UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 7, 2005
SmartServ Online, Inc.
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(Exact Name of Registrant as Specified in its Charter)
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Delaware 0-28008 13-3750708
- ------------------------------- -------------------- -------------------
(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification No.)
2250 Butler Pike, Suite 150, Plymouth Meeting, Pennsylvania 19462
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (610) 397-0689
N/A
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(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:
[_] 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))
This report on Form 8-K/A amends and supplements the report on Form 8-K filed by
SmartServ Online, Inc. ("SmartServ") on January 13, 2005 (the "Report"). The
Report relates to SmartServ's acquisition of KPCCD, Inc. pursuant to the Stock
Purchase Agreement by and among Nimesh Patel, Ashok Patel and Kala Patel and
SmartServ, dated December 19, 2004. SmartServ hereby amends Item 9.01 of the
Report to read in its entirety as set forth below.
ITEM 9.01. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of businesses acquired.
The audited balance sheets of KPCCD, Inc. as of December 31, 2004, 2003 and
2002 and the related audited statements of operations and retained earnings and
cash flows for each of the years then ended are set forth as Exhibit 99.1 to
this amendment to Report, which exhibit is incorporated by reference into this
Item 9.01.
(b) Pro-forma financial information.
The unaudited pro forma condensed balance sheets of SmartServ as of
September 30, 2004 and KPCCD, Inc. as of December 31, 2004 and the unaudited pro
forma statements of income of SmartServ and KPCCD, Inc. for the year ended
December 31, 2003 and for the nine months ended September 30, 2004 are set forth
as Exhibit 99.2 to this amendment to Report, which exhibit is incorporated by
reference into this Item 9.01.
(c) Exhibits
2 Stock Purchase Agreement by and among Nimesh Patel, Ashok Patel and
Kala Patel and SmartServ, dated December 19, 2004 (filed previously as
Exhibit 2 to the Report)
99.1 Audited balance sheets of KPCCD, Inc. as of December 31, 2004, 2003
and 2002 and the related audited statements of operations and retained
earnings and cash flows for each of the years then ended.
99.2 Unaudited pro forma condensed balance sheets of SmartServ as of
September 30, 2004 and KPCCD, Inc. as of December 31, 2004 and the
unaudited pro forma statements of income of SmartServ and KPCCD, Inc.
for the year ended December 31, 2003 and for the nine months ended
September 30, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
SMARTSERV ONLINE, INC.
Dated: March 23, 2005 By:/s/ Robert M. Pons
-----------------------
Robert M. Pons,
Chief Executive Officer
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
Exhibit 2 Stock Purchase Agreement by and among Nimesh Patel,
Ashok Patel and Kala Patel and SmartServ, dated December
19, 2004 (filed previously as Exhibit 2 to the Report)
Exhibit 99.1 Audited balance sheets of KPCCD, Inc. as of December
31, 2004, 2003 and 2002 and the related audited statements
of operations and retained earnings and cash
flows for each of the years then ended.
Exhibit 99.2 Unaudited pro forma balance sheets of SmartServ as
of September 30, 2004 and KPCCD, Inc. as of December
31, 2004 and the unaudited pro forma statements of
income of SmartServ and KPCCD, Inc. for the year
ended December 31, 2003 and for the nine months
ended September 30, 2004.
EXHIBIT 99.1
STONE, RUSSO & LAZZARO, CPAs, LLP
Accountants & Consultants
333 Westchester Avenue-East Building
White Plains, New York 10604
Telephone 914-285-1040
Fax 914-285-0285
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Stockholders
KPCCD, Inc.
We have audited the accompanying balance sheet of KPCCD, INC. as of December 31,
2004, 2003 and 2002 and the related statements of operations and retained
earnings and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of KPCCD, INC. as of December 31,
2004, 2003 and 2002 and their results of operations and cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.
/s/ Stone, Russo and Lazzaro, CPAs, LLP
Stone, Russo and Lazzaro, CPAs, LLP
White Plains, New York
March 4, 2005
KPCCD, INC.
