Exhibit 99.2
RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
(UNAUDITED)
1
The accompanying unaudited pro forma consolidated financial statements of
RelationServe Media, Inc. and Subsidiaries (formerly Chubasco Resources Corp.)
(the "Company") give effect to the return and cancellation of common shares and
the recapitalization of the Company for debt, cash, and the issuance of common
stock. These pro forma statements are presented for illustrative purposes only.
The pro forma adjustments are based upon available information and assumptions
that management believes are reasonable. The Unaudited Pro Forma Balance Sheet
as of March 31, 2005 and the Unaudited Pro Forma Statement of Operations for the
three months ended March 31, 2005 do not purport to represent what the financial
position or results of operations of the Company would actually have been if the
transaction discussed above had in fact occurred on March 31, 2005, nor do they
purport to project the results of operations or financial position of
Relationserve Media, Inc. and Subsidiaries for any future period or as of any
date.
Prior to June 13, 2005, the Company had been an exploration stage company
engaged in the business of mineral exploration incorporated in Nevada as
Chubasco Resources Corp. ("Chubasco"). Since its formation on August 2, 2004,
Chubasco had been primarily engaged in exploration activities through its
wholly-owned subsidiary Chub Exploration Ltd., a British Columbia corporation.
On June 10, 2005, Chubasco's Board of Directors authorized the merger (the
"Merger") of its newly formed wholly-owned subsidiary Reland Acquisition, Inc.
("Reland"), a Delaware corporation, with RelationServe, Inc., a Delaware
corporation incorporated on March 29, 2005 ("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,
Chubasco changed its name to RelationServe Media, Inc.
In connection with the Merger, the Company acquired all of the issued and
outstanding capital stock of RelationServe in exchange for 13,326,000 shares
(the "Merger Stock") of the Company's common stock, par value $0.001 per share
(the "Common Stock"), and certain holders agreed to cancel 6,800,000 outstanding
shares of the Company's Common Stock following the Merger. Under the terms of
the Merger Agreement, each share of Relationserve common stock outstanding prior
to the Merger (13,326,000) and each RelationServe warrant (6,562,500) were
converted into one share of the Company's Common Stock and a warrant to purchase
one share of the Company's Common Stock, respectively, following the Merger. As
a result, RelationServe's former stockholders became the Company's majority
stockholders and RelationServe became the Company's wholly-owned subsidiary with
Chubasco's former shareholders retaining 3,216,500 shares of common stock.
Following the Merger certain purchasers acquired 3,203,000 shares of the
Company's freely-tradable Common Stock in privately negotiated transactions with
the former holders of such shares who retained 13,500 shares of the Company's
Common Stock. Additionally, the Company assumed obligations under a $700,000
promissory note due in May 2007 incurred by Relationserve in connection with an
acquisition.
The acquisition of Relationserve by the Company was accounted for as a reverse
merger because on a post-merger basis, the former Relationserve shareholders
hold a majority of the outstanding common stock of the Company on a voting and
fully diluted basis. As a result, Relationserve was deemed to be the acquirer
for accounting purposes. Accordingly, the consolidated financial statements
presented, beginning with the period ending June 30, 2005, are those of
Relationserve for all periods prior to the acquisition, and the financial
statements of the consolidated companies from the acquisition date forward. The
historical stockholders' deficit of Relationserve prior to the acquisition have
been retroactively restated (a recapitalization) for the equivalent number of
shares received in the acquisition after giving effect to any differences in the
par value of the Company and Relationserve's common stock, with an offset to
additional paid-in capital. The restated consolidated retained earnings of the
accounting acquirer (RelationServe) are carried forward after the acquisition.
Effective May 16, 2005, Relationserve, through its wholly-owned subsidiary
Relationserve Access, Inc., a Delaware company, purchased the assets and assumed
certain liabilities of Omni Point Marketing, LLC, a Florida limited liability
company ("Omni Point"), and through its wholly-owned subsidiary, Friendsand,
Inc., a Delaware corporation ("Friendsand") acquired all of the assets and
liabilities of Friendsand.com LLC, a Delaware limited liability company. These
companies were acquired for a combination of cash payments totaling $150,000, a
two-year promissory note payable in the amount of $700,000, and 8,000,000
newly-issued common shares of RelationServe.
