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): December 10, 2006
Nevada 0-33135 68-0448219
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
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1141 South Rogers Circle, Suite 11, Boca Raton, FL 33487
(Address of principal executive offices)
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))
Item 1.01. Entry into a Material Definitive Agreement.
Item 2.01. Completion of Acquisition or Disposition of Assets.
On December 11, 2006, Adsouth Partners, Inc. (the "Company") entered into an agreement dated December 10, 2006, with New Valu, Inc. and HSK Funding, Inc. At the time of the parties entered into this agreement, the Company's 80%-owned subsidiary, Genco Power Systems, Inc., owed $1,866,666 to New Valu and $156,250 to HSK. The Company had guaranteed these loans, and pledged its 80% interest in Genco and 625,000 shares of MFC Development Corp. that were owned by the Company as security for payment of these loans. Further, Genco did not have sufficient funds to continue its operations and it had significant potential liabilities with respect to customer deposits for generators.
Pursuant to the agreement with New Value and HSK, on December 11, 2006:
* The Company's obligations under its guarantee to New Valu were terminated.
* The Company transferred to New Valu its 80% interest in Genco.
* The Company sold 625,000 shares of MFC Development common stock to HSK for $156,250 and used the proceeds to pay HSK the $156,250 due to HSK.
* Any obligations from Genco to the Company were terminated, including any obligations Genco has pursuant to an oral lease of office space in Boca Raton, StateFlorida.
As a result of this transaction:
* The Company ceased to have any ownership interest in Genco.
* Genco's operations are treated as discontinued operations.
* None of Genco's assets or liabilities will be reflected as assets or liabilities on the Company's balance sheet.
John Acunto, who, together with his wife, is the Company's largest common stockholder, was also a guarantor of Genco's obligations to New Valu. Contemporaneously with the Company's agreement with New Valu and HSK, Mr. Acunto entered into a separate agreement with New Valu pursuant to which he acknowledged that his previous guarantee of Genco's obligations remains in full force and effect. The agreement also provides that:
* Mr. Acunto will cause the commons stock which he and his wife own in the Company to be pledged to New Valu as collateral for the loan;
* Mr. Acunto's employment agreement with Genco is terminated; and
* Mr. Acunto and Genco the parties will negotiate in good faith with respect to a new employment agreement.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On December 10, 2006, Anton Lee Wingeier resigned as a director, chief executive officer and chief financial officer of the Company and any other positions he held with the Company or its subsidiaries.
On December 11, 2006, the board of directors elected Loren R. Haynes as interim chief executive officer. Mr. Haynes, 45, has been a director since December 2005. Mr. Haynes has been the placeSouth Florida regional manager for Genco since May 29, 2006. From 2005 until May 2006, Mr. Haynes was vice president of sales and marketing for United Auto Group, an automobile brokerage firm. From 1997 to 2005 he was customer service engineer/installation coordinator for Sentry Technology Corp., a manufacturer of traveling robotic CCTV systems for industrial use. Mr. Haynes is the brother-in-law of John P. Acunto, Jr., a greater than 37% stockholder. Mr. Haynes was the designee of Mr. Acunto, as provided in his consulting agreement.
Item 9.01. Financial Statements and Exhibits.
(b) Pro forma financial information (See Exhibit 99.4)
(c) Exhibits
99.1 Agreement dated December 10, 2006 among the Company and
New Valu, Inc. and HSK, Inc.
99.2 Agreement dated December 10, 2006 between New Valu, Inc.
and John Acunto.
99.3 Letter dated December 10, 2006 from Anton Lee Wingeier to
the Company.
99.4 Pro forma financial information.
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.
