plan;
o intense competition;
o unexpected costs and operating deficits, and lower than expected
sales and revenues;
o adverse results of any legal proceedings;
o inability to satisfy customers;
o the volatility of our operating results and financial condition;
o inability to attract or retain qualified senior management
personnel; and
o other specific risks that may be alluded to in this Report.
27
All statements, other than statements of historical facts, included
in this Report regarding our strategy, future operations, financial position,
estimated revenue or losses, projected costs, prospects and plans and objectives
of management are forward-looking statements. When used in this Report, the
words "will," "may," "believe," "anticipate," "intend," "estimate," "expect,"
"project," "plan" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
such identifying words. All forward-looking statements speak only as of the date
of this Report. We do not undertake any obligation to update any forward-looking
statements or other information contained herein. Stockholders should not place
undue reliance on these forward-looking statements. Although we believe that our
plans, intentions and expectations reflected in or suggested by the
forward-looking statements in this Report are reasonable, no one can assure that
these plans, intentions or expectations will be achieved. Important factors that
could cause actual results to differ materially from expectations expressed
herein are described under "Cautionary Statements" and elsewhere in this Report.
These cautionary statements qualify all forward-looking statements attributable
to information provided in this Report on our behalf or on behalf of persons
acting on our or their behalf.
Information regarding market and industry statistics contained in
this Report is included based on information available to us that we believe is
accurate. It is generally based on publications that are not produced for
purposes of securities offerings or economic analysis. We have not reviewed or
included data from all sources, and we cannot assure stockholders of the
accuracy or completeness of the data included in this Report. Forecasts and
other forward-looking information obtained from these sources are subject to the
same qualifications and the additional uncertainties accompanying any estimates
of future market size, revenue and market acceptance of products and services.
We have no obligation to update forward-looking information to reflect actual
results or changes in assumptions or other factors that could affect those
statements. See "Risk Factors" for a more detailed discussion of uncertainties
and risks that may have an impact on future results.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT
In connection with the Merger, on June 10, 2005, the Company assumed
a promissory note in the amount of $700,000 by us in favor of Stacy McCall (the
"Note").
Relationserve issued the Note in connection with the acquisition of
Friendsand. The entire principal amount and accrued interest is due and payable
on May 13, 2007. The Note can be accelerated as to 50% of the principal amount,
and accrued interest, upon closing of a transaction in which $5,000,000 is
raised through a private placement or public offering and as to the balance,
upon a closing of a transaction in which $10,000,000 is raised.
In addition, upon the occurrence and during the continuation of an
Event of Default (as defined in the Note), at the option of the holder of the
Note, the entire principal and accrued unpaid interest on the Note becomes
immediately due and payable.
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ITEM 3.02 UNREGISTERED SALES OF UNREGISTERED SECURITIES
The following information is furnished with regard to all securities
sold within the past three years that were not registered under the Securities
Act of 1933, as amended (the "Securities Act") is based upon information in our
SEC filings for periods prior to the Merger. The issuances described hereunder
were made in reliance upon the exemptions from the registration set forth in
Section 4(2) of the Securities Act or Regulation D, of the Securities Act. None
of the foregoing transactions involved a distribution or public offering.
On May 14, 2004, we issued 6,800,000 shares of Common Stock to Mr.
Scott Young, the Company's former President, Chief Financial Officer and sole
director. Mr. Young acquired these shares at a price of $0.01 per share. We
received $68,000 from this offering. These shares were issued pursuant to
Section 4(2) of the Securities Act and are restricted shares as defined in the
Securities Act. We did not engage in any general solicitation or advertising.
We completed an offering of 3,210,000 shares of Common Stock at a
price of $0.01 per share to a total of seven purchasers on June 8, 2004. The
total amount the Company received from this offering was $32,100. The Company
completed the offering pursuant to Regulation S of the Securities Act. Each
purchaser represented to the Company that he was a non-US person as defined in
Regulation S. The Company did not engage in a distribution of this offering in
the United States. Each purchaser represented his intention to acquire the
securities for investment only and not with a view toward distribution. The
Company requested our stock transfer agent to affix appropriate legends to the
stock certificate issued to each purchaser in accordance with Regulation S and
the transfer agent affixed the appropriate legends. Each investor was given
adequate access to sufficient information about the Company to make an informed
investment decision. None of the securities were sold through an underwriter.
The Company completed an offering of 6,500 shares of our common
stock at a price of $0.25 per share to a total of forty-three purchasers on July
30, 2004. The total amount the Company received from this offering was $1,625.
The Company completed the offering pursuant to Regulation S of the Securities
Act. Each purchaser represented to the Company that he was a non-US person as
defined in Regulation S. The Company did not engage in a distribution of this
offering in the United States. Each purchaser represented his intention to
acquire the securities for investment only and not with a view toward
distribution. Appropriate legends were affixed to the stock certificate issued
to each purchaser in accordance with Regulation S. Each investor was given
adequate access to sufficient information about the Company to make an informed
investment decision. None of the securities were sold through an underwriter and
accordingly, there were no underwriting discounts. The Company paid a commission
of approximately $145 with respect to this offering.
