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): July 6, 2005 (May 23, 2005)
Market Central, Inc.
Delaware 0-22969 59-3562953
(State or other jurisdiction (Commission File ID No.) (IRS Employer No.)
of incorporation)
7810 Ballantyne Commons Parkway
Suite 300
Charlotte, NC 28277
(Address of principal executive offices)
(704) 319-2250
(Registrant's telephone number, including area code)
(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))
SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS
Item 1.01 Entry into a Material Definitive Agreement
On May 23, 2005, E-Commerce Support Centers, Inc., a North Carolina corporation
("E-Commerce") and wholly-owned subsidiary of the Company entered into an Asset
Purchase Agreement (the "Asset Purchase Agreement") with Customerlinx of North
Carolina, Inc., a North Carolina corporation ("Customerlinx NC") and
wholly-owned subsidiary of Customerlinx Corp., a Delaware corporation
("Customerlinx"), pursuant to which Customerlinx NC agreed to purchase
substantially all of the assets of E-Commerce.
The Purchase Price for the assets is the sum of $1,100,000, and the assumption
of $85,233.90 of net liabilities of E-Commerce (the "Liabilities"). As of the
Closing, the E-Commerce owed Customerlinx the sum of $129,000 in management fess
pursuant to a management agreement. Therefore, the parties agreed that, at the
Closing, Customerlinx NC shall deliver a promissory note (the "Note") to
E-Commerce in the amount of $971,000, and Customerlinx shall credit the sum of
$129,000 to the unpaid management fees. The Note has a maturity date of 39
months, pays simple interest at five percent (5%), and is secured by certain
assets of Customerlinx NC.
In the event that Customerlinx NC has not pre-paid the Note in full by May 31,
2006, then Customerlinx NC shall also pay to E-Commerce on or before July 31,
2006 an amount equal to (I) 0.75 multiplied by (II) the amount by which (A) the
net income (which calculation shall only include expenses directly attributable
to Customerlinx NC's operation of the Business in North Carolina and Allocable
Corporate Expenses) that Customerlinx NC generates from its operation of the
Business in North Carolina during the 12 months ending May 31, 2006 (i.e., the
period commencing June 1, 2005 and ending May 31, 2006) exceeds (B) the greater
of (i) zero or (ii) the net income or loss generated from the operation of the
Business in North Carolina by E-Commerce and Customerlinx NC in the calendar
year ending December 31, 2005.
In addition, pursuant to the Asset Purchase Agreement, Customerlinx agreed to
guaranty the obligations of Customerlinx NC thereunder.
SECTION 2 - FINANCIAL INFORMATION
Item 2.01 Completion of Acquisition or Disposition of Assets
On May 23, 2005, E-Commerce completed the sale of substantially all of its
assets pursuant to the Asset Purchase Agreement as described in Item 1.01.
E-Commerce was engaged in the business of operating a contact call center and
related services and its assets consisted of contracts, leases, service
agreements, vendor agreements, employment agreements, websites, URLs,
intellectual property and other agreements.
SECTION 8 - OTHER EVENTS
Item 8.01 Other Events
On May 24, 2005, Market Central, Inc. issued a press release announcing that it
has completed its previously announced sale of substantially all of the assets
of E-Commerce, its contact call center located in Jacksonville, North Carolina.
A copy of the press release is attached as Exhibit 99.1 to this Current Report
on Form 8-K.
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SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
Item 9.01 Financial Statements, Pro Forma Financial Information and Exhibits
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION.
Condensed Consolidated Pro Forma Unaudited Balance Sheet as of February
28, 2005
Condensed Consolidated Pro Forma Unaudited Statement of Operations for the
Six Month Ended February 28, 2005
Condensed Consolidated Pro Forma Unaudited Statement of Operations for the
Year Ended August 31, 2004
Notes to Condensed Consolidated Pro Forma Unaudited Financial Statements
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
On May 23, 2005, the Company consummated the sale of its call center business
segment in exchange for $1,180,000, comprised of a deferred purchase promissory
note in the amount of $971,000 and the assumption of $209,000 of liabilities,
net of transaction costs. The promissory note is payable at the rate of $25,000
per month including interest at 5% per annum on the unpaid balance until paid in
full. The call center was the Company's principal revenue producing business
segment. This sale results in the Company's principal assets and operations
being its suite of software products and its intellectual property.
