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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 27, 2005
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RCG COMPANIES INCORPORATED
(Exact name of registrant as specified in its charter)
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Delaware 1-8662 23-2265039
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
6836 Morrison Blvd., Ste. 200, Charlotte,
North Carolina 28211
(Address of principal executive offices) (Zip Code)
(704) 366-5054
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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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)) [GRAPHIC OMITTED]
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Item 1.01 Entry into Material Definitive Agreement
Disclosure information required for Item 1.01 is contained in Item 2.01
below which is incorporated by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets
On April 27, 2005, RCG Companies Incorporated ("RCG"), pursuant to the
terms of an Asset Purchase Agreement dated April 26, 2005 (the "APA"), closed a
transaction through which its wholly owned subsidiary Logisoft Corp.
("Logisoft") and Logisoft's wholly owned subsidiary eStorefronts.net
Corp.("eStorefronts" and together with Logisoft the "Sellers") sold
substantially all of the assets of Sellers to RMK Holdings, LLC ("Buyer"), in
consideration for which Buyer paid Sellers $699,000 and assumed $2,083,000 of
Sellers' liabilities. The purchase price paid is subject to a post closing
adjustment, as set forth in the APA, once the closing date financial statements
have been finalized.
In connection with the transactions set forth in the APA, RCG executed (i)
a Guaranty and Indemnification Agreement pursuant to which it guaranteed the
payment and performance obligations of Sellers under the APA, and (ii) a
Noncompetition Agreement pursuant to which it agreed not to compete with Buyer
in a limited number of States for a period of 5 years in the business of
reselling computer software and hardware, sales, design, hosting and maintenance
of internet and intranet websites, information technology consulting and
ecommerce software development and consulting.
The foregoing disclosures are in all cases subject to the terms and
provisions set forth in the APA, the Guaranty and Indemnification Agreement, and
the Noncompetition Agreement, copies of which are filed herewith as exhibits.
Item 7.01 Regulation FD Disclosure
A copy of a press release with respect to the foregoing transactions is
attached hereto as an Exhibit.
Item 9.01. Financial Statements and Exhibits
(b) Unaudited pro forma financial information of RCG reflecting the sale of
Logisoft business.
The unaudited pro forma consolidated financial information gives effect to
the sale of the Logisoft business as if the disposition had occurred for
the consolidated balance sheet on December 31, 2004, and for the
consolidated statement of operations on July 1 of each period presented.
The pro forma adjustments are based on presently available information.
The unaudited pro forma information has been included as required by the
1
Securities and Exchange Commission and is not necessarily indicative of
the results that would have been reported had the disposition actually
occurred on the dates specified, nor is it indicative of the results that
may be obtained in the future.
RCG Companies Incorporated and Subsidiaries
UNADITED PRO FORMA COMBINED BALANCE SHEET DATA
AT DECEMBER 31, 2004
(In thousands)
Pro Forma Adjustments
RCG Sale of Other RCG
Historical Logisoft Adjustments Pro Forma
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ASSETS
Cash and cash equivalents $ 1,163 $ 1,161 $ 2,324
Restricted cash 7,279 -- 7,279
Accounts receivable, net 1,353 (1,277) 76
Prepaid expenses and other current assets 1,858 (87) 1,771
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Total current assets 11,653 (203) 11,450
Property and equipment, net 853 (366) 487
Deferred costs and other assets 49 (43) 6
Net non-current assets of discontinued operations 376 -- 376
Goodwill and other intangible assets 18,005 (7,917) 10,088
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Total assets $ 30,936 $ (8,529) [A] $ 22,407
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LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable and other obligations-current portion $ 3,949 $ (501) $ 3,448
Accounts payable and accrued expenses 11,959 (1,819) 10,140
Net non-current liabilities of discontinued operations 4,478 -- 4,478
Unearned income 6,296 -- 6,296
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Total current liabilities 26,682 (2,320) 24,362
Warrant obligations 1,593 -- 1,593
Notes payable and other obligations 4,847 (64) 4,783
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Total liabilities 33,122 (2,384) [B] 30,738
Commitments and Contingencies
Shareholders' equity:
Common stock 896 -- 896
Additional paid-in capital 125,461 -- 125,461
Accumulated deficit (127,911) (6,145) (134,056)
Treasury stock at cost (632) -- (632)
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Total shareholders' equity (2,186) (6,145) (8,331)
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Total liabilities and shareholders' equity $ 30,936 $ (8,529) $ 22,407
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See Notes to Unaudited Pro Forma Consolidated Financial Information.