BALANCE SHEETS
DECEMBER 31,
2004 2003 2002
------------------- ------------------ -------------------
ASSETS
Current Assets
Cash $ - $9,848 $ 46,069
Accounts Receivable 2,227,479 173,549 788,014
Inventory 1,083,532 849,738 516,455
------------------- ------------------ -------------------
TOTAL ASSETS $ 3,311,011 $ 1,033,135 $ 1,350,538
=================== ================== ===================
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts Payable &
Accrued Expenses $ 2,264,573 $ 165,737 $ 633,822
Related company &
shareholder Loans Payable 817,680 773,680 -
------------------- ------------------ -------------------
Total Liabilities 3,082,253 939,417 633,822
------------------- ------------------ -------------------
STOCKHOLDERS' EQUITY
Common stock, no par value; 200 shares
authorized, 99 shares issued
and outstanding 2,000 2,000 2,000
Additional paid-in capital 73,000 73,000 -
Retained Earnings 153,758 18,718 714,716
------------------- ------------------ -------------------
Total Stockholders' Equity 228,758 93,718 716,716
------------------- ------------------ -------------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 3,311,011 $ 1,033,135 $ 1,350,538
=================== ================== ===================
See Notes to Financial Statements
KPCCD, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31,
2004 2003 2002
INCOME
Net Sales $ 19,755,212 $ 6,073,511 $ 12,321,482
---------------- ------------------ -----------------
Cost of Goods Sold
Beginning Inventory 849,738 516,455 472,826
Purchases 19,564,949 6,345,673 12,109,412
Ending Inventory (1,083,532) (849,738) (516,455)
---------------- ------------------ -----------------
Total Cost of Goods Sold 19,331,155 6,012,390 12,065,783
---------------- ------------------ -----------------
Gross Profit 424,057 61,121 255,699
---------------- ------------------ -----------------
Expenses
Advertising 1,342 2,000 -
Bank Charges 938 2,459 8,884
Insurance 519 378 471
Interest Expense - 34 919
Office Expenses 14,757 277 5,319
Payroll 98,136 44,828 22,706
Payroll Taxes 9,002 4,373 2,439
Professional Fees 61,560 12,548 6,900
Salesmen & Consultants 33,655 9,380 26,100
Rent 39,842 21,420 28,820
Telephone 7,196 469 1,252
Utilities 8,570 1,502 4,457
---------------- ------------------ -----------------
Total Expense 275,517 99,668 108,267
---------------- ------------------ -----------------
Income/(loss) before income taxes 148,540 (38,547) 147,432
Provision for local income taxes 13,500 788 10,556
---------------- ------------------ -----------------
Net Income/(loss) 135,040 (39,335) 136,876
Retained Earnings
Balance, Beginning of year 18,718 714,716 645,840
Less: Shareholders distributions - 656,663 68,000
---------------- ------------------ -----------------
Balance, end of year $ 153,758 $ 18,718 $ 714,716
=================== ================== =================
See Notes to Financial Statements
KPCCD, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
2004 2003 2002
---------------- ------------------ -----------------
OPERATING ACTIVITIES
Net Income/(loss) $ 135,040 $ (39,335) $ 136,876
Adjustments to reconcile
Net Income/(loss)
to net cash provided/(used)
by operations:
Accounts Receivable (2,053,930) 614,465 (50,308)
Inventory (233,794) (333,283) (43,629)
Accounts Payable and
Accrued expenses 2,098,836 (468,085) 71,130
---------------- ------------------ -----------------
Net cash provided/(used) by
Operating Activities (53,848) (226,238) 114,069
---------------- ------------------ -----------------
FINANCING ACTIVITIES
Shareholders draw - (656,663) (68,000)
Loans from related company
and shareholders 44,000 773,680 -
Additional paid-in capital - 73,000 -
---------------- ------------------ -----------------
Net cash provided/(used) by
Financing Activities 44,000 190,017 (68,000)
---------------- ------------------ -----------------
Net cash increase/(decrease) for year (9,848) (36,221) 46,069
Cash at beginning of year 9,848 46,069 -
---------------- ------------------ -----------------
Cash at end of year $- $9,848 $46,069
=================== ================== =================
Supplemental disclosures of
cash flow information:
Interest paid $- $34 $919
Income taxes paid $100 $13,538 $158
See Notes to Financial Statements
KPCCD, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004, 2003 AND 2002
Note 1 - Organization and summary of significant accounting policies:
Organization:
-------------
KPCCD, INC. (the "Company") is a distributor of prepaid telephone
calling cards. The Company has been in business since 1997. In
2003 the Company entered into the prepaid cell phone business but
the business was discontinued in the same year.
