UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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): January 7, 2005
SmartServ Online, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 0-28008 13-3750708
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(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))
Item 1.01 Entry into a Material Definitive Agreement
As described in greater detail in Item 2.01 below, on January 7, 2005
SmartServ Online, Inc. (the "Company") acquired all of the issued and
outstanding capital stock of KPCCD, Inc. ("KPCCD") pursuant to a Stock Purchase
Agreement by and among Nimesh Patel, Ashok Patel and Kala Patel (collectively,
the "Sellers") and the Company, dated December 19, 2004 ("Agreement"). Following
the closing of this acquisition, KPCCD is a wholly-owned subsidiary of the
Company.
In connection with the closing of the transactions contemplated by the
Agreement, on January 7, 2005 KPCCD, the Sellers and Prima Communications, Inc.
("Prima"), a company controlled by the Sellers, entered into a Master Vendor
Agreement ("Vendor Agreement"). Under the Vendor Agreement, Prima will sell to
KPCCD at cost all of KPCCD's requirements of international prepaid calling cards
for up to one year after January 7, 2005. The Company has guaranteed the
obligations of KPCCD under the Vendor Agreement as disclosed in Item 2.03 below.
While the Vendor Agreement has a one year term, it is subject to early
termination upon the happening of certain enumerated events, including the
following:
o Automatic termination 30 days after the Company raises over $10
million in an equity financing or closes the acquisition of Telco
Group, Inc. (either a "Significant Event").
o If a Significant Event does not occur within nine months from the date
of the Vendor Agreement, upon 30 days written notice by Prima if Prima
is not satisfied with the Company's then current business plan.
o Immediately if the employment of Nimesh Patel or Kala Patel is
terminated by KPCCD (other than voluntary termination by the
employee).
o Upon 5 days notice provided by KPCCD.
Upon any such termination, all amounts outstanding at the time of the
termination shall be paid to Prima and, under certain circumstance, KPCCD will
be required to purchase from Prima all inventory that Prima is holding and has
ordered for future sale by KPCCD.
Item 2.01 Completion of Acquisition or Disposition of Assets
On January 7, 2005, the Company acquired all of the issued and outstanding
capital stock of KPCCD pursuant to the Agreement. Pursuant to the terms of the
Agreement, the Company issued 1,000,000 shares of its common stock, $.01 par
value per share ("Common Stock"), to the Sellers as consideration for acquiring
KPCCD.
KPCCD is a New York City-based distributor of international prepaid calling
cards. The Company expects KPCCD to continue in the same line of business as a
wholly-owned subsidiary of the Company. The Company expects that KPCCD will add
revenues of approximately $2 million per month.
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Per the terms of the Agreement, immediately prior to the closing KPCCD
distributed to Prima all of KPCCD's cash, accounts receivable, inventory
(including prepaid calling cards) and accounts payable. The Agreement also
provides the Sellers with certain registration rights with regard to the Common
Stock they received in the transaction. In particular, the Sellers received
"piggyback" registration rights for a period of two years after the closing,
which requires the Company to use best efforts to include the Sellers' shares in
any registration statement under the Securities Act of 1933 that the Company
otherwise files with the Securities and Exchange Commission to register the
Common Stock, except for certain registration statements relating to an equity
line of credit, employee benefit plans or certain business combinations.
In connection with the closing of the transactions contemplated by the
Agreement, on January 7, 2005 the Sellers and Prima entered into the Vendor
Agreement to sell international prepaid calling cards to KPCCD for up to one
year following the closing. The terms of the Vendor Agreement are summarized in
Item 1.01 above. In addition, the Company has guaranteed the obligations of
KPCCD under the Vendor Agreements as described in Item 2.03 below. Two of the
Sellers entered into one-year employment agreements with KPCCD.
Item 2.03 Creation of a Direct Financial Obligation
As described above in Item 1.01, the Company has guaranteed the obligations
of KPCCD under the Vendor Agreement. These obligations became effective on
January 7, 2005 and the terms and conditions are described in detail in Item
1.01 above. The exact amount of the obligations cannot be determined at this
time as the amount of inventory acquired will vary over time. The Company does
not have recourse against any third parties, and the payment of the obligations
may be accelerated as described in Item 1.01 above relating to early termination
of the Vendor Agreement. The information contained in Item 1.01 hereof is
incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
The financial statements required by this item will be filed by amendment
to this Form 8-K. The Company expects to file these financial statements within
75 days from the date of acquisition of KPCCD.
(b) Pro forma financial information.
The pro forma financial information required by this item will be filed by
amendment to this Form 8-K. The Company expects to file the pro forma financial
information within 75 days from the date of acquisition of KPCCD.
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(c) Exhibits.
Exhibit Description
2 Stock Purchase Agreement by and among Nimesh Patel,
Ashok Patel and Kala Patel and the Company, dated
December 19, 2004. The schedules and exhibits to the
Stock Purchase Agreement are listed at the end of the
Stock Purchase Agreement but have been omitted from
this Form 8-K. The Registrant agrees to supplementally
furnish a copy of any omitted schedule or exhibit to
the Securities and Exchange Commission upon request.
Forward-Looking Statements
This current report on Form 8-K contains forward-looking statements that involve
risks and uncertainties. Forward-looking statements in this document and those
made from time-to-time by the Company are made under the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements concerning future plans or results are necessarily only estimates and
actual results could differ materially from expectations. Certain factors that
could cause or contribute to such differences are described from time to time in
the Company's filings with the Securities and Exchange Commission, including but
not limited to, the "Risk Factors" described under the heading "Certain Factors
That May Affect Future Results" in the Company's Annual Report on Form 10-KSB/A
for the year ended December 31, 2003 and other SEC filings.
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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.
SMARTSERV ONLINE, INC.
Dated: January 13, 2005 By: /s/ Robert M. Pons
Robert M. Pons,
Chief Executive Officer
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EXHIBIT INDEX
Exhibit Description
2 Stock Purchase Agreement by and among Nimesh Patel,
Ashok Patel and Kala Patel and the Company, dated
December 19, 2004.
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