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RCG Companies Incorporated and Subsidiaries
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004
(In thousands, except share data)
Pro Forma Adjustments
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RCG Sale of Other RCG
Historical Logisoft Adjustments Pro Forma
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Revenue:
Services ................................... $ 41,341 $ (203) $ 41,138
Product sales .............................. 7,369 (7,369) --
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Total revenue ..................... 48,710 (7,572) 41,138
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Cost of revenue:
Services ................................... 41,349 (6) 41,343
Product sales .............................. 6,520 (6,520) --
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Total cost of revenue ............. 47,869 (6,526) 41,343
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Gross profit ...................... 841 (1,046) (205)
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Selling, general and administrative expenses 7,598 (1,192) 6,406
Depreciation and amortization .............. 221 (76) 145
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Operating costs and expenses ...... 7,819 (1,268) 6,551
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Operating loss .................... (6,978) (222) (6,756)
Interest expense, net ...................... 335 (42) 293
Other expense .............................. 325 8 333
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Loss from continuing operations before
extraordinary items ........................ (7,638) (256) (7,382)
Gain on debt restructuring .............. 2,257 -- 2,257
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Loss from continuing operations .... $ (5,381) $ (256) $ (5,125)
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Basic and diluted loss per share:
Loss from continuing operations ....... $ (0.25) $ (0.01) NA $ (0.24)
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Weighted average shares outstanding ........ 21,419,404 21,419,404 NA 21,419,404
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See Notes to Unaudited Pro Forma Consolidated Financial Information.
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RCG Companies Incorporated and Subsidiaries
UNADITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2004
(In thousands, except share data)
Pro Forma Adjustments
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RCG Sale of Other RCG
Historical Logisoft Adjustments Pro Forma
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Revenue:
Services ................................... $ 165,765 $ (389) $ 165,376
Product sales .............................. 15,042 (15,042) --
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Total revenue ..................... 180,807 (15,431) 165,376
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Cost of revenue:
Services ................................... 154,812 (260) 154,552
Product sales .............................. 13,244 (13,244) --
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Total cost of revenue ............. 168,056 (13,504) 154,552
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Gross profit ...................... 12,751 1,927 10,824
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Selling, general and administrative expenses 18,637 (2,138) 16,499
Depreciation and amortization .............. 810 (204) 606
Goodwill impairment ........................ 1,199 (199) 1,000
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Operating costs and expenses ...... 20,646 (2,541) 18,105
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Operating loss .................... (7,895) (614) (7,281)
Interest expense, net ...................... 842 (74) 768
Gain on investments, net ................... (120) -- (120)
Other income ............................... (95) 100 5
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Loss from continuing operations ... $ (8,522) $ (588) $ (7,934)
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Basic and diluted loss per share:
Loss from continuing operations ....... $ (0.51) $ (.04) NA $ (0.47)
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Weighted average shares outstanding ........ 16,799,540 16,799,540 NA 16,799,540
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See Notes to Unaudited Pro Forma Consolidated Financial Information.
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RCG Companies Incorporated and Subsidiaries
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(A) Total assets of the Logisoft business sold, net of the assumed cash
received if the transaction had closed on December 31, 2004.
(B) Liabilities assumed by the Purchaser.
(c) Exhibits
Exhibit Description
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10.1 Asset Purchase Agreement dated April 26, 2005, between RMK
Holdings, LLC, Logisoft Corp., and eStorefronts.net Corp.
10.2 Guaranty and Indemnification Agreement, dated April 26, 2005,
between RCG Companies Incorporated and RMK Holdings, LLC
10.3 Noncompetition Agreement, dated April 26, 2005, between RCG
Companies Incorporated and RMK Holdings, LLC
99.1 Press Release dated April 28, 2005
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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.
Dated: April 29, 2005
RCG COMPANIES INCORPORATED
By: /s/ Marc Bercoon
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Marc Bercoon
Chief Financial Officer