___________________
 
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 9, 2004
 
___________________
 
RCG COMPANIES INCORPORATED
(Exact name of registrant as specified in its charter)
 
___________________
 
Delaware
 
1-8662
 
23-2265039
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer 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)
 
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):
 
þ
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 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 December 10, 2004, RCG Companies Incorporated’s (“RCG”) subsidiary FSTours, Inc., d/b/a Vacation Express, (“Company” or “FSTours”) completed a transaction pursuant to an Asset Purchase Agreement by and between Company and Vacation Acquisition, LLC (“Purchaser”), dated December 9, 2004. Under the terms and conditions of the Asset Purchase Agreement, the Company sold to Purchaser substantially all of the assets of FSTours and the Purchaser agreed to assume $8,000,000 in liabilities, consisting principally of trade payables and certain other liabilities and obligations arising under contracts and other agreed matters. Under the terms of the Agreement, RCG has agreed to guaranty the payment and performance obligations of the Company. The terms of this transaction are more fully set forth in the Asset Purchase Agreement, a copy of which is attached to this filing.

RCG issued a press release describing the transaction, a copy of which is attached to this filing.

Item 9.01. Financial Statements and Exhibits

(b)   Unaudited pro forma financial information of RCG reflecting the sale of FSTours business.

The unaudited pro forma consolidated financial information gives effect to the sale of the FSTours business as if the disposition had occurred for the consolidated balance sheet on September 30, 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 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.


 
   1  

RCG Companies Incorporated and Subsidiaries
PRO FORMA CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 2004
(In thousands, except share data)
(Unaudited)
 
        Pro Forma Adjustments    
   
RCG
Historical
  
Sale of
FSTours
  
Other
Adjustments
  
RCG
Pro Forma
  
ASSETS
                  
Cash and cash equivalents    
  
$
2,640
              
$
2,640
  
Restricted cash    
    
19,210
  
$
(8,857
)
        
10,353
  
Accounts receivable, net of allowance of doubtful accounts of $328 and $332, respectively
    
3,679
    
(603
)
        
3,076
  
Due from affiliates    
    
6
                
6
  
Inventory    
    
73
                
73
  
Investments    
    
322
                
322
  
Prepaid expenses    
    
3,371
    
(1,290
)
        
2,081
  
Total current assets
    
29,301
    
(10,750
)
        
18,551
  
                           
Property and equipment, net    
    
1,751
    
(659
)
        
1,092
  
Deferred costs and other assets    
    
459
    
(2
)
        
457
  
Goodwill and other intangible assets    
    
24,394
    
(5,245
)
        
19,149
  
Total assets
  
$
55,905
  
$
(16,656
)
  
(A)
 
$
39,249
  
                           
LIABILITIES AND SHAREHOLDERS’ EQUITY
                          
Notes payable and other obligations-current portion    
  
$
2,148
              
$
2,148
  
Accounts payable and accrued expenses    
    
21,857
  
$
(8,382
)
  
(B)(C)
 
  
13,475
  
Unearned income    
    
20,914
    
(9,446
)
  
(D)
 
  
11,468
  
Total current liabilities
    
44,919
    
(17,828
)
        
27,091
  
                           
Warrant obligations    
    
2,802
                
2,802
  
Notes payable and other obligations    
    
7,279
                
7,279
  
Total liabilities
    
55,000
    
(17,828
)
        
37,172
  
Commitments and Contingencies
                          
Shareholders’ equity:
                          
Preferred stock, $.01 par value, 10,000,000 shares authorized, 4,300 and -0- issued, respectively
    
-
                
-
  
Common stock, $.04 par value, 200,000,000 shares authorized, 21,301,504 and 21,289,004 issued, 21,170,290 and 21,157,790 outstanding, respectively
    
850
                
850
  
Additional paid-in capital    
    
123,832
                
123,832
  
Accumulated deficit    
    
(122,869
)
  
1,172
          
(121,697
)
Accumulated other comprehensive loss    
    
(276
)
              
(276
)
Treasury stock at cost (131,214 shares)    
    
(632
)
              
(632
)
Total shareholders’ equity
    
905
    
1,172
          
2,077
  
                           
Total liabilities and shareholders’ equity
  
$
55,905
  
$
(16,656
)
      
$
39,249
  


   2  
 

RCG Companies Incorporated and Subsidiaries
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
fOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004
(In thousands, except share data)
(Unaudited)

