Filed Pursuant to Rule 424(b)(3)
Registration No. 333-34940
PROSPECTUS
SMARTSERV ONLINE, INC.
1,986,138 SHARES OF COMMON STOCK
o The selling stockholders are offering to sell 1,986,138 shares of
common stock of which 1,258,208 shares are issuable upon exercise
of warrants.
o We will not receive any proceeds from the offering of common
stock.
o Our common stock is traded and quoted on the Nasdaq National
Market (NMS) under the symbol "SSOL". On July 11, 2002, the last
reported bid price of our common stock was $0.97 and the last
reported asked price was $1.01.
The address and telephone number of SmartServ's principal executive offices are:
One Station Place
Stamford, CT 06902
(203) 353-5950
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE CAPTION "RISK FACTORS"
BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
The date of this Prospectus is July 26, 2002
TABLE OF CONTENTS
Page
----
Risk Factors...................................................................3
Special Information About Forward Looking Statements...........................7
The Company....................................................................7
Use of Proceeds................................................................7
Selling Stockholders...........................................................8
Plan of Distribution..........................................................10
Indemnification for Securities Act Liabilities................................11
Where You Can Find More Information About Us..................................13
Legal Matters.................................................................14
Experts.......................................................................14
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YOU SHOULD READ THE ENTIRE PROSPECTUS AND ANY DOCUMENTS INCORPORATED BY
REFERENCE CAREFULLY BEFORE PURCHASING SMARTSERV COMMON STOCK. IN THIS
PROSPECTUS, "SMARTSERV," "WE," "US" AND "OUR" REFER TO THE BUSINESS THAT IS
OWNED AND CONDUCTED BY SMARTSERV ONLINE, INC. AND ITS SUBSIDIARIES AND NOT TO
THE SELLING STOCKHOLDERS.
RISK FACTORS
BEFORE YOU BUY SHARES OF OUR COMMON STOCK, YOU SHOULD BE AWARE THAT THERE ARE
VARIOUS RISKS ASSOCIATED WITH THE PURCHASE OF OUR COMMON STOCK. YOU SHOULD
CONSIDER CAREFULLY THESE RISK FACTORS, TOGETHER WITH ALL OF THE OTHER
INFORMATION IN THIS PROSPECTUS AND ALL DOCUMENTS INCORPORATED BY REFERENCE,
BEFORE YOU DECIDE TO PURCHASE SHARES OF OUR COMMON STOCK. THE TRADING PRICE OF
OUR COMMON STOCK COULD DECLINE DUE TO ANY OF THESE RISKS, AND YOU MAY LOSE ALL
OR PART OF YOUR INVESTMENT. YOU SHOULD ALSO REFER TO THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS, INCLUDING THE DOCUMENTS WE INCORPORATE BY
REFERENCE UNDER "WHERE YOU CAN FIND MORE INFORMATION ABOUT US".
WE HAVE A HISTORY OF LOSSES AND IF WE DO NOT ACHIEVE PROFITABILITY WE
MAY NOT BE ABLE TO CONTINUE OUR BUSINESS
Although we had net income of $2,937,591 for the six month transition
period ended December 31, 2000, we incurred net losses of $4,109,347 for the
three months ended March 31, 2002, $14,819,860 for the year ended December 31,
2001, $30,993,559 for the year ended June 30, 2000, $7,124,126 for the year
ended June 30, 1999, $5,040,009 for the year ended June 30, 1998, $4,434,482 for
the year ended June 30, 1997 and $2,966,287 for the year ended June 30, 1996.
Included in the June 30, 2000 amount was a non-cash charge for stock-based
compensation of $30,271,024. On March 31, 2002, we had an accumulated deficit of
$68,931,181. Losses have resulted principally from costs incurred in connection
with activities aimed at developing our software, information and transactional
services and from costs associated with our marketing and administrative
activities. We have incurred substantial expenses and commitments and continue
to have negative cash flows from operations. These losses raise substantial
doubt as to our ability to continue as a going concern. In January, 2002 we
engaged investment bankers to assist us with the sale of equity to private
investors which led to the sale of equity securities to two investors. The funds
received pursuant to this transaction, however, will not support our operations
for an extended period of time. We can give no assurance that we will be able to
raise additional capital on satisfactory terms. Additionally, we can give no
assurance that we will be able to develop revenues sufficient to support our
operations.