Use of estimates:
-----------------
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Concentrations of credit risk:
-------------------------------
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and
accounts receivable. Cash balances are insured by the FDIC up to
$100,000 per depositor. The Company's cash balances on deposit at
December 31, 2004, 2003 and 2002 do not exceed this amount. The
Company routinely assesses the financial strength of its
customers and, as a result, attempts to limit its exposure to
concentrations of credit risk. Management does not believe that
significant credit risk exists at December 31, 2004, 2003 and
2002 relating to its accounts receivable.
Advertising:
-------------
The Company expenses the cost of advertising and promotions as
incurred. Advertising costs expensed were $1,342 in 2004, $2,000
in 2003 and nothing in 2002.
KPCCD, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004, 2003 AND 2002
Inventories:
-------------
Inventory consists of calling cards purchased for resale.
Inventories are stated at the lower of cost or market.
Note 2 - Subsequent events - - Stock purchase agreement
On January 7, 2005 SmartServ Online, Inc. ("SmartServ") acquired
all of the issued and outstanding capital stock of the Company
pursuant to a Stock Purchase Agreement by and among Nimesh Patel,
Ashok Patel and Kala Patel (collectively, the "Sellers") and
SmartServ, dated December 19, 2004 ("Stock Purchase Agreement").
Pursuant to the terms of the Stock Purchase Agreement, SmartServ
issued 1,000,000 shares of its common stock, $.01 par value per
share, with an approximate fair market value of $1,720,000, to
the Sellers as consideration for acquiring the Company. Following
the closing of the acquisition, the Company became a wholly-owed
subsidiary of the SmartServ. SmartServ is located in Plymouth
Meeting, PA and it provides mobile phone service, discounted
international long distance service and content for mobile
communication devices.
In connection with the closing of the transactions contemplated
by the Stock Purchase Agreement, on January 7, 2005, the Sellers
and Prima Communications, Inc. ("Prima"), a company controlled by
the Sellers, entered into a Master Vendor Agreement (the "Vendor
Agreement"). Under the Vendor Agreement, Prima will sell to the
Company at cost all of the Company's requirements of
international prepaid calling cards for up to one year after
January 7, 2005. SmartServ guaranteed the obligations of the
Company under the Vendor Agreement. Per the terms of the Stock
Purchase Agreement, immediately prior to the closing the Company
distributed to Prima all of the Company's cash, accounts
receivable, inventory (including prepaid calling cards) and
accounts payable.
Note 3 - Lease:
The Company leases its office space from Kelly's Properties, LLC
a related company under an operating lease that expires in
December 2006. The lease
KPCCD, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004, 2003 AND 2002
provides for payments of supplemental amounts for real estate
taxes and expense escalations.
Rent expense for the years ended December 31, 2004, 2003 and 2002
was $39,342, $21,420 and $28,820, respectively.
Note 4 - Income taxes:
The accompanying financial statements do not contain a provision
for Federal or State income taxes since the Company is treated
for tax purposes as an S-Corporation, whereby any income or loss
is included in the Federal and State income tax returns of the
stockholders. New York City does not recognize S-Corporations,
therefore, there is a provision in the financial statements for
local tax.
EXHIBIT 99.2
SUMMARY OF UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements are based on the
historical financial statements of SmartServ Online, Inc. and KPCCD, Inc. and
have been prepared on a pro forma basis to give effect to the acquisition under
the purchase method of accounting, as if the transaction occurred at the
beginning of the period. The pro forma information was prepared based upon
certain assumptions described in the notes to the pro forma financial statements
and may not be indicative of results that would have occurred had the
acquisition occurred at the beginning of the period or results which may occur
in the future.