The Proforma Unaudited Financial Statements have been prepared by management of
the Company in order to present consolidated financial position and results of
operations of the Company as if the disposition had occurred as of February 28,
2005 for the pro forma condensed balance sheet and to give effect to the
disposition of the call center segment, as if the transaction had taken place at
September 1, 2003 for the pro forma condensed consolidated statement of
operations for the six months ended February 28, 2005 and the year ended August
31, 2004.
The unaudited pro forma financial information is not necessarily indicative of
the actual results of operations or the financial position which would have been
attained had the disposition been consummated at either of the foregoing dates
or which may be attained in the future.
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Market Central, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
February 28, 2005
Pro Forma Pro Forma
ASSETS Historical Adjustments Balance Sheet
Current Assets:
Cash and cash equivalents $ -- $ -- $ --
Accounts receivable 648,514 648,514
Accounts receivable - related parties 428,747 428,747
Notes receivable 257,293(a) 257,293
Prepaid expenses and other assets 57,941 57,941
--------------- --------------- ---------------
Total Current Assets 1,135,202 257,293 1,392,495
Notes receivable 713,707(a) 713,707
Property and Equipment, net 10,423 10,423
Net assets from discontinued operations 699,705 (699,705)(a)
Cash and cash equivalents $ -- $ --
Restricted cash 109,617 109,617
Goodwill 745,050 745,050
Deposits and other 426 426
Patents and trademarks, net of amortization 48,657 48,657
--------------- --------------- ---------------
Total Assets $ 2,749,080 $ 271,295 $ 3,020,375
=============== =============== ===============
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current Liabilities:
Cash disbursed in excess of available funds $ 83,472 $ -- $ 83,472
Accounts payable and accrued liabilities 3,468,388 (20,000)(a,b) 3,448,388
Note payable to related parties 2,912,465 2,912,465
Notes payable, current portion 48,597 48,597
Due to factor 354,584 354,584
Accrued preferred stock dividend 139,529 139,529
Current portion of capital lease obligation 523,921 523,921
--------------- --------------- ---------------
Total Current Liabilities 7,530,956 7,510,956
Capital lease obligation - long-term portion 36,982 36,982
Liabilities from discontinued operations 125,000 (125,000)(a)
Total Deficiency in Stockholders' Equity (4,943,858) 416,295(a,b) (4,527,563)
Total Liabilities and Deficiency in Stockholders' Equity $ 2,749,080 $ 271,295 $ 3,020,375
=============== =============== ===============
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Notes to unaudited Pro Forma Condensed Consolidated Financial Information
The pro forma unaudited condensed consolidated balance sheet was prepared
assuming the disposition occurred as of September 1, 2004 and include pro forma
adjustments as follows:
(a) To record transaction with Customer Linx of N.C., Inc for purchase of
certain assets and assumption of certain liabilities of Ecom Support
Centers, Inc. as follows:
Promissory note $ 971,000
Liabilities assumed 209,000
Total consideration 1,180,000
Less: Net book value of assets sold (699,705)
Pre-tax and after tax gain on sale $ 480,295
(b) To accrue for estimated transaction costs as follows:
Professional fees $ 64,000
Accrued transaction costs $ 64,000
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Market Central, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Loss
For the Six Months ended February 28, 2005
Pro Forma Pro Forma
Historical Adjustments Statement of Operations
Revenues, net $ 6,784 $ -- $ 6,784
Cost of sales 2,455 -- 2,455
------------ ------------ ------------
Gross profit 4,329 -- 4,329
Operating expenses:
Selling, general and administrative 1,451,734 1,451,734
Depreciation and amortization 22,863 22,863
------------ ------------ ------------
Total operating expenses 1,474,597 1,474,597
Loss from operations (1,470,268) (1,470,268)
Other income (Note K) 235,661 235,661