2
RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2005
(UNAUDITED)
Relationserve
Media, Inc.
(formerly Chubasco Relationserve, Inc. Pro forma Adjustments Pro Forma
Resources Corp.) and Subsidiaries AJE Dr. AJE Cr. Balances
------------------ ----------------------- ----------------------------------- -----------
ASSETS
------
Current Assets:
Cash $ 48,195 $ 100,194 (3) $ 995,027 (2) $ 198,195 $ 945,221
Accounts receivable, net - 1,517,092 - - 1,517,092
Prepaid expenses and other assets - 71,698 - - 71,698
--------- ------------ --------- ----------- ------------
Total current assets 48,195 1,688,984 995,027 198,195 2,534,011
--------- ------------ --------- ----------- ------------
Property and Equipment, net - 759,698 - - 759,698
Intangibles, net - 1,091,685 - - 1,091,685
Other Assets - 228,966 - - 228,966
--------- ------------ --------- ----------- ------------
Total Assets $ 48,195 $ 3,769,333 $ 995,027 $ 198,195 $ 4,614,360
========= ============ ========= =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 4,432 $ 608,008 (2) $ 4,432 $ - $ 608,008
Accrued expenses - 321,280 - (5) 212,696 533,976
Accrued commissions - 396,534 - - 396,534
Deferred rent - 186,748 - - 186,748
Customer deposits - 264,213 - - 264,213
--------- ----------- --------- ------------ ------------
Total current liabilities 4,432 1,776,783 4,432 212,696 1,989,479
LONG-TERM NOTE PAYABLE - - - 700,000 700,000
--------- ------------ ---------- ------------ ------------
Total liabilities 4,432 1,776,783 4,432 912,696 2,689,479
--------- ----------- ---------- ------------ -------------
SHAREHOLDERS' EQUITY:
Common stock ($.001 Par value; 90,000,000
share authorized); 10,016,500 shares issued
and outstanding (pre-merger) and 16,542,500
shares issued and outstanding (pro forma) 10,017 - (1) 6,800 (2)(3) (4) 13,326 16,543
Paid-in Capital 91,708 2,180,220 (2) 963,726 (1)(3) (4) 2,050,502 3,358,704
Retained earnings (60,035) (187,670) (5) 212,696 (2) 60,035 (400,366)
Other comprehensive income 2,073 (2) 2,073 -
Less: Deferred compensation - - (4) 1,050,000 - (1,050,000)
--------- ----------- ---------- ----------- -------------
Total shareholders' equity 43,763 1,992,550 2,235,295 2,123,863 1,924,881
--------- ----------- ---------- ----------- -------------
Total liabilities and
shareholders' equity $ 48,195 $ 3,769,333 $2,239,727 $ 3,036,559 $ 4,614,360
========= =========== ========== =========== ============
See notes to pro forma consolidated financial statements
3
RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2005
(UNAUDITED)
Relationserve
Media, Inc.