SmartServ Online, Inc.
Pro forma Balance Sheets
(Unaudited)
------------------ ------------------- ---------------------- ------------------
SmartServ KPCCD Pro Forma Pro Forma
------------------ ------------------- ---------------------- ------------------
September 30, December 31, Adjustments
2004 2004
Assets
Current assets
Cash $ 3,225,295 $-- $-- $ 3,225,295
Accounts receivable 105,821 2,227,479 2,333,300
Prepaid expenses 66,914 -- 66,914
Inventory -- 1,083,532 1,083,532
------------------ ------------------- ---------------------- ------------------
Total current assets 3,398,030 3,311,011 6,709,041
------------------ ------------------- ---------------------- ------------------
Property and equipment, net 97,008 -- 97,008
Other assets
Goodwill 1,814,889 -- 1,491,242 3,306,131
Security deposits 18,237 -- 18,237
------------------ ------------------- ---------------------- ------------------
Total Assets $ 5,328,164 $ 3,311,011 $ 1,491,242 $ 10,130,417
================== =================== ====================== ==================
See notes to unaudited pro forma financial statements
SmartServ Online, Inc.
Pro forma Balance Sheets
(Unaudited)
------------------ ------------------- ------------------ ------------------
SmartServ KPCCD Pro Forma Pro Forma
------------------ ------------------- ------------------ ------------------
September 30, December 31, Adjustments
2004 2004
Liabilities and Stockholders'
Equity (Deficiency)
Current liabilities
Current portion of notes payable $ 24,133 $ -- $ -- 24,133
Related company shareholde
loans payable -- 817,680 -- 817,680
Accounts payable and accrued expenses 2,899,592 2,264,573 5,164,165
------------------ ------------------- ------------------ ------------------
Total current liabilities
2,923,725 3,082,253 6,005,978
------------------ ------------------- ------------------ ------------------
Notes payable
34,687 -- 34,687
Commitments and Contingencies
-- -- --
Stockholders' Equity (Deficiency)
Preferred stock - $.01 par value 2,440,267 2,440,267
Common stock - $.01 par value 35,814 2,000 8,000 45,814
Additional paid-in capital 96,790,924 73,000 1,637,000 98,500,924
Accumulated deficit/retained earnings (96,733,600) 153,758 (153,758) (96,733,600)
------------------ ------------------- ------------------ ------------------
2,533,405 228,758 1,491,242 4,253,405
------------------ ------------------- ------------------ ------------------
Treasury stock (163,653) -- -- (163,653)
------------------ ------------------- ------------------ ------------------
Total stockholders' equity (deficit)
2,369,752 228,758 1,491,242 4,089,752
Total Liabilities and Stockholders'
Equity (Deficiency) $ 5,328,164 $ 3,311,011 $ 1,491,242 $ 10,130,417
================== =================== ================== ==================
See notes to unaudited pro forma financial statements
SmartServ Online, Inc.
Pro forma Statements of Operations
(Unaudited)
Year Ended December 31,
--------------------------------------------------------------------
SmartServ KPCCD Pro Forma Pro Forma
----------------- ---------------- ---------------- ----------------
2003 2003 Adjustments 2003
Revenues $ 709,388 $ 6,073,511 $ $ 6,782,899
--
----------------- ---------------- ---------------- ----------------
Costs and expenses:
Costs of services (2,732,571) -- (2,732,571)
Cost of goods sold -- (6,012,390) (6,012,390)
S,G&A expenses (4,150,151) (99,668) (4,249,819)
Stock-based compensation (374,569) -- (374,569)
Impairement of capital assets
and capitalized software (1,548,473) -- (1,548,473)
Provision for local taxes -- (788) (13,500)
----------------- ---------------- ---------------- ----------------
Total costs and expenses (8,805,764) (6,112,846) (14,931,322)
----------------- ---------------- ---------------- ----------------
(Loss)/income from operations (8,096,376) (39,335) (8,135,711)
----------------- ---------------- ---------------- ----------------
Other income
455,552 -- 455,552
Debt origination and other
financing costs (9,896,951) -- (9,896,951)
----------------- ----------------
( 9,441,399) -- (9,441,399)
----------------- ---------------- ---------------- ----------------
Net (loss)income $(17,537,775) $ (39,335) $(17,577,110)
================= ================ ================ ================
Basic and diluted loss per share $ (8.46) $ (5.72)
================= ================
Weighted average shares
outstanding - basic and diluted 2,073,448 3,073,448
================= ================
See notes to unaudited pro
forma financial statements
SmartServ Online, Inc.