WE MAY BE DELISTED FROM THE NASDAQ NATIONAL MARKET, WHICH COULD
ADVERSELY AFFECT THE LIQUIDITY AND VOLATILITY OF OUR COMMON STOCK
We have received notification from Nasdaq that we no longer meet the
listing requirements for Nasdaq National Market. While we are trying to maintain
our listing, we cannot guarantee that we will be successful in doing so.
Delisting from the Nasdaq National Market would require us to move our common
stock to either the Nasdaq SmallCap Market or the OTC Bulletin Board. The move
to either of those markets could decrease the liquidity and volume of our common
stock and reduce the number of market makers willing to trade in our stock,
making it more likely that wide fluctuations in the quoted price of our common
stock would occur. As a result, there is a risk that stockholders will not be
able to obtain accurate price quotes or be able to correctly assess the market
price of our stock. Increases in the
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volatility could also make it more difficult to pledge the common stock as
collateral, if stockholders sought to do so, because a lender might also be
unable to accurately value the common stock.
WE DEPEND ON A SMALL NUMBER OF CUSTOMERS, AND THE LOSS OF ANY ONE
CUSTOMER COULD ADVERSELY AFFECT OUR OPERATING RESULTS
Currently, substantially all of our revenues are generated through our
licensing arrangements with a small number of customers. Our results from
operations will depend upon numerous factors including the introduction and
market acceptance of new services, establishing alliances with strategic
marketing partners, competition and the regulatory environment. We anticipate
that our results from operations for the immediate future will continue to
depend to a significant extent upon revenues from a small number of customers.
In order to increase our revenues, we will need to attract and retain additional
customers. Our failure to obtain a sufficient number of additional customers
would adversely affect our results of operations.
OUR BUSINESS DEPENDS UPON STRATEGIC MARKETING PARTNERSHIPS WHICH MAY
NOT MATERIALIZE
We intend to sell our products and services primarily by entering into
non-exclusive agreements with strategic marketing partners who would brand our
information and transaction services with their own private label, promote the
product offering and then provide our information and e-commerce services to
their clients. Our success will depend on:
o our ability to enter into agreements with strategic marketing
partners;
o the ultimate success of these strategic marketing partners; and
o the ability of the strategic marketing partners to successfully
market our services.
Our failure to successfully effectuate our strategic alliance strategy
or the failure of the strategic marketing partners to develop and sustain a
market for our services would have a material adverse affect on our overall
performance.
Although we view strategic marketing alliances as a major factor in the
successful commercialization of our services, there can be no assurance that the
strategic marketing partners would view an alliance with us as significant to
their businesses and any potential benefits from these arrangements may not
materialize.
THE MARKET FOR OUR BUSINESS IS IN A DEVELOPMENT STAGE AND MAY NOT
ACHIEVE THE GROWTH WE EXPECT
Online information and transactional services, as well as the
convergence of wireless and Internet technologies, are developing markets. Our
future growth and profitability will depend, in part, upon consumer acceptance
of online information and transactional services in general and a significant
expansion in the consumer market for the delivery of such services via wireless
telephones, personal digital assistants and personal computers. Even if these
markets experience substantial growth, there can be no assurance that our
products and services will be commercially successful or will benefit from such
growth. Further, even if initially successful, any continued development and
expansion of the market for our products and services will depend in part upon
our ability to create and develop additional products and adjust existing
products in accordance with changing consumer preferences, all at competitive
prices. Our failure to develop new products and generate revenues could have a
material adverse effect on our financial condition and operating results.
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WE COMPETE AGAINST LARGER, WELL KNOWN COMPANIES WITH GREATER RESOURCES
The market for Web and wireless based information and transactional
services is highly competitive and involves rapid innovation and technological
change, shifting consumer preferences and frequent new product and service
introductions. Most of our competitors and potential competitors have
substantially greater financial, marketing and technical resources than we have.
Increased competition in the market for our products and services could limit
our ability to expand and materially and adversely affect our results from
operations.
The principal competitive factors in both the Internet-based and
wireless services industry include content, product features and quality, ease
of use, access to distribution channels, brand recognition, reliability and
price. We believe that potential new competitors, including large multimedia and
information system companies, are increasing their focus on transaction
processing. We face competition from numerous services delivered through the
Internet to personal computers. Although in its infancy, the wireless arena also
has its competitors, such as Semotus Solutions, Inc., I3 Mobile, Inc., Aether
Systems, Inc., 724 Solutions, Inc. and Everypath. We expect competition to
increase from existing competitors and from new competitors, including
telecommunications companies.