(Registrant)
Date: December 14, 2006 /s/ Loren R. Haynes
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Loren R. Haynes
Interim Chief Executive Officer
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AGREEMENT
This Agreement made this 10th day of December, 2006, by and between New Valu, Inc. ("Lender") and HSK Funding, Inc. ("HSK") and Adsouth, Inc. and Adsouth Partners, Inc., (collectively "Adsouth")
W I T N E S S E T H
WHEREAS, Lender has loaned to Genco Power Solutions, Inc. ("Borrower"), the sum of Two Million One Hundred Thousand and 00/100 Dollars ($2,100,000.00) pursuant to the terms of a Loan Agreement dated May 8, 2006, a Promissory Note dated May 8, 2006 and other loan documents associated therewith which loan was modified by Modification to Loan Agreement dated September 5, 2006. (The loan dated May 8, 2006, together with the Modification to Loan Agreement shall collectively be referred to as the "Loan"); and
WHEREAS, the principal balance of the Loan as of the date hereof is One Million Eight Hundred Sixty Six Thousand Six Hundred Sixty-six and 00/100 Dollars ($1,866,666.00) together with accrued interest; and
WHEREAS, Adsouth guaranteed the repayment of the Loan pursuant to Commercial Guarantees executed by Adsouth (the "Commercial Guaranty(s)"); and
WHEREAS, Adsouth Partners, Inc. pledged 80% of the issued and outstanding common stock of Borrower to Lender as collateral for the Loan. The common stock pledged by Adsouth Partners, Inc. is represented by the following certificates (the "Genco Shares"):
Certificate No. Number of Shares
2 660
10 135
11 5 ;and
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WHEREAS, Adsouth has requested that it be released from all obligations from under its Guaranty to Lender and Lender has agreed upon the following terms and conditions; and
WHEREAS, HSK Funding loaned to Borrower, the sum of One Hundred Fifty Six Thousand Two Hundred Fifty and 00/100 Dollars ($156,250.00) pursuant to a Promissory Note dated October 18, 2006 (the "HSK Loan"); and
WHEREAS, Adsouth Partners, Inc. pledged 625,000 shares of the common stock of MFC Development Corp. as security for the HSK Loan.
NOW THEREFORE, in consideration of one and 00/100 dollars ($1.00) and other good and valuable consideration, a receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Lender hereby terminates the Commercial Guaranty executed by Adsouth, Inc. and Adsouth Partners, Inc. and releases Adsouth from any liability under the Guaranty subject to the terms of this Agreement.
2. In consideration of its release of the Commercial Guaranty by Lender as set forth above, Adsouth hereby transfers and conveys to Lender, all of the Genco Shares described above and represents that it does not own or have knowledge of any other shares of common stock, preferred stock, or warrants issued by Genco, to it or any other person or entity.
3. Adsouth acknowledges that any financial commitments, loans or indebtedness owed by Genco to Adsouth or to any of the officers, directors or shareholders of Adsouth by Genco are hereby forgiven, released and terminated and that Genco has no other further financial obligations to Adsouth, including but not limited to, any payments previously made pursuant to an unwritten lease by Adsouth to Genco with respect to Premises located at 1141 South Rogers Circle, Boca Raton, Florida 33487. Such lease is deemed to be terminated as of the date hereof and Adsouth acknowledges that there are no further amounts due and owing from Genco in connection with such lease. Genco agrees to vacate the Premises on or before December 17, 2006.
4. Lender agrees to release to Adsouth, 625,000 shares of the common stock of MFC Development Corp., which it holds as collateral for the Loan.
5. If Adsouth files a petition in bankruptcy or if a petition is involuntarily filed against Adsouth and if any of the terms of this Agreement are deemed void or if any transfers are deemed preferences or if the transfer of stock to the Lender is deemed void, then the release and termination of the Commercial Guaranty of Adsouth shall be null and void and the Guaranty shall be reinstated and shall be in full force and effect.
6. Adsouth does hereby sell and transfer the 625,000 shares of MFC Development Corp. stock to HSK for the sum of .25 cents per share or a total of One Hundred Fifty Six Thousand Two Hundred Fifty and 00/100 Dollars ($156,250.00) and Adsouth agrees that the proceeds of such sale shall be applied by HSK to the HSK Loan to pay the same in full and that the 625,000 shares shall be transferred free and clear of any liens and encumbrances to HSK.
7. Adsouth agrees to deliver to Lender, all of the corporate books and financial records of Genco simultaneously with the execution of this Agreement.
8. This Agreement shall bind the successors and assigns of the parties hereto.
(The remainder of this page intentionally left blank)
IN WITNESS WHEREOF the parties have executed this Agreement the day and year first written above.
ADSOUTH, INC.
By: /S/ Harlan Press_______________
Name: Harlan Press
Title: Chairman of the Board of Directors
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ADSOUTH PARTNERS, INC.
By: /S/ Loren Haynes_______________
Name: Loren Haynes
Title: Secretary and Director
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NEW VALU, INC.
By: /S/ Burton Kaufman________________
Name: Burton Kaufman
Title: Vice-President
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HSK FUNDING, INC.