Pro forma Statements of Operations
(Unaudited)
For the Nine Months Ended September 30,
------------------------------------------------------------------
SmartServ KPCCD Pro Forma Pro Forma
--------------- ---------------- ---------------- ----------------
2004 2004 Adjustments 2004
Revenues $ 268,189 $ 4,555,133 $ -- $ 4,823,322
--------------- ---------------- ---------------- ----------------
Costs and expenses:
Costs of services (1,626,357) -- 1,626,357)
Cost of goods sold -- (4,509,293) (4,509,293)
S,G&A expenses (2,170,367) (74,751) (2,245,118)
Provision for local taxes -- (591) (13,500)
--------------- ---------------- ---------------- ----------------
Total costs and expenses (3,796,724) (4,584,635) (8,394,268)
--------------- ---------------- ---------------- ----------------
(Loss)/income from operations (3,528,535) (29,501) (3,558,036)
--------------- ---------------- ---------------- ----------------
Other expense (177,513) -- (177,513)
Debt origination and other
financing costs (2,630,771) (2,630,771)
--
--------------- ---------------- ----------------
(2,808,284) -- (2,808,284)
--------------- ---------------- ---------------- ----------------
Net (loss)income $(6,336,819) $ (29,501) $ (6,366,320)
=============== ================ ================ ================
Preferred stock dividend accrued (3,130,460) (3,130,460)
--------------- ---------------- ----------------
Net loss applicable to common
shareholders $(9,467,279) $ (29,501) $(9,496,780)
=============== ================ ================
Basic and diluted loss per share $ (3.41) $ (1.69)
=============== ================
Weighted average shares outstanding -
basic and diluted 2,773,669 3,773,669
=============== ================
SMARTSERV ONLINE, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
On July 29, 2004, the Company announced that it had entered into a letter of
intent to acquire KPCCD, Inc., a New York City-based distributor of
international prepaid calling cards. On January 7, 2005, the Company issued
1,000,000 shares of SmartServ common stock in exchange for all of the
outstanding shares of KPCCD, Inc for a total purchase price of approximately
$1,720,000. The acquisition was accounted for using the purchase method of
accounting. The Pro Forma Financial Statements are unaudited and presented for
informational purposes only and may not reflect the Company's future results of
operations and financial position or what the results of operations and
financial position would have been had such transactions occurred as of the
dates indicated.
Basis of Presentation of Pro Forma Financial Statements
The unaudited pro forma combined financial statements include a pro forma
combined balance sheet as of September 30, 2004/December 31, 2004 (see
discussion below), and pro forma combined statements of operations for the nine
months ended September 30, 2004 and the year ended December 31, 2003 based on
the latest historical unaudited and audited financial statements of SmartServ
and KPCCD, Inc. The December 31, 2004 audited historical financial information
provided by KPCCD, Inc. was utilized in connection with preparing the pro forma
combined balance sheet since prior to the acquisition, KPCCD, Inc. maintained
their books on a cash basis. The financial statements were converted to the
accrual basis of accounting in connection with the audit of KPCCD, Inc.'s
financial statements as of and for the years ended December 31, 2004, 2003 and
2002. Overall, adjustments were made in the pro forma financial statements to
record the acquisitions, and to reflect known changes being made in the
operations of the business.
The weighted average shares outstanding for SmartServ have been adjusted for the
purposes of the pro forma financial statements to reflect the total shares
issued in connection with the acquisition. Historical net loss and pro forma net
loss per common share were computed based upon 2,773,669 and 3,773,669 weighted
average shares outstanding, respectively, for the nine months ended September
30, 2004 and 2,073,448 and 3,073,448 respectively for the year ended December
31, 2003.