The information content provided through our software and communication
architecture is generally purchased through non-exclusive distribution
agreements. While we are not dependent on any single content provider, existing
and potential competitors may enter into agreements with these and other such
providers and thereby acquire the ability to deliver online information and
transactional services substantially similar to those provided by us.
WE ARE HIGHLY DEPENDENT ON OUR EXECUTIVE OFFICERS AND SEVERAL TECHNICAL
EMPLOYEES, THE LOSS OF ANY OF WHOM COULD HAVE AN ADVERSE IMPACT ON OUR FUTURE
OPERATIONS
We believe that, due to the rapid pace of innovation within our
industry, factors such as the technological and creative skills of our personnel
are more important in establishing and maintaining a leadership position within
the industry than legal protections of our technology. We are dependent on our
ability to recruit, retain and motivate high quality personnel. However,
competition for such personnel is intense and the inability to attract and
retain additional qualified employees or the loss of current key employees could
materially and adversely affect our business, operating results and financial
condition. We maintain and are the sole beneficiary of a key-person life
insurance policy on the life of (1) Mr. Sebastian E. Cassetta, our Chief
Executive Officer, in the amount of $1,000,000 and (2) Mr. Mario F. Rossi, our
Executive Vice President of Technology, in the amount of $500,000. The loss of
the services of either Mr. Cassetta or Mr. Rossi would have a material adverse
effect upon our business, financial condition and results of operations.
PROVISIONS IN OUR CHARTER MAY MAKE IT MORE DIFFICULT FOR A PERSON TO
ACQUIRE US AT A PREMIUM TO OUR CURRENT MARKET VALUE
Our charter restricts the ability of our stockholders to call a
stockholders' meeting and provides that our stockholders may not act by written
consent. Additionally, our Board of Directors is divided into three classes with
each class being elected by our stockholders in different years. Our charter
restricts the ability of our stockholders to change the number of directors and
classes of our board of directors. These provisions may have the effect of
deterring or delaying certain transactions involving an actual or potential
change in control of SmartServ, including transactions in which our stockholders
might
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otherwise receive a premium for their shares over then current market prices,
and may limit the ability of our stockholders to approve transactions that they
may deem to be in their best interests.
YOUR OWNERSHIP INTEREST, VOTING POWER AND THE MARKET PRICE OF OUR
COMMON STOCK MAY DECREASE BECAUSE WE HAVE ISSUED, AND MAY CONTINUE TO ISSUE, A
SUBSTANTIAL NUMBER OF SECURITIES CONVERTIBLE OR EXERCISABLE INTO OUR COMMON
STOCK
We have issued common stock, options and warrants to purchase our
common stock, and in the future we may issue additional shares of common stock,
options, warrants, preferred stock or other securities exercisable for or
convertible into our common stock. At June 30, 2002, there were $392,000 of our
prepaid warrants outstanding that were then convertible into 490,000 shares of
our common stock. Additionally, we have issued warrants to investors and
consultants and granted options to employees for the purchase of 5,417,200
shares of our common stock. Except for 1,731,684 shares subject to stock
options, substantially all of such shares have been registered for resale under
the Securities Act. Additional shares are available for sale under Rule 144 of
the Securities Act. Sales of these shares or the market's perception that these
sales could occur may cause the market price of our common stock to fall and may
make it more difficult for us to sell equity securities in the future at a time
and price that we deem appropriate or to use equity securities as consideration
for future acquisitions. In January, 2002, we engaged investment bankers to
assist us with the sale of equity to private investors which led to the sale of
securities to two investors. We continue to seek additional investors. If
additional sales of equity are effected, as to which there can be no assurance,
your ownership interest and voting power in SmartServ will be further diluted.
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS
We have designed and developed our own "device agnostic" information
and transaction platform, made up of our patent-pending "W2W MiddlewareTM" and
our content and processing engines. This platform is comprised of the "W2W
MiddlewareTM", based on Windows NT operating system and the authorization,
quote, news and transaction engines, based on Hewlett-Packard Company's Unix
operating system and Oracle's Corp.'s version 9i parallel server database.
Although we intend to protect our rights vigorously, there can be no assurance
that any of the measures to protect our proprietary rights will be successful.
In an effort to protect our proprietary rights, we rely upon a combination of
contract provisions, patents, trademarks, and copyright and trade secret laws.
We license the use of our products and services to our customers and partners
under agreements that contain terms and conditions prohibiting the unauthorized
reproduction of our products and services. We seek to protect the source code of
our application software and communications architecture as a trade secret and
as an unpublished copyrighted work.