(formerly Chubasco Relationserve, Inc. Pro forma Adjustments Pro Forma
Resources Corp.) and Subsidiaries AJE Dr. AJE Cr. Balances
----------------- ------------------------- -------------------------- ----------
Revenues, net $ - $ 2,691,670 (3) $ - $ - $ 2,691,670
Cost of revenue - 355,551 - - 355,551
----------- ------------- --------- --------- -----------
Gross Profit - 2,336,119 - - 2,336,119
----------- ------------- --------- --------- -----------
Selling Expenses:
Salaries and commissions - 709,546 - - 709,546
Advertising and trade shows - 135,853 - - 135,853
----------- ------------- --------- --------- -----------
- 845,399 - - 845,399
----------- ------------- --------- --------- -----------
General and Administrative Expenses:
Bad debt - 300,401 - - 300,401
Salaries - 129,989 - - 129,989
Depreciation and amortization - 160,291 - - 160,291
Professional fees 9,589 22,443 - 9,589 22,443
Rent and occupancy - 56,716 - - 56,716
Other general and administrative 5,907 261,154 - 5,907 261,154
----------- ------------- --------- --------- -----------
15,496 930,994 - 15,496 930,994
----------- ------------- --------- --------- -----------
Income (Loss) from operations (15,496) 559,726 - (15,496) 559,726
Provision for income taxes - 212,696 - (212,696)
----------- ------------- --------- --------- ------------
Net Income (Loss) $ (15,496) $ 559,726 $ 212,696 $ (15,496) $ 347,030
=========== ============= ========= ========== ============
See notes to pro forma consolidated financial statements
4
RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The adjustments to the unaudited pro forma balance sheet as of March 31, 2005
reflect the issuance of 12,001,000 shares of the Company's common stock for the
acquisition of all of the outstanding common stock of Relationserve, Inc. and
Subsidiaries, the return and cancellation of 6,800,00 shares of common stock of
a former officer, the issuance of 200,000 and 850,000 shares of common stock by
the Company and certain shareholders of the Company for services to be rendered
in the future, respectively, the sale of 1,125,000 shares of common under a
private placement memorandum, the payment of cash of $150,000 and the assumption
of a $700,000 note payable and that the transaction occurred as of March 31,
2005 and are as follows:
(1) To reflect the return and cancellation of 6,800,000 common shares.
(2) To reflect the issuance of 12,001,000 shares of the Company's common
stock for the acquisition of all of the outstanding capital stock of
Relationserve, Inc., a Delaware corporation and Subsidiaries ("Relationserve"),
the payment of $150,000 in cash, and the recording of a $700,000 note payable.
Additionally, the Company reflected the distribution of net assets of
Relationserve Media, Inc. prior to acquisition, which at March 31, 2005 was the
payment of accounts payable of $4,432 and the distribution of cash of $48,195.
For financial accounting purposes, the exchange of stock will be treated as a
recapitalization of Relationserve Media, Inc. (formerly Chubasco Resources
Corp.) with the former shareholders of the Company retaining 13,500 of the
outstanding stock.
(3) To reflect the sale of 1,125,000 shares on common stock under a private
placement memorandum for net proceeds of $995,027.
(4) To reflect the issuance of 200,000 shares of the Company for services
rendered. Additionally, to reflect the transfer of 850,000 shares of common
stock by certain shareholders to a consultant for services to be rendered in the
future
(5) To reflect a provision for income taxes at effective tax rate of 38%.
Unaudited Pro Forma adjustments reflect the following transaction:
(1)
Common stock 6,800
Paid in Capital 6,800
To reflect the return and cancellation of 6,800,000
shares of common stock in connection with merger
(2)
(a)
Accounts payable 4,432
Additional paid in capital 101,725
Other comprehensive income 2,073
Cash 48,195
Retained earnings 60,035
(b)
Additional paid in capital 862,001
Common stock, at par 12,001
Cash 150,000
Note payable 700,000
(a) To reflect the distribution of the net assets of
Relationserve Media, Inc. (formerly Chubasco Resource Corp.)
prior to the merger and to reclassify accumulated deficit to
additional paid in capital.
(b) To reflect the recapitalization of the Company, the issuance
of 12,001,000 shares of common stock in connection with reverse
merger, the payment of $150,000 in cash, and the assumption of a
$700,000 note payable,
(3)
Cash 995,027
Common stock 1,125
Additional Paid-in Capital 993,902
To reflect sale of 1,125,000 shares on common stock under
a private placement for proceeds of $995,027
5
RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(4)
Deferred Compensation 1,050,000
Common stock 200
Additional Paid-in Capital 1,049,800
To reflect the issuance of 200,000 shares of common stock by the
Company at $1.00 per share and to reflect the transfer of
850,000 shares of common stock by certain shareholders to a
consultant for services to be rendered in the future valued
at a fair market value of $1.00 per share
(5)
Provision for income taxes 212,696
Accrued expenses 212,696
To reflect provision for income taxes at effective tax rate of 38%
6
