UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): August 1, 2006
ADSOUTH PARTNERS, INC.
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(Exact name of registrant as specified in its charter)
Nevada 0-33135 68-0448219
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
1141 South Rogers Circle, Suite 11, Boca Raton, FL 33487
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 750-0410
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))
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Item 2.01. Completion of Acquisition and Disposition of Assets.
On August 1, 2006, the Company and its subsidiaries sold to MFC Development
Corp. ("MFC") substantially all of the assets of its business relating to the
direct, wholesale and retail marketing and sales of consumer products, which is
the line of business which the Company refers to as its products business. The
sale was made pursuant to the previously-reported agreement dated June 22, 2006
with MFC. The Company transferred to MFC substantially all of its assets
relating to the products business in exchange for (i) the assumption of certain
accounts payables, accrued expenses and other liabilities related to the product
business approximating an aggregate of $1.5 million, (ii) an unsecured
promissory note in the amount of $1,525,000, and (iii) 5,500,000 shares of MFC's
common stock, of which 750,000 shares are held in escrow as security for its
obligations relating to its representations and warranties. The principal amount
of the note is subject to adjustment based upon a post-closing accounting.
On August 2, 2006, MFC made a payment of $381,250, representing 25% of the
principal amount of the note. A second payment in the amount of $381,250, which
is subject to adjustment in the event of an adjustment in the principal amount
of the note, will be due upon the completion by MFC of a financing. The note is
payable on demand at any time commencing April 21, 2007; provided, that if MFC
shall have paid 50% of the principal amount of the note by January 20, 2007, the
note is payable in installments through January 2009 and the Company does not
have the right to demand payment unless there is a default under the note. If
MFC shall not have paid 50% of the principal amount of the note, together with
accrued interest, by January 20, 2007, the Company has the right to convert the
note into MFC's common stock at a conversion price of $.80 per share. If MFC
shall have paid 50% of the principal amount of the note by January 20, 2007, the
Company has no right to convert the note and MFC has the right to force
conversion at a 15% premium.
MFC also has an option to purchase any or all of the shares of MFC common stock
which the Company owns at the time the option is exercised at an exercise price
per shares of $1.00 through July 19, 2007 and $1.15 for from July 20, 2007
through July 19, 2008, at which time the option terminates. The option does not
prohibit the Company from selling shares of MFC common stock, and any shares
sold are no longer subject to the option.
MFC agreed to certain registration rights with respect to the shares of MFC
common stock issued at the closing and issuable upon conversion of the note.
As previously reported, the Company has agreed to pledge 2,250,000 shares of MFC
common stock as security for the Company's guaranty of the obligations of its
majority-owned subsidiary, Genco Power Solutions, Inc., to HSK Funding, Inc. and
New Valu, Inc. in the principal amount of $1,000,000.
The Company has reported its products division as a discontinued operation in
its Form 10-QSB for the quarter ended March 31, 2006.
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Item 8.01 Other Events.
As previously reported, on May 15, 2006, the Company was served in an action in
the Bankruptcy Court in the State of New Jersey by N.V.E., Inc. ("NVE"). Other
defendants in the action are John Acunto, Jr., a principal stockholder and
former chief executive officer, John Cammarano, a former chief executive
officer, Anton Lee Wingeier, the Company's chief financial officer and three
other employees of the Company. The complaint arises from a letter agreement
dated May 12, 2005, pursuant to which the Company performed services for NVE
relating to NVE's advertising campaign. The complaint alleges that the Company
breached the contract in fraudulently invoicing NVE for advertising services.
The complaint also alleges that the Company's conduct constituted criminal
activity and includes a claim under the Racketeer Influenced and Corrupt
Organizations Act (generally known as RICO) and its state law equivalent, and
seeks damages in excess of $2,000,000 plus costs, with claims for treble damages
and punitive damages. The Company believes that the allegations of the complaint
are without merit. The Company believes that it has meritorious defenses to the
other claims alleged and intends to vigorously defend the action.
On July 17, 2004, the court dismissed with prejudice, the RICO and conversion
claims against the Company and the individual defendants. The fraud claims were
dismissed against all defendants, with the plaintiff having the right to replead
those claims within 30 days. The claims based on breach of contract and the
claims seeking an accounting were not dismissed against the Company.
On August 4, 2006, the plaintiff filed an amended complaint repleading the fraud
claim, adding a claim for breach of duty and amending the other claims that were
not previously dismissed.
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Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
99.1 Note dated August 1, 2006 from MFC Development Corp. and
Adsouth Marketing, LLC, to Adsouth Partners, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ADSOUTH PARTNERS, INC.
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(Registrant)
Date: August 7, 2006 /S/ Anton Lee Wingeier
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Anton Lee Wingeier
Chief Executive Officer
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