Interest (expenses), net (44,499) (44,499)
------------ ------------ ------------
Total other (income) expenses 191,162 191,162
Loss from continuing operations, before
income taxes and discontinued operations (1,279,106) (1,279,106)
Provision for income taxes -- --
------------ ------------ ------------
Loss from continuing operations,
before discontinued operations (1,279,106) (1,279,106)
Loss from discontinued operations (543,397) 543,397 (a) --
Net loss $ (1,822,503) $ 543,397 $ (1,279,106)
============ ============ ============
Cumulative convertible preferred stock
dividend requirements (78,189) (78,189)
------------ ------------
Net loss attributable to common shareholders $ (1,900,692) $ (1,357,295)
============ ============
Net (loss) per common share $ (0.15) $ (.10)
============ ============
Continuing operations: (0.10) (.10)
============ ============
Discontinued operations: (0.05) --
============ ============
Weighted Average Shares Outstanding
Basic and assumed diluted 12,786,954 12,786,954
============ ============
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Market Central, Inc.
Pro Forma Condensed Consolidated Statement of Loss
For the Year ended August 31, 2004
Pro Forma Pro Forma
Audited Adjustments Statement of Operations
Revenues, net $ 7,732,021 $ (7,702,432)(a) $ 29,589
Cost of sales 5,519,077 (5,511,365)(a) 7,712
----------------- ----------------- -----------------
Gross profit 2,212,944 (2,191,067) 21,877
Operating expenses:
Selling, general and administrative 6,387,490 (4,208,659)(a) 2,178,831
2,178,831
Depreciation and amortization 576,115 (533,769)(a) 42,346
----------------- ----------------- -----------------
Total operating expenses 6,963,605 (4,742,428) 2,221,177
Loss from operations (4,750,661) (2,551,361)(a) (2,199,300)
Interest expense, net (513,343) (403,644)(a) (109,699)
----------------- ----------------- -----------------
Loss from continuing operations, before
income taxes and discontinued operations (5,264,004) (2,955,005) (2,308,999)
Provision for income taxes -- --
Loss from continuing operations,
before discontinued operations (5,264,004) (2,955,005) (2,308,999)
Loss from discontinued operations (2,419,163) (2,419,163)
----------------- ----------------- -----------------
Net loss (7,683,167) (2,955,005) (4,728,162)
Preferred stock dividend - beneficial
conversion feature (875,000) (875,000)
Cumulative convertible preferred stock
dividend requirements (61,067) (61,067)
----------------- ----------------- -----------------
Net loss attributable to common shareholders $ (8,619,234) $ (2,955,005) $ (5,664,229)
================= ================= =================
Net (loss) per common share $ (0.65) $ (.43)
================= =================
Continuing operations: (0.47) (.25)
================= =================
Discontinued operations: $ (0.18) $ (.18)
================= =================
Weighted Average Shares Outstanding
Basic and assumed diluted 13,293,655 13,293,655
================= =================
Notes to unaudited Pro Forma Condensed Consolidated Financial Information
The pro forma unaudited condensed consolidated statements of loss for the six
months ended February 28, 2005 and for the year ended August 31, 2004 have been
presented assuming the disposition occurred as of September 1, 2003 and include
pro forma adjustments as follows:
(a) To remove the operations of the call center assets that was sold.
Note that the discontinued operations shown in the statement of loss for the
year ended August 31, 2004 relate to the sale of another subsidiary of the
Company.
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(c) Exhibits
10.1 Asset Purchase Agreement
99.1 Press Release on sale of substantially all of the assets of
E-Commerce.
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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 hereto duly authorized.
Market Central, Inc.
(Registrant)
Dated: July 6, 2005 By: /s/ Clifford Clark
---------------------------------------
Clifford Clark, Chief Financial Officer
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