By: /S/ Robert C. Nolt_____________
Name: Robert C. Nolt
Title: Chief Financial Officer
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STATE OF FLORIDA )
) ss:
COUNTY OF BROWARD )
On the 10 day of December in the year 2006, before me, the
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undersigned, personally appeared Harlan Press as Chairman of the Board of Directors for ADSOUTH, INC., personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary Public
STATE OF FLORIDA )
) ss:
COUNTY OF BROWARD )
On the 10 day of December in the year 2006, before me, the
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undersigned, personally appeared Loren Haynes as Secretary and Director for ADSOUTH PARTNERS, INC., personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary Public
STATE OF NEW YORK )
) ss:
COUNTY OF )
On the 11 day of December in the year 2006, before me, the
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undersigned, personally appeared Burton Kaufman as Vice President for NEW VALU, INC., personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary Public
STATE OF NEW YORK )
) ss:
COUNTY OF )
On the 11 day of December in the year 2006, before me, the
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undersigned, personally appeared Robert C. Nolt as Chief Financial Officer for HSK FUNDING, INC., personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary Public
AGREEMENT
Agreement made this 10 day of December, 2006 by and between New Valu, Inc. ("Lender") and John Acunto ("Guarantor")
W I T N E S S E T H
WHEREAS, Lender has loaned to Genco Power Solutions, Inc. ("Genco"), the sum of Two Million One Hundred Thousand and 00/100 Dollars ($2,100,000.00) pursuant to a Promissory Note and Loan Agreement each dated May 8, 2006, as modified by Modification to Loan Agreement dated September 5, 2006 (collectively the "Loan"); and
WHEREAS, Guarantor has personally guaranteed the obligations of Genco under the Loan pursuant to a Commercial Guaranty executed by Guarantor (the "Acunto Guaranty"); and
WHEREAS, Guarantor has been advised that Adsouth, Inc. and Adsouth Partners, Inc. have been released from their guarantees of the Loan pursuant to an Agreement executed simultaneously herewith and Guarantor, in consideration of his continued employment at Genco, agrees as follows:
NOW THEREFORE, in consideration of one and 00/100 dollars ($1.00) and other good and valuable consideration, a receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Guarantor hereby confirms that his Guaranty dated May 8, 2006 is in full force and effect with respect to the Loan notwithstanding the release of Adsouth, Inc. and Adsouth Partners, Inc. as Guarantors of the Loan and that Guarantor has no defenses or offsets to the Guaranty.
2. Guarantor agrees that all obligations of Genco to Guarantor are hereby forgiven, including any deferred compensation owed by Genco to the Guarantor and that no further indebtedness exists between Genco and Guarantor.
3. The Guarantor agrees to cause the common stock which he and his wife own in
Adsouth, Inc. to be transferred to the Lender, by documents to be executed within fifteen (15) days from the date hereof.
4. Guarantor agrees that his employment agreement with Genco is terminated and that he and Genco will negotiate in good faith to enter into a new employment agreement within ten (10) business days. Genco has executed this Agreement to acknowledge the above.
5. This Agreement shall bind the heirs, administrators, successors and assigns of the parties hereto.
(Remainder of page intentionally left blank)
IN WITNESS WHEREOF the parties have executed this Agreement the day and year first written above.
NEW VALU, INC.
By: /S/ Burton Kaufman___________ Name: Burton Kaufman Title: Vice President /S/ John Acunto__________________ John Acunto |
GENCO POWER SOLUTIONS, INC.
By: /S/ John Acunto______________ Name: John Acunto Title: Chief Executive Officer |
STATE OF NEW YORK )
) ss:
COUNTY OF )
On the 11 day of December in the year 2006, before me, the
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undersigned, personally appeared Burton Kaufman as Vice President for NEW VALU, INC., personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary Public
STATE OF FLORIDA )
) ss:
COUNTY OF BROWARD )
On the 10 day of December in the year 2006, before me, the
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undersigned, personally appeared JOHN ACUNTO, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary Public
STATE OF FLORIDA )
) ss:
COUNTY OF BROWARD )
On the 10 day of December in the year 2006, before me, the
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undersigned, personally appeared John Acunto as Chief Executive Officer for GENCO POWER SOLUTIONS, INC., personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary Public
Anton Lee Wingeier 19513 Estuary Drive Boca Raton, FL 33498
December 10, 2006
Harlan Press
Chairman of the Board
Adsouth Partners, Inc. and Subsidiaries
Mr. Press:
Effective December 10, 2006 (10:30am), I am resigning my position as Chief Executive Officer, Chief Financial Officer, Secretary, my directorship on the board of directors and any other positions I may hold with Adsouth Partners, Inc. and any of its subsidiaries.
For some time now, my duties with Adsouth Partners, Inc. have focused on the corporate matters of the parent company and not on the operating entities and I believe that Adsouth is now in a position whereby a more limited role is needed at the parent company level so that more company resources can be directed to its operations.