Pursuant to the Merger, we acquired all of the outstanding capital
stock of Relationserve in exchange for 13,326,000 shares of our Common Stock. We
also assumed warrants to purchase 6,550,000 shares of our Common Stock issued by
Relationserve. These shares and warrants were issued pursuant to and exception
from registration pursuant to Section 4(2) of the Securities Act and are
restricted securities as defined in the Securities Act.
On May 24, 2005, the Company entered into an Independent Consulting
Agreement with Summit Financial Partners, LLC. Under the terms of the Agreement,
Summit Financial Partners, LLC. is to provide investor relations and similar
services in exchange for issuance of 1,050,000 shares of Common Stock. A copy of
the Agreement is annexed hereto as Exhibit 2.6.
29
On April 20, 2005 Relationserve commenced a private offering of up
to $1,000,000 Units, each Unit consisted of 50,000 shares of Relationserve
common stock with warrants to purchase 25,000 shares of Relationserve common
stock exercisable at $2.00 per share (the "Offering"). Relationserve received
and accepted $1,125,000 of subscriptions. The Units were issued in reliance on
an exemption from registration provided under Regulation D of the Securities Act
and are restricted shares as defined by the Securities Act.
On May 16, 2005 Relationserve executed agreements for the
acquisition of Omni Point and Friendsand and issued 8,000,000 shares of
Relationserve common stock. These shares were issued pursuant to 4(2) of the
Securities Act and are restricted shares as defined in the Securities Act.
Relationserve's founders received 4,001,000 shares of Relationserve
common stock and 6,000,000 warrants in connection with their efforts and for
providing the bridge loan advances and negotiating the Company's initial
acquisitions. The exercise price of the warrants issued to bridge loan holders
is $0.25 per share. These shares were issued pursuant to an exemption from
registration pursuant to Section 4(2) of the Securities Act and are restricted
shares as defined in the Securities Act.
The information set forth in Item 1.01 is incorporated herein by
reference.
ITEM 4.01 CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
As of June 10, 2005, upon effectiveness of the Merger, Morgan &
Company was replaced as our independent accountant and McKean, Paul, Chrycy,
Fletcher & Co. appointed as independent accountant to audit our financial
statements. The reason for the replacement of Morgan & Company was that
following the Merger our business unit and operation is the former Internet
marketing business of Omni Point which was audited by McKean, Paul, Chrycy,
Fletcher & Co. We believe that it is in our best interests to have McKean, Paul,
Chrycy, Fletcher & Co. continue to work with our business, and therefore, we
expect to retain McKean, Paul, Chrycy, Fletcher & Co. as our new independent
auditors. McKean, Paul, Chrycy, Fletcher & Co. is located at 2419 E. Commercial
Blvd., Suite 302, Ft. Lauderdale, Florida 33308.
The reports of Morgan & Company from our inception in April 2004
contained no adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles.
From the Company's inception in April 2004, there were no
disagreements with Morgan & Company on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure which,
if not resolved to the satisfaction of Morgan & Company, would have caused it to
make reference to the matter in connection with its reports. There were no
"reportable events" as that term is described in Item 304(a)(1)(v) of Regulation
S-B.
Appointment of McKean, Paul, Chrycy, Fletcher & Co. is expected to
be recommended and approved by our Board of Directors during 2005. From our
inception in April 2004, we did not consult McKean, Paul, Chrycy, Fletcher & Co.
regarding either: (i) the application of accounting principles to a specified
transaction, completed or proposed, or the type of audit opinion that might be
rendered on the Company's financial statements, or (ii) any matter that was
either the subject of a disagreement as defined in Item 304(a)(1)(iv) of
Regulation S-B or a reportable event as described in Item 304(a)(1)(v) of
Regulation S-B.
30
ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT.
As described in Item 1.01, on June 10, 2005 a change in control
occurred.
The following table sets forth information regarding the number of
shares of Common Stock beneficially owned on June 10, 2005, giving effect to the
Merger, by each person who is known by the Company to beneficially own 5% or
more of the Company's Common Stock, each of the Company's directors and
executive officers, and all of the Company's directors and executive officers,
as a group. On June 10, 2005, there were 23,342,500 shares of Common Stock
outstanding, the Company's Transfer Agent had not yet canceled 6,800,000 shares
of Common Stock contemplated by the Merger Agreement and the selling
stockholders had not yet sold the 3,203,000 shares of Common Stock contemplated
by the Merger Agreement:
31
NUMBER OF PERCENTAGE
SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
OWNED OWNED
-------------- --------------
MHB Trust 7,000,000 (1) 25.8%
Omni Point Marketing, LLC 3,500,000 (2) 15.1%
Boston Technology Group Inc. 4,500,000 19.4%
Scott Young 6,800,000 (3) 29.4%
Danielle Karp (Director and Executive Officer) 0 (2) --
All directors and executive officers as a group 0 (2) --
(1 person)
(1) Includes presently exercisable warrants to purchase 4,000,000 shares
of Common Stock at $0.25 per share.
