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 15, 2006
-------------
RELATIONSERVE MEDIA, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 333-119632 43-2053462
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
877 Executive Center Drive West, Suite 300, St. Petersburg, Florida 33702
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (727) 576-6630
--------------
N/A
- --------------------------------------------------------------------------------
(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 240.14a-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 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
See the disclosure set forth under Item 5.02, which is
incorporated by reference into this Item 1.01.
ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
On June 15, 2006, the Registrant sold substantially all of the
business and net assets of its wholly-owned subsidiary RelationServe
Access, Inc., a Delaware corporation ("Access"), to R.S.A.C., Inc., a
Delaware corporation and wholly-owned subsidiary of Come & Stay S.A
("R.S.A.C.").
The sale was made pursuant to a certain Asset Purchase
Agreement dated as of June 5, 2006, (the "Agreement"), among the
Registrant, Access and R.S.A.C. The purchase price included $1.4
million in cash and the assumption of certain liabilities of Access.
Pursuant to the Agreement, Access (and in certain cases, Registrant)
has agreed to remain liable for certain contingencies and liabilities,
and any liabilities in excess of $3 million.
The foregoing description of the Agreement is not complete and
is qualified in its entirety by reference to the full text of the
Agreement, a copy of which is filed herewith and is incorporated herein
by reference.
In addition to the foregoing, the Registrant will discontinue
the business of Friendsand.com, Inc. ("Friendsand") and will cease all
operations by June 30, 2006 unless a purchaser is identified for some
or all of the assets or business of Friendsand.
ITEM 2.05. COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES.
After recurring losses and a strategic evaluation of the
marketplace, on June 15, 2006, the Board of Directors of the Registrant
authorized and directed management to immediately begin an orderly
discontinuation of Friendsand. At the time of this filing, the
Registrant expects to record a $459,000 charge with respect to the
discontinued operations. The wind-down of Friendsand's operations has
already begun and is expected to rapidly conclude unless a purchaser is
identified for some or all of the assets or business.
ITEM 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS.
As of June 15, 2006, Shawn McNamara, Steven Stowell and Adam
Wasserman resigned from all positions with the Registrant and each of
Registrant's subsidiaries in connection with the sale of the business
of Access. Such resignations were not due to any disagreement with the
Registrant or Access on any matter relating to the Registrant's or
Access' operations, policies or practices.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION.
The accompanying unaudited condensed consolidated pro forma financial
information illustrates the estimated effects of the Registrant's (i)
sale of substantially all of its assets and transfer of certain
liabilities of Access, and (ii) discontinuing of the operations of
Friendsand. The Unaudited Condensed Consolidated Pro Forma Balance
Sheet of the Registrant at March 31, 2006 shows the financial position
of the Registrant after giving effect to the sale of substantially all
of its assets and transfer of certain liabilities of Access, and the
write-off of the assets of Friendsand, as if these events had occurred
on March 31, 2006. The Unaudited Condensed Consolidated Pro Forma
Statements of Operations of the Registrant for the three months ended
March 31, 2006 and the year ended December 31, 2005 give effect to
these events as if they had occurred at the beginning of each of the
periods presented.
The pro forma condensed consolidated financial statements should be
read in conjunction with the historical consolidated financial
statements and notes thereto included in the Registrant's Annual Report
on Form 10-KSB for the year ended December 31, 2005. The pro forma
information may not necessarily be indicative of what the Registrant's
results of operations or financial position would have been had the
events occurred as of and for the periods presented, nor is such
information necessarily indicative of the Registrant's results of
operations or financial position for any future period or date.
RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
MARCH 31, 2006
Pro Forma Adjustments
----------------------------
Discontinued
Sale of Operations of
Relationserve Friendsand,
Historical Access, Inc. Inc.
