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): September 6, 2005
(August 31, 2005)
MARKET CENTRAL, INC.
Delaware 0-22969 59-3562953
(State or other jurisdiction (Commission File ID No.) (IRS Employer No.)
of incorporation)
6701 Carmel Road
Suite 205
Charlotte, NC 28226
(Address of principal executive offices)
(704) 837-0500
(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 August 31, 2005, the Company entered into an agreement to sell all of the
outstanding capital stock of E-Commerce Support Centers, Inc., a North Carolina
corporation ("E-Commerce") and a wholly-owned subsidiary of the Company to Lion
Development Group II, Inc. (the "Agreement"). The transaction was closed on
August 31, 2005.
The Purchase Price for the assets was the sum of $1,000, and the assumption of
all liabilities of E-Commerce. Additionally, the Company and the Purchaser
agreed that on or before one year from the date of the closing, they would in
good faith complete a reconciliation of claims against E-Commerce and the
payment of such claims in order to compute the deferred portion of the purchase
price. Such deferred purchase amount is 70% of the amount by which the cash
received from a note owned by E-Commerce and the remaining balance of such note
exceeds liabilities paid or agreed to be paid from the proceeds of the note.
Such amount is due to the Company either in the form of cash or assignment of a
portion of such note. At closing, the note had a principal balance of $929,004
and is payable over a remaining term of 40 months together with simple interest
at an annual rate of five percent (5%), and is secured by certain assets of the
obligor.
SECTION 2 - FINANCIAL INFORMATION
Item 2.01 Completion of Acquisition or Disposition of Assets
On August 31, 2005, the Company completed the sale of all of the capital stock
of E-Commerce as described in Item 1.01.
E-Commerce was an inactive subsidiary of the Company.
SECTION 5 - CORPORATE GOVERNANCE AND MANAGEMENT
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers
(a) None.
(b) None.
(c) None
(d) On September 2, 2005, Stuart J. Yarbrough was elected to the Board of
Directors to fill a vacancy on the board and was also elected Chairman of the
board. It is anticipated that Mr. Yarbrough will be elected to the Audit and
Compensation Committees of the board. Mr. Yarbrough, age 54, is currently a
principal in CrossHill Financial Group, a private equity funding, mezzanine
financing and bridge financing company based in the Washington, D.C. area, which
Mr. Yarbrough co-founded in 1994.
-2-
SECTION 8 - OTHER EVENTS
Item 8.01 Other Events
On September 6, 2005, Market Central, Inc. issued a press release announcing the
foregoing change to its Board of Directors. A copy of the press release is
attached as Exhibit 99.1 to this Current Report on Form 8-K.
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
The unaudited pro forma condensed financial information of the Company is based
on and should be read in conjunction with the audited consolidated financial
statements and notes thereto appearing in the Company's Annual Report on Form
10-KSB for the year ended August 31, 2004. The unaudited pro forma condensed
consolidated statement of loss for the nine months ended May 31, 2005, and the
year ended August 31, 2004 are presented as if the disposition of the stock of
E-Commerce referred to in Item 2.01 above had been completed as of September 1,
2003. The unaudited pro forma condensed consolidated balance sheet as of May 31,
2005 is presented as if the disposition had been completed as of September 1,
2004.
It is management's belief that the accompanying unaudited pro forma condensed
consolidated financial statements include all material adjustments necessary to
reflect, on a pro forma basis, the impact of the disposition on the historical
information of the Company. The adjustments are set forth in the Pro Forma
Adjustments column and further described in the notes to the unaudited pro forma
condensed consolidated financial statements.
The unaudited pro forma condensed consolidated financial information has been
presented for informational purposes only and is not indicative of any future
results of operations of the results that would have occurred had the sale
actually been completed on the dates indicated above. The transaction will be
recorded on the Company's consolidated financial statements as of the actual
date of sale and such results may vary from the pro forma condensed consolidated
financial information presented herein.
-3-
Market Central, Inc.