(2) On June 13, 2005, Omni Point Marketing, LLC, authorized an award of
430,000 shares of Common Stock to Ms. Karp, our President,
Secretary, and sole director.
(3) Subsequent to the date of the Merger, Mr. Young forfeited all
6,800,000 shares of Common Stock which have been tendered to the
Company's Transfer Agent for cancellation.
The Company's Board of Director's currently is composed of one
director, Danielle Karp. Ms. Karp shall hold office until the next annual
meeting of stockholders and the election and qualification of her successor. The
Company intends to appoint a majority of directors that are considered
"independent" under the SEC's independence standards. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board. Ms.
Karp, is also our President and Secretary.
No arrangement or understanding exists among present or former
controlling stockholders with respect to the election of members of the
Company's Board of Directors and, to the Company's knowledge, no other
arrangement exists that might result in a change of control in the future.
ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS.
As a result of the Merger, the Company's director and officer prior
to the Merger, Scott Young resigned effective June 10, 2005 from all positions
with the Company.
32
The following table sets forth information regarding the members of
our Board of Directors and our executive officers following the Merger. The
directors listed below will serve until the next annual meeting of shareholders.
Name Age Position
- ---- --- --------
Danielle Karp 32 President, Secretary, Sole Member of the
Board of Directors
Please see Item 2.01, Management of Relationserve, for a full background on Ms. Karp.
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR.
In connection with the Merger, and as a result of adoption of the
financial statements of Relationserve, as our financial statements we will
hereafter utilize a different fiscal year from that used in our most recent
filing with the Securities and Exchange Commission. Our fiscal year end
hereafter shall be December 31. We do not maintain any class of equity
securities registered under Section 12 of the Securities Exchange Act of 1934,
as amended, and therefore no proxy statement or information statement has been
filed or distributed to stockholders.
On June 15, 2005 we filed with Secretary of State of Nevada a
Certificate of Amendment to our Articles of Incorporation changing our name to
Relationserve Media, Inc. The amendment also adopted as the purpose of the
company "All General Legal Business Purposes." We also amended our By-Laws to
change our name to Relationserve Media, Inc.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
On June 10, 2005, the Company closed on the transactions described
in Item 1.01, Item 2.01 and Item 3.02 of this Current Report on Form 8-K. The
Financial Statements of Relationserve a wholly-owned subsidiary, are filed
pursuant to Item 9.01(a)(4) (included herein as Exhibit 99.1).
In accordance with Instruction 4 of this Item 9.01, financial
statements and pro forma information, if any, required by this Item will be
filed by an amendment to this initial Report on Form 8-K as soon as practicable,
but in no event later than 71 days after this Initial Report is required to be
filed.
(b) EXHIBITS
Exhibit No. Exhibits
- ----------- --------
2.1 Agreement of Merger and Plan of Reorganization among Chubasco
Resources Corp., Reland Acquisition, Inc. and Relationserve,
Inc. dated June 10, 2005
2.2 Certificate of Merger of Reland Acquisition, Inc. with and into
Relationserve, Inc. dated June 10, 2005
33
2.3 Asset Purchase Agreement by and among Relationserve Access,
Inc., Omni Point Marketing, LLC, Cobalt Holdings, LLC and
McCall and Estes Advertising, Inc. dated May 12, 2005
2.4 Agreement and Plan of Merger between Friends Acquisition, Inc.
and Friendsand LLC dated May 13, 2005
2.5 Note Purchase Agreement by and between Relationserve, Inc., JH
Associates, Inc. and GRQ Consultants, Inc. dated April 1, 2005
2.6 Independent Consulting Agreement by and between Relationserve,
Inc. and Summit Financial Partners, LLC. dated May 24, 2005
2.7 Promissory Note by Relationserve, Inc. payable to the order of
Stacy McCall dated May 13, 2005
2.8 Form of Warrant to purchase Common Stock of Relationserve, Inc.
3.1 Certificate of Amendment to Articles of Incorporation of
Chubasco Resources Corp. dated June 15, 2005
3.2 Amended and Restated By-Laws of Relationserve Media, Inc.
99.1 Audited Financial Statements for the years ended December 31,
2004 and December 31, 2003, for Omni Point Marketing, LLC, a
Florida limited liability company
34
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned hereunto duly authorized.
Dated: June 16, 2005 By: /s/ Danielle Karp
---------------------------------------
Name: Danielle Karp
Title: President and Secretary
35