 
        Pro Forma Adjustments   
   
RCG
Historical
  
Sale of
FSTours
  
Other
Adjustments
  
RCG
Pro Forma
  
Revenue:
                          
Services        
  
$
52,283
  
$
(25,906
)
      
$
26,377
  
Product sales    
    
4,517
                
4,517
  
Total revenue
    
56,800
    
(25,906
)
        
30,894
  
Cost of revenue:
                          
Services    
    
53,484
    
(27,409
)
        
26,075
  
Product sales    
    
4,016
                
4,016
  
Total cost of revenue
    
57,500
    
(27,409
)
        
30,091
  
                           
Gross (loss) profit
    
(700
)
  
(1,503
)
        
803
  
                           
Selling, general and administrative expenses    
    
6,791
    
(2,173
)
        
4,618
  
Depreciation and amortization    
    
213
    
(80
)
        
133
  
Operating costs and expenses
    
7,004
    
(2,253
)
        
4,751
  
                           
Operating loss
    
(7,704
)
  
(3,756
)
        
(3,948
)
                           
Interest expense, net    
    
278
    
(133
)
        
145
  
Gain on investments, net    
    
-
                
-
  
Other income    
    
(250
)
  
-
          
(250
)
                           
Net loss    
  
$
(7,732
)
$
(3,889
)
      
$
(3,843
)
                           
Basic and diluted net loss per share:
                          
Net loss
  
$
(0.37
)
            
$
(0.18
)
                           
Weighted average shares outstanding    
    
21,166,198
                
21,166,198
  



 
   3  
 

RCG Companies Incorporated and Subsidiaries
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
fOR THE YEAR ENDED JUNE 30, 2004
(In thousands, except share data)
(Unaudited)

 
        Pro Forma Adjustments   
   
RCG
Historical
  
Sale of
FSTours
  
Other
Adjustments
  
RCG
Pro Forma
  
Revenue:
                          
Services         
  
$
165,765
  
$
(72,873
)
      
$
92,892
  
Product sales    
    
15,042
                
15,042
  
Total revenue
    
180,807
    
(72,873
)
        
107,934
  
Cost of revenue:
                          
Services    
    
154,812
    
(72,812
)
        
82,000
  
Product sales    
    
13,244
                
13,244
  
Total cost of revenue
    
168,056
    
(72,812
)
        
95,244
  
                           
Gross (loss) profit
    
12,751
    
(61
)
        
12,690
  
                           
Selling, general and administrative expenses    
    
18,637
    
(4,888
)
        
13,749
  
Depreciation and amortization    
    
810
    
(197
)
        
613
  
Goodwill impairment    
    
1,199
                
1,199
  
Operating costs and expenses
    
20,646
    
(5,085
)
        
15,561
  
                           
Operating loss
    
(7,895
)
  
(5,024
)
        
(2,871
)
                           
Interest expense, net    
    
842
    
(322
)
        
520
  
Gain on investments, net    
    
(120
)
              
(120
)
Other income    
    
(95
)
  
(5
)
        
(100
)
Loss from continuing operations
   
(8,522
)
  
(5,351
)
        
(3,171
)
                           
Loss from discontinued operations, net    
    
(3,591
)
              
(3,591
)
                           
Net loss    
  
$
(12,113
)
$
(5,351
)
      
$
(6,762
)
                           
Basic and diluted net loss per share:
                          
Loss from continuing operations    
  
$
(0.51
)
            
$
(0.19
)
Loss from discontinued operations    
    
(0.21
)
              
(0.21
)
Net loss
  
$
(0.72
)
            
$
(0.40
)
                           
Weighted average shares outstanding    
    
16,799,540
                
16,799,540
  


 
   4  
 

RCG Companies Incorporated and Subsidiaries
NOTEs to Pro Forma statements


(A)   Assets of FSTours business sold.

(B)   Liabilities assumed by the Purchaser.

(C)   Debt forgiven by Purchaser’s affiliate.

(D)   Unearned income, primarily related to deposits for future travel assumed by the Purchaser.


(c)  Exhibits

Exhibit     Description

10.1 Asset Purchase Agreement dated December 9, 2004 by and between Vacation Acquisition, LLC and FSTours, Inc.

99.1  

 Press Release dated December 13, 2004.




 
   5  
 
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: December 14, 2004
 
RCG COMPANIES INCORPORATED


By: /s/ Michael Pruitt                
Michael Pruitt
President

 
   6