It is my recommendation that the Board of Directors act urgently to find my replacement. As of today, it has been more than a month since I have received compensation, and personally, I need to use my time and energy right now pursuing other business interests.
If needed, I am certainly willing to provide interim transitional services on a consulting basis, including that I will attend the mediation scheduled for Tuesday in New York, New York to cover the NVE lawsuit if so directed by the board.
Very truly yours,
/S/ Anton Lee Wingeier Anton Lee Wingeier Cc: Loren Haynes, Director John Cammarano, Director John P. Acunto, Jr., Asher Levitsky, Counsel for Adsouth Rob Abrams, Counsel for ALW Sam Rastogi, Counsel for Adsouth |
Adsouth Partners, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
As of and for the Nine Months Ended September 30, 2006
On December 11, 2006, pursuant to an agreement with New Valu, Inc. and HSK Funding, Inc., Adsouth Partners, Inc. (the "Company") transferred to New Valu its 80% interest in Genco Power Solutions, Inc. ("Genco") and New Valu terminated the Company's guarantee of the obligations of Genco to New Valu, which, on that date were $1,866,666. In addition, any obligations of Genco to the Company were cancelled.
The following pro forma unaudited condensed consolidated balance sheet as of September 30, 2006 and the pro forma unaudited condensed consolidated statement of operations for the nine months ended September 30, 2006 give effect to the Company's disposition of its majority-owned subsidiary, Genco.
The pro forma financial information is based on the historical consolidated financial statements of Adsouth Partners , Inc. as of September 30, 2006 and for the nine months ended September 30, 2006, giving effect to the disposition of Genco and the assumptions and adjustments in the accompanying notes to the pro forma unaudited condensed consolidated financial statements.
The pro forma unaudited condensed consolidated balance sheet as of September 30, 2006 gives effect to the disposition of Genco as if it occurred on January 1, 2006. The pro forma unaudited condensed consolidated statement of operations for the nine months ended September 30, 2006 gives effect to the disposition of Genco as if it had occurred on January 1, 2006.
The pro forma unaudited condensed consolidated financial statements have been prepared by the Company's management based upon the historical consolidated financial statements of Adsouth Partners, Inc. These pro forma condensed consolidated financial statements may not be indicative of what would have occurred if the disposition of Genco had actually occurred on the indicated dates and they should not be relied upon as an indication of future results of operations.
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Adsouth Partners, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet As of September 30, 2006
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Pro Forma Adjustments
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Historical Debit Credit Pro Forma
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ASSETS
Cash and cash equivalents $222,000 - $156,000 [A] $66,000
Accounts receivable - net 60,000 - 20,000 [A] 40,000
Marketable securities 1,687,000 - 562,000 [E] 1,125,000
Marketable securities held in escrow 675,000 - - 675,000
Inventory 312,000 - 312,000 [A] -
Interest receivable 9,000 - - 9,000
Current portion of deferred charge, related party 67,000 - - 67,000
Prepaid expenses and other current assets 448,000 - 437,000 [A] 11,000
Current portion of note receivable 275,000 - - 275,000
Assets of discontinued products segment 84,000 - - 84,000
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Total current assets 3,839,000 - 1,487,000 2,352,000
Property and equipment - net 1,157,000 - 646,000 [A] 511,000
Note receivable - net of current portion 488,000 - - 488,000
Goodwill 120,000 - 120,000 -
Deferred charge, related party - net of current portion 50,000 - - 50,000
Deferred loan costs 18,000 - 18,000 [A] -
Deposit 42,000 - 31,000 [A] 11,000
Investment in Genco - $1,001,000 [B] 1,001,000 [B] -
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TOTAL ASSETS $5,714,000 1,001,000 $3,303,000 $3,412,000
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continued
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The see notes to unaudited pro forma condensed consolidated financial statements.