We believe that our registered marks "SmartServ Online" and "SmartServ"
have significant value and are important to the marketing of our services. There
can be no absolute assurance, however, that our marks do not or will not violate
the proprietary rights of others, that our marks would be upheld if challenged
or that we would not be prevented from using our marks, any of which could have
an adverse effect on us. In addition, there can be no assurance that we will
have the financial resources necessary to enforce or defend our marks. We
believe that our software, products, services, service marks and other
proprietary rights do not infringe on the proprietary rights of third parties.
However, there can be no assurance that third parties will not assert
infringement claims against us with respect to current features, content or
services or that any such assertion may not require us to enter into royalty
arrangements or result in litigation.
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WE ARE INVOLVED IN SEVERAL PENDING LEGAL PROCEEDINGS WHICH, IF RESOLVED
AGAINST US, COULD CAUSE DILUTION TO OUR STOCKHOLDERS AND HAVE A MATERIAL
NEGATIVE IMPACT ON OUR OPERATIONS
From time to time we have been, and expect to continue to be, a party
to legal proceedings and claims in the ordinary course of our business. Our
ongoing legal proceedings with Michael Fishman and Commonwealth Associates, L.P.
are described in the "Legal Proceedings" section of our 10-KSB for the year
ended December 31, 2001, which is incorporated by reference into this document
(See the section entitled "Where You Can Find More Information About Us" on page
13). While we expect to contest these matters vigorously, litigation is
inherently uncertain and an adverse judgment on any of these claims could cause
dilution to our stockholders, as well as harm to our business. Even if not
meritorious, any of these current and future matters could require the
expenditure of significant financial and managerial resources.
SPECIAL INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus or in the documents we
incorporate by reference are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements involve certain known and unknown risks, uncertainties and other
factors which may cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by these forward-looking statements. These factors include,
among others, the factors set forth above under "Risk Factors." The words
"believe," "expect," "anticipate," "intend" and "plan" and similar expressions
identify forward-looking statements. We caution you not to place undue reliance
on these forward-looking statements. We undertake no obligation to update or
revise any forward-looking statements or publicly announce the result of any
revisions to any of the forward-looking statements in this document to reflect
future events or developments.
THE COMPANY
SmartServ provides Web and wireless applications and infrastructure
that allow financial institutions, network service providers and other
businesses to deliver content and transaction-intensive services to their work
forces and customers - in real time and via virtually any wired or wireless
device. SmartServ's products include a transaction processing engine, capable of
routing high-volume transactions to multiple destinations; proprietary W2W
MiddlewareTM that ensures content and applications are optimized for the full
array of present and future devices; and a suite of applications designed so
businesses and their customers can exploit the merits of wireless data exchange
and transactional capability.
USE OF PROCEEDS
Each selling stockholder is selling all of the shares covered by this
prospectus for his, her or its own account. Accordingly, we will not receive any
proceeds from the resale of the shares. We will, however, receive $8,551,600 if
all of the warrants for the underlying shares of common stock being registered
are exercised. We expect to use these proceeds, if any, for general corporate
purposes.
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SELLING STOCKHOLDERS
The following table sets forth the names of the selling stockholders,
the number of shares of common stock beneficially owned by the selling
stockholders as of July 11, 2002, the number of shares of common stock being
offered by the selling stockholders, the number of shares of common stock each
selling stockholder will beneficially own if the stockholder sells all of the
shares being registered and the selling stockholder's percentage ownership of
SmartServ common stock if all the shares in the offering are sold. The shares
being offered hereby are being registered to permit public secondary trading,
and the selling stockholders may offer all or part of the shares for resale from
time to time. However, the selling stockholders are under no obligation to sell
all or any portion of such shares nor are the selling stockholders obligated to
sell any shares immediately under this prospectus. All information with respect
to share ownership has been furnished by the selling stockholders. Because the
selling stockholders may sell all or part of their shares, no estimates can be
given as to the number of shares of common stock that will be held by the
selling stockholders upon termination of any offering made hereby.
The shares being offered for resale by the selling stockholders consist
of shares of common stock issued in private placements in January and May 2000,
shares of common stock held by certain financial consultants and shares of
common stock underlying warrants to purchase common stock. Other than Claudio
Guazzoni being a former director of SmartServ, consulting arrangements with
Bruno Guazzoni, Ehrenkrantz King Nussbaum, Inc., Michael Kramer, Lindquist
Global Advisors, LLC, and Steven Rosner, an investment advisory relationship
with America First Associates Corp. (of which Joseph A. Genzardi and Joseph R.
