Business Context and Reporting Period
This Form 8-K was filed by Smart Server, Inc. (Nevada) on January 8, 2017. The company is in the process of rebranding to RumbleON, Inc. and changing its trading symbol to "RMBL" effective January 10, 2017. The filing primarily details a strategic asset acquisition and significant corporate governance changes.
Key Financial Metrics and Transaction Details
The filing does not provide standard financial statements (revenue, profit, cash flow) for a reporting period. Instead, it outlines the financial structure of a material acquisition:
- Acquisition Target: Substantially all assets of NextGen Dealer Solutions, LLC (NextGen).
- Consideration: Approximately $750,000 in cash, 1,523,809 unregistered common shares, and a subordinated secured promissory note of $1,333,333.
- Note Terms: Interest accrues at 6.5% annually for the first two years, increasing to 8.5% annually thereafter, maturing on the third anniversary.
- Investor Funding: Accelerated funding of $1.35 million from investors via 1,161,920 shares and a $667,000 note.
- Outstanding Shares: 6,400,000 shares of common stock issued and outstanding as of the report date.
Material Changes and Corporate Actions
Several material changes were executed or approved in early January 2017:
- Asset Purchase: Entered into an Asset Purchase Agreement to acquire NextGen's proprietary technology platform, expected to close in Q1 2017.
- Board Expansion: The Board of Directors was increased from 2 to 6 members. New directors elected include Kevin Westfall, Denmar J. Dixon, and Mitch Pierce.
- Stock Class Restructuring: Approved an amendment to create Class A Common Stock (10 votes per share) and Class B Common Stock (1 vote per share). 1,000,000 authorized shares were designated as Class A.
- Executive Compensation: CEO Marshall Chesrown and CFO Steven R. Berrard exchanged Class B shares for Class A shares (875,000 and 125,000 shares, respectively).
- Stock Incentive Plan: Adopted the 2017 Stock Incentive Plan, reserving 12% of outstanding shares (768,000 shares) for issuance.
Outlook, Risks, and Contingencies
Management commentary and risks are centered on the successful closing of the NextGen acquisition and the implementation of the new capital structure.
- Closing Conditions: The acquisition is subject to standard closing conditions, including the absence of legal injunctions and performance of covenants.
- Termination Rights: Either party may terminate the agreement if closing does not occur by February 15, 2017.
- Interim Funding Obligation: The Company must fund NextGen's ordinary course payroll expenses up to $14,000 per week starting January 16, 2017, until closing or termination.
- Indemnification: Liability for indemnification is subject to a $50,000 loss threshold and a $1,333,333 cap, with specific exceptions for fundamental representations.
- Regulatory Risk: The name change and stock class amendment require a 20-day notice period to non-consenting stockholders before becoming effective.
Investor Verification Checklist
- Verify the closing date of the NextGen acquisition and the actual cash outflow required.
- Confirm the effective date of the name change to RumbleON, Inc. and the trading symbol change to "RMBL."
- Review the full Asset Purchase Agreement (Exhibit 2.1) for excluded assets and specific liabilities assumed.
- Monitor the dilution impact of the 1,523,809 acquisition shares and 1,161,920 investor shares on existing shareholders.
- Check for any legal proceedings that might trigger the termination right before February 15, 2017.