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Adsouth Partners, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet As of September 30, 2006
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Pro Forma Adjustments
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Historical Debit Credit Pro Forma
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $1,584,000 $479,000 [A] - $1,105,000
Customer deposits 2,603,000 1,842,000 [A] - 761,000
Accrued expenses 215,000 179,000 [A] - 36,000
Current portion of notes payable 1,948,000 1,925,000 [A] - 23,000
Current portion of capital lease obligations 7,000 - - 7,000
Liabilities of discontinued products segment 175,000 - - 175,000
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Total current liabilities 6,532,000 4,425,000 - 2,107,000
Notes payable - net of current portion 51,000 - - 51,000
Capital lease obligations - net of current portion 21,000 - - 21,000
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Total liabilities 6,604,000 4,425,000 - 2,179,000
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(CAPITAL DEFICIENCY) STOCKHOLDERS' EQUITY
Preferred stock, $.0001 par value; 10,000,000 shares authorized,
1,500,000 designated as series B convertible preferred stock,
1,194,924 issued and outstanding - - - -
Common stock, $.0001 par value; 60,000,000 shares authorized,
9,309,065 issued and outstanding 1,000 - - 1,000
Additional paid-in capital 9,535,000 1,001,000 [B] - 8,534,000
Notes receivable - stockholder (21,000) - - (21,000)
Accumulated deficit (11,980,000) 30,000 [E] 3,529,000 [C] (8,481,000)
Accumulated other comprehensive income 1,575,000 375,000 [E] - 1,200,000
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Total stockholders' (deficiency) equity (890,000) 1,406,000 3,529,000 1,233,000
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TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY $5,714,000 $5,831,000 $3,529,000 $3,412,000
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The see notes to unaudited pro forma condensed consolidated financial statements.
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Adsouth Partners, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2006
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Pro Forma Adjustments
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Historical Debit Credit Pro Forma
---------- ----- ------ ---------
Revenues $6,558,000 $2,186,000 [D] - $4,372,000
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Costs and expenses
Media placement and production costs 3,790,000 - - 3,790,000
Cost of goods sold 1,706,000 - $1,706,000 [D] -
Selling, administrative and other expense 6,303,000 - 3,807,000 [D] 2,496,000
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Total costs and expenses 11,799,000 - 5,513,000 6,286,000
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(Loss) income from operations (5,241,000)(2,186,000) 5,513,000 1,914,000
Interest income 32,000 - - 32,000
Interest expense (197,000) - 189,000 (8,000)
Net gain on sale of marketable securities 225,000 30,000 [E] - 195,000
Non cash stock based expense from liquidated damages related to series B
preferred shareholders (263,000) - - (263,000)
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Loss from continuing operations (5,444,000)(2,216,000) 5,702,000 (1,958,000)
Loss from operations of discontinued products segment (2,667,000) - - (2,667,000)
Gain on disposal of discontinued products segment 2,611,000 - - 2,611,000
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Pro forma net loss ($5,500,000)(2,216,000) 5,702,000 ($2,014,000)
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PRO FORMA AMOUNTS PER SHARE OF COMMON STOCK
Pro forma Basic and diluted loss per share of common stock:
Pro forma loss from continuing operations ($.60) ($.21)
Loss from operations of discontinued product segment attributable to common
stockholders (.30) (.30)
Gain on disposal of discontinued products segment .29 .29
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Pro forma net loss ($.61) ($.22)
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Weighted average number of common shares:
Basic and diluted 9,014,898 9,014,898
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The see notes to unaudited pro forma condensed consolidated financial statements.
Note A - Balance Sheet
For purposes of the pro forma unaudited pro forma condensed consolidated balance sheet, all of the assets and liabilities of Genco are eliminated.
Note B -Investment in Genco
For purposes of the pro forma unaudited pro forma condensed consolidated balance sheet, the working capital invested by Adsouth Partners, Inc. into Genco is reflected as a reduction in additional paid-in capital.
Note C - Accumulated Deficit of Genco
For purposes of the pro forma unaudited pro forma condensed consolidated balance sheet, the accumulated deficit of Genco, from the date of its inception through September 30, 2006 is eliminated.
Note D - Statement of Operations
For purposes of the unaudited pro forma condensed statement of operations, all operating activity directly related to Genco is eliminated.
Note E - Sale of Marketable Securities
As a part of the agreement to sell its interest in Genco, the Company sold 625,000 shares of MFC Development Corp. stock to HSK Funding for $.25 cents per share or a total of $156,250.00 and Adsouth used the proceeds of the sale to pay in full a loan from HSK Funding. The shares of MFC Development had a cost basis of $187,000. The $30,000 loss is reflected in the unaudited pro forma condensed consolidated statement of operations.
As of September 30, 2006, the Company recorded on its balance sheet a mark to market unrealized gain of $1,575,000 attributable to its holdings of 2,625,000 shares of common stock of MFC Development Corp. of $1,575,000. In connection with the sale of Genco, the Company sold 625,000 shares of common stock of MFC and used the proceeds to satisfy a debt obligation of approximately $158,000. As such, the Company recorded a realized loss of $406,000 related to its holdings in MFC during the period from September 30, 2006 to December 11, 2006, the date of the sale.