Ricupero are principals) and The Zanett Securities Corporation (of which Claudio
Guazzoni, Samuel Millbank and David M. McCarthy are principals), a contractual
license arrangement with Data Transmission Network Inc. (one of whose former
officers, Charles R. Wood, is one of our directors) and that Charles R. Klotz is
a former director of SmartServ and designee of TecCapital, Ltd. and Mario F.
Rossi is Executive Vice President, Chief Technology Officer and a director of
SmartServ, none of the selling stockholders have and, within the past three
years have not had, any position, office or other material relationship with us
or any of our predecessors or affiliates.
Shares of Common Beneficial Percent of Class
Stock Shares of Ownership After Owned After
Beneficially Common Stock Offering If All Offering if All
Selling Stockholders Owned to be Sold Shares Are Sold Shares Are Sold
- ----------------------------------- ---------------- ------------ --------------- ----------------
Data Transmission Network Corp. (1) 174,900 174,900 0 *
Steven B. Rosner 473,533 208,000 265,533 3.8%
Joseph A. Genzardi 5,000 5,000 0 *
Joseph R. Ricupero 5,000 5,000 0 *
America First Associates Corp. (2) 3,140 3,140 0 *
Bruno Guazzoni (3) 353,918 960,463 0 *
Claudio Guazzoni 65,280 65,280 0 *
Samuel Millbank 2,718 2,718 0 *
David M. McCarthy 5,347 5,347 0 *
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Shares of Common Beneficial Percent of Class
Stock Shares of Ownership After Owned After
Beneficially Common Stock Offering If All Offering if All
Selling Stockholders Owned to be Sold Shares Are Sold Shares Are Sold
- ----------------------------------- ---------------- ------------ --------------- ----------------
Zanett Lombardier, Ltd. 21,260 21,260 0 *
TecCapital, Ltd.(4) 303,030 303,030 0 *
Ira Abbott 2,000 2,000 0 *
CLFS Equities(5) 2,000 2,000 0 *
Henry Snow 52,000 52,000 0 *
John and Anna Albanese 8,000 8,000 0 *
Marvin and Susan Numeroff 8,000 8,000 0 *
Goldie Grief 6,000 6,000 0 *
H.P. Hiranandani 4,000 4,000 0 *
Gail Markiewicz 4,000 4,000 0 *
Edward G. Brown 2,000 2,000 0 *
Andrew and Susan Carter 2,000 2,000 0 *
John and Donna Franco 2,000 2,000 0 *
Arthur George Frost 2,000 2,000 0 *
S.W. Ghali, MD 2,000 2,000 0 *
Ernest Gottdiener 2,000 2,000 0 *
Michael Miller 2,000 2,000 0 *
Frank and Diane Mills 2,000 2,000 0 *
Anthony Pirrera 2,000 2,000 0 *
Plushbottom & Peabody, Ltd.(6) 2,000 2,000 0 *
Mark I. Silverman 2,000 2,000 0 *
Maceo K. Sloan 2,000 2,000 0 *
H. Diehl Suss 2,000 2,000 0 *
Ervin Tansky 2,000 2,000 0 *
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Shares of Common Beneficial Percent of Class
Stock Shares of Ownership After Owned After
Beneficially Common Stock Offering If All Offering if All
Selling Stockholders Owned to be Sold Shares Are Sold Shares Are Sold
- ----------------------------------- ---------------- ------------ --------------- ----------------
Stephen and Anndra Martinelli 1,000 1,000 0 *
Evelyn, Lori and Lisa Martinelli 1,000 1,000 0 *
Michael Kramer 16,000 16,000 0 *
Lindquist Global Advisors, LLC(7) 50,000 50,000 0 *
Mario F. Rossi 343,830 50,000 293,830 4.2%
Total 1,938,956 1,986,138 559,363 7.9%
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* Less than 1%.
1. We have been advised by Data Transmission Network, Corp. that Brian L.
Larson, Senior Vice President and Chief Financial Officer, is the
person who directs the investments of Data Transmission Network, Corp.
2. We have been advised by America First Associates Corp. that its
controlling stockholders are Joseph A. Genzardi and Joseph Ricupero.
3. Although he owns warrants to purchase 960,463 shares of common stock,
Mr. Guazzoni agreed not to exercise his warrants to the extent that he
would beneficially own more than 4.99% of our common stock. Mr.
Guazzoni may waive this restriction on 61 days notice.