Results (a) (b) Pro Forma
------------- ------------ ----------- -------------
ASSETS
Current assets
Cash................................................ $ 5,270,406 $ 1,400,000 $ -- $ 6,670,406
Accounts receivable, less allowance for doubtful
accounts of $841,000.............................. 11,283,994 (885,724) -- 10,398,270
Prepaid expenses and other current assets........... 370,466 (118,429) -- 252,037
------------- ------------ ----------- -------------
Total current assets.............................. 16,924,866 395,847 -- 17,320,713
Property and equipment, net............................ 1,728,554 (742,117) -- 986,437
Intangible assets, net................................. 5,816,502 (1,789,060) (508,399) 3,519,043
Goodwill............................................... 40,489,056 -- -- 40,489,056
Other assets........................................... 49,196 (33,867) -- 15,329
------------- ------------ ----------- -------------
Total assets...................................... $65,008,174 $(2,169,197) $ (508,399) $ 62,330,578
============= ============ =========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.................................... $ 9,470,868 $ (817,945) $ -- $ 8,652,923
Accrued expenses.................................... 614,551 (49,034) -- 565,517
Accrued compensation................................ 135,055 -- -- 135,055
Accrued commissions................................. 310,102 (285,821) -- 24,281
Accrued penalty - registration rights............... 265,000 -- -- 265,000
Deferred revenue.................................... 1,387,794 -- -- 1,387,794
Customer deposits................................... 486,204 (486,204) -- --
------------- ------------ ----------- -------------
Total current liabilities......................... 12,669,574 (1,639,004) -- 11,030,570
Debentures payable, net of debt discount of $33,396,667 1,553,333 -- 1,553,333
Deferred rent.......................................... 306,549 (158,555) -- 147,994
------------- ------------ ----------- -------------
Total liabilities................................. 14,529,456 (1,797,559) -- 12,731,897
Commitments and contingencies
Stockholders' equity
Series A Convertible Preferred stock - $.001 par value;
1,500,000 authorized;no shares issued and
outstanding....................................... -- -- -- --
Common stock - $.001 par value; 90,000,000 shares
authorized; 40,741,920 shares issued and outstanding 40,742 -- -- 40,742
Deferred compensation............................... (3,906,357) -- -- (3,906,357)
Additional paid in capital.......................... 72,556,841 -- -- 72,556,841
Accumulated deficit................................. (18,212,508) (371,638) (508,399) (19,092,545)
------------- ------------ ----------- -------------
Total stockholders' equity........................ 50,478,718 (371,638) (508,399) 49,598,681
------------- ------------ ----------- -------------
Total liabilities and stockholders' equity........ $65,008,174 $(2,169,197) $ (508,399) $ 62,330,578
============= ============ =========== =============
RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
Pro Forma Adjustments
----------------------------
Discontinued
Sale of Operations of
Relationserve Friendsand,
Historical Access, Inc. Inc.
Results (a) (b) Pro Forma
------------- ------------ ----------- -------------
Revenues, net............................................ $ 8,513,022 $(1,295,562) $ -- $ 7,217,460
Cost of revenues......................................... 5,782,180 (981,805) (45,774) 4,754,601
------------- ------------ ----------- -------------
Gross profit.......................................... 2,730,842 (313,757) 45,774 2,462,859
------------- ------------ ----------- -------------
Operating expenses
Salaries ................................................ 1,678,413 (551,444) -- 1,126,969
Bad debt................................................. 256,054 (256,054) -- --
Commissions.............................................. 163,329 (106,557) -- 56,772
Professional fees........................................ 539,854 (141,189) -- 398,665
Advertising and trade shows.............................. 42,406 (3,997) (10,000) 28,409
Depreciation and amortization............................ 277,362 (61,287) (3,496) 212,579
Other general and administrative......................... 1,492,225 (511,060) (26,310) 954,855
------------- ------------ ----------- -------------
Total operating expenses.............................. 4,449,643 (1,631,588) (39,806) 2,778,249
------------- ------------ ----------- -------------
Loss from operations.................................. (1,718,801) (1,317,831) (85,580) (315,390)
Other income (expense)
Registration rights penalty.............................. 60,000 -- -- 60,000
Covenant penalty......................................... (1,443,750) -- -- (1,443,750)
Loss on equity-method investment......................... (153,389) -- -- (153,389)
Interest income.......................................... 18,419 -- -- 18,419
Interest expense......................................... (1,897,008) -- -- (1,897,008)
------------- ------------ ----------- -------------
Total other expense................................... (3,415,728) -- -- (3,415,728)
------------- ------------ ----------- -------------
Loss before provision for income taxes................ (5,134,529) (1,317,831) (85,580) (3,731,118)
Provision for income taxes............................... -- -- -- --
------------- ------------ ----------- -------------
Net loss attributable to common stockholders............. $(5,134,529) $(1,317,831) $ (85,580) $ (3,731,118)
============= ============ =========== =============
Net loss per common share:
basic and diluted.................................... $ (0.14) $ (0.10)
============= =============
Weighted average number of common shares outstanding:
basic and diluted.................................... 37,261,031 37,261,031
============= =============
RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
Pro Forma Adjustments
----------------------------
Discontinued
Sale of Operations of
Relationserve Friendsand,
Historical Access, Inc. Inc.