Condensed Consolidated Pro Forma Unaudited Balance Sheet
May 31, 2005
PRO FORMA
ASSETS HISTORICAL ADJUSTMENT PRO FORMA
-----------------------------------------
Current Assets:
Cash and cash equivalents $ 1,716,813 $ 19,973 (a)$ 1,736,786
Accounts receivable, net of allowance for doubtful
accounts of $0 518,593 (503,042)(a) 15,551
Related parties, net of allowance for doubtful
accounts of $0 -- -- --
Notes receivable 657,293 (257,293)(a) 400,000
Prepaid expenses and other assets 64,179 -- 64,179
-----------------------------------------
Total Current Assets: 2,956,878 2,216,516
-----------------------------------------
Property and equipment: 189,614 -- 189,614
Less: accumulated depreciation (121,109) -- (121,109)
----------- ----------- -----------
Property and equipment, net: 68,505 -- 68,505
Other Assets: -- --
Notes receivable 713,707 (713,707)(a) --
Goodwill 745,050 -- 745,050
Capitalized financing costs, net of amortization
of $7,420 240,154 -- 240,154
Patents and trademarks, net of accumulated
amortization of $56,771 40,548 -- 40,548
-----------------------------------------
Total other assets 1,739,459 1,025,752
-----------------------------------------
Total assets $ 4,764,842 $ 3,310,773
=========================================
LIABILITIES AND DEFICIENCY IN STOCKHOLDER'S EQUITY
-----------------------------------------
Current Liabilities:
Accounts payable and accrued liabilities $ 3,226,847 (1,483,936)(a) 1,742,911
Note payable to related parties 365,148 -- 365,148
Notes payable, current portion 3,241 -- 3,241
Due to Factor 115,884 (115,884)(a) --
Accrued preferred stock dividend 444,282 -- 444,282
Current portion of capital lease obligation 593,012 (593,012)(a) --
Deferred interest income 239,445 -- 239,445
-----------------------------------------
Total Current Liabilities 4,987,859 2,795,027
-----------------------------------------
6.4% Convertible notes 526,221 -- 526,221
Notes payable - related party 854,852 -- 854,852
Capital lease obligation - long-term portion 18,885 (18,885)(a) --
Commitments and Contingencies -- -- --
-- --
Deficiency in Stockholders' Equity: -- -- --
Preferred stock, par value $.001 per share;
10,000,000 shares authorized; Series A - 5,557,005
shares issued and outstanding 5,557 -- 5,557
Series B - 350,000 shares issued and outstanding 350 -- 350
Common stock, par value, $.001 per share;
75,000,000 shares authorized; 6,916,385 shares
issued and outstanding 6,916 -- 6,916
Common stock receivable -- -- --
Additional paid-in-capital 35,666,786 -- 35,666,786
Preferred stock dividend (875,000) -- (875,000)
Accumulated deficit (36,427,584) 757,648 (a)(35,669,936)
-----------------------------------------
Total shareholders' deficit (1,622,975) (865,327)
Total liabilities and deficiency in shareholders' -----------------------------------------
equity $ 4,764,842 $ 3,310,773
=========================================
-4-
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 Lion Development Group II, Inc. for purchase of
certain assets and assumption of certain liabilities of Ecom Support
Centers, Inc. as follows:
Cash received $ 1,000
Liabilities assumed 2,211,717
Less: Net book value of assets sold 1,455,069
Pre-tax and after tax gain on sale $ 757,648
-5-
Market Central, Inc.
Condensed Consolidated Pro Forma Unaudited Statement of Operations
For The Nine Months Ended May 31, 2005
HISTORICAL PRO FORMA
2005 ADJUSTMENTS PRO FORMA
----------- ----------- -----------
Revenues, Net $ 11,677 $ 11,677
Cost of Sales -- --
----------- -----------
Gross Profit 11,677 11,677
----------- -----------
Operating Expenses:
Selling, General & Administrative 2,424,898 2,424,898
Depreciation and Amortization 41,579 41,579
----------- -----------
TOTAL OPERATING EXPENSES 2,466,477 2,466,477
LOSS FROM OPERATIONS (2,454,800) (2,454,800)
----------- -----------
Other Income (expenses): 223,822 223,822
Interest Income (Expenses) (1,193,145) (1,193,145)
----------- -----------
Total Other (Income) expenses (969,323) (969,323)
----------- -----------
Loss from continuing operations, (Before
income taxes and discontinued operations) (3,424,123) (3,424,123)
Provision for Income Taxes -- --
Loss from Continuing Operations, before
Discontinued Operations (3,424,123) (3,424,123)
Loss from Discontinued Operations (1,085,432) 1,085,432 (a) --
Gain from disposal of discontinued
operations 552,491 (552,491)(a) --
----------- -----------
NET LOSS (3,957,064) (3,424,123)
----------- -----------
Preferred stock dividend - beneficial
conversion feature
Cumulative convertible preferred stock
dividend requirements (382,712) (382,712)
----------- -----------
Net loss attributable to Common Shareholders $(4,339,776) $(3,806,835)
=========== ===========
Net loss per common share $ (0.35) $ (0.31)
Continuing operations: $ (0.31) $ (0.31)
Discontinued operations: $ (0.04) $ --
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and assumed diluted 12,456,895 12,456,895
-6-
Market Central, Inc.
Condensed Consolidated Pro Forma Unaudited Statement of
Operations
For The Year Ended August 31, 2004
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- -----------
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 21,877
Operating expenses:
Selling, general and administrative 6,387,490 (4,208,659)(a) 2,178,831
Depreciation and amortization 576,115 (533,769)(a) 42,346
----------- -----------
Total operating expenses 6,963,605 2,221,177
Loss from operations (4,750,661) (2,199,300)
Other income (expenses):
Interest income (expenses) (513,343) 403,644 (a) (109,699)
----------- -----------
Total other expenses (513,343) (109,699)
Loss from continuing operations, before income
taxes and discontinued operations (5,264,004) (2,308,999)
Provision for income taxes -- --
----------- -----------
Loss from continuing operations, before
discontinued operations (5,264,004) (2,308,999)
Loss from discontinued operations (5,203,534) (5,203,534)
Gain from disposal of discontinued operations 2,784,371 2,784,371
----------- -----------
Net (loss) $(7,683,167) $(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) $(5,664,229)
=========== ===========
Net (loss) per common share (basic and assumed
diluted) $ (0.65) $ (0.43)
Continuing operations: (0.47) (0.25)
Discontinued operations: (0.18) (0.18)
Weighted Average Shares Outstanding
Basic and assumed diluted 13,293,655 13,293,655
-7-
Notes to Condensed Consolidated Pro Forma Unaudited Financial Statements
The pro forma unaudited condensed consolidated statements of operations for the
nine months ended May 31, 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 operations for
the year ended August 31, 2004 relate to the sale of another subsidiary of the
Company.
(c) Exhibits
10.1 Stock Purchase Agreement
99.1 Press Release dated September 6, 2005, regarding the election of
Stuart J. Yarbrough as a director and Chairman of the board of
directors of the Registrant.
-8-
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: September 6, 2005 By: /s/ Clifford Clark
----------------------------------------
Clifford Clark, Chief Financial Officer
-9-