Results (a) (b) Pro Forma
------------- ------------ ----------- -------------
Revenues, net............................................ $11,302,780 $(11,302,780) $ -- $ --
Cost of revenues......................................... 2,542,614 (2,486,329) (56,285) --
------------- ------------ ----------- -------------
Gross profit.......................................... 8,760,166 (8,816,451) 56,285 --
------------- ------------ ----------- -------------
Operating expenses
Salaries ................................................ 2,441,026 (1,859,521) (86,451) 495,054
Bad debt................................................. 2,393,203 (2,393,203) -- --
Commissions.............................................. 1,462,728 (1,462,728) -- --
Professional fees........................................ 975,132 (642,994) -- 332,138
Advertising and trade shows.............................. 653,484 (485,166) (168,318) --
Depreciation and amortization............................ 215,307 (215,307) -- --
Other general and administrative......................... 2,287,349 (1,913,465) (139,859) 234,025
------------- ------------ ----------- -------------
Total operating expenses.............................. 10,428,229 (8,972,384) (394,628) 1,061,217
------------- ------------ ----------- -------------
(Loss) income from operations......................... (1,668,063) 155,933 450,913 (1,061,217)
Other income (expense)
Registration rights penalty.............................. (75,000) -- -- (75,000)
Loss on equity-method investment......................... (1,034,102) -- -- (1,034,102)
Interest income.......................................... 3,144 -- -- 3,144
Interest expense......................................... (14,268) 1,433 -- (12,835)
------------- ------------ ----------- -------------
Total other expense................................... (1,120,226) 1,433 -- (1,118,793)
------------- ------------ ----------- -------------
(Loss) income before provision for income taxes....... (2,788,289) 157,366 450,913 (2,180,010)
Provision for income taxes............................... -- -- -- --
------------- ------------ ----------- -------------
Net (loss) income........................................ (2,788,289) 157,366 450,913 (2,180,010)
Beneficial conversion feature - preferred stock.......... (10,289,690) -- -- (10,289,690)
------------- ------------ ----------- -------------
Net (loss) income attributable to common shareholders.... $(13,077,979)$ 157,366 $ 450,913 $ (12,469,700)
============= ============ =========== =============
Net loss per common share:
basic and diluted.................................... $ (0.19) $ (0.15)
============= =============
Weighted average number of common shares outstanding:
basic and diluted.................................... 14,500,271 14,500,271
============= =============
5
RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
NOTE 1 - PRO FORMA BALANCE SHEET ADJUSTMENTS
(a) Sale of substantially all of the net assets of RelationServe Access,
Inc. in exchange for $1,400,000 in cash. The proceeds were used to
provide working capital and liquidity for the Company. The loss of
approximately $372,000 is included in the pro forma accumulated deficit
as of March 31, 2006, but has been excluded from the pro forma
consolidated statements of operations for the three months ended March
31, 2006 and for the year ended December 31, 2005. No income tax
benefit is included in the pro forma presentation with respect to this
transaction because the Company fully reserved for deferred tax assets
since it is more likely than not that the benefit of these assets will
not be realized in future periods.
The amount of the estimated loss will be adjusted based on Access's
operating results for June 2006. The operating results for June 2006
are not available as of the date of this report.
(b) Discontinuance of the operations of Friendsand. The write-off of the
operating assets results in an estimated loss of approximately $508,000
and is included in the pro forma accumulated deficit as of March 31,
2006, but has been excluded from the pro forma consolidated statements
of operations for the three months ended March 31, 2006 and for the
year ended December 31, 2005. No income tax benefit is included in the
pro forma presentation with respect to this transaction because the
Company fully reserved for deferred tax assets since it is more likely
than not that the benefit of these assets will not be realized in
future periods.
The amount of the estimated loss will be adjusted based on Friendsand's
operating results for June 2006. The operating results for June 2006
are not available as of the date of this report.
NOTE 2 - PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
(a) The elimination of the operating results for RelationServe Access, Inc.
for the respective periods.
(b) The elimination of the operating results for Friendsand.com for the
respective periods.
(d) EXHIBITS.
The exhibits listed in the following Exhibit Index are filed
as part of this Report.
EXHIBIT NO. Description
----------- -----------
10.1 Asset Purchase Agreement, dated as of June 5, 2006.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: June 21, 2006 By: /s/ Donald Gould
--------------------------------------
Name: Donald Gould
Title: Chief Financial Officer