4. David R. Barclay and Frederick H. Barclay have sole voting and
investment power with respect to the shares of SmartServ being resold
for the account of TecCapital, Ltd.
5. Cynthia Farber, Debra Lustig and Shelly Sapkin have shared voting and
investment power with respect to the shares of SmartServ being resold
for the account of CLFS Equities.
6. Samuel Weiss has sole voting and investment power with respect to the
shares of SmartServ being resold for the account of Plushbottom and
Peabody, Ltd.
7. Anders Lindquist has sole voting and investment power with respect to
the shares of SmartServ being resold for the account of Lindquist
Global Advisors, LLC.
PLAN OF DISTRIBUTION
The shares may be sold or distributed from time to time by the selling
stockholders or by pledgees, donees or transferees of, or successors in interest
to, the selling stockholders, directly to one or more purchasers (including
pledgees) or through brokers, dealers or underwriters who may act solely as
agents or may acquire shares as principals, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices, which may be changed. The distribution of the shares
may be effected in one or more of the following methods:
o ordinary brokers transactions, which may include long or short
sales,
o transactions involving cross or block trades or otherwise on the
OTC Bulletin Board,
o purchases by brokers, dealers or underwriters as principal and
resale by such purchasers for their own accounts pursuant to this
prospectus,
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o "at the market" to or through market makers or into an existing
market for the common stock,
o in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected
through agents,
o through transactions in options, swaps or other derivatives
(whether exchange listed or otherwise), or
o any combination of the foregoing, or by any other legally
available means.
In addition, the selling stockholders may enter into hedging
transactions with broker-dealers who may engage in short sales of shares in the
course of hedging the positions they assume with the selling stockholders. The
selling stockholders may also enter into option or other transactions with
broker-dealers that require the delivery by such broker-dealers of the shares,
which shares may be resold thereafter pursuant to this prospectus.
Brokers, dealers, underwriters or agents participating in the
distribution of the shares may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders and/or the purchasers
of shares for whom such broker-dealers may act as agent or to whom they may sell
as principal or both (which compensation as to a particular broker-dealer may be
in excess of customary commissions). The selling stockholders and any
broker-dealers acting in connection with the sale of the shares hereunder may be
deemed to be underwriters within the meaning of Section 2(11) of the Securities
Act of 1933, and any commissions received by them and any profit realized by
them on the resale of shares as principals may be deemed underwriting
compensation under the Securities Act of 1933. Neither SmartServ nor the selling
stockholders can presently estimate the amount of such compensation. SmartServ
knows of no existing arrangements between the selling stockholders and any other
stockholder, broker, dealer, underwriter or agent relating to the sale or
distribution of the shares.
SmartServ will not receive any proceeds from the sale of the shares
pursuant to this prospectus. SmartServ has agreed to bear the expenses of the
registration of the shares, including legal and accounting fees, and such
expenses are estimated to be approximately $30,000.
SmartServ has informed the selling stockholders that while they are
engaged in a distribution of the shares included in this prospectus they are
required to comply with certain anti-manipulative rules contained in Regulation
M under the Securities Exchange Act of 1934. With certain exceptions, Regulation
M precludes the selling stockholders, any affiliated purchasers, and any
broker-dealer or other person who participates in such distribution from bidding
for or purchasing, or attempting to induce any person to bid for or purchase any
security which is the subject of the distribution until the entire distribution
is complete. Regulation M also prohibits any bids or purchases made in order to
stabilize the price of a security in connection with the distribution of that
security. All of the foregoing may affect the marketability of the shares
offered by this prospectus.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the Delaware General Corporate Law ("DGCL")
enables a corporation in its original certificate of incorporation or an
amendment thereto to eliminate or limit the personal liability of a director to
a corporation or its stockholders for violations of the director's fiduciary
duty, except:
o for any breach of a director's duty of loyalty to the corporation
or its stockholders,
o for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
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o pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock
purchases or redemptions), or
o for any transaction from which a director derived an improper
personal benefit.
The Amended and Restated Certificate of Incorporation of SmartServ
provides for the elimination of the liability of directors to the extent
permitted by the DGCL.
Section 145 of the DGCL provides, in summary, that directors and
officers of Delaware corporations are entitled, under certain circumstances, to
be indemnified against all expenses and liabilities (including attorney's fees)
incurred by them as a result of suits brought against them in their capacity as
a director or officer, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful; provided that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, they
are fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper. Any such indemnification may be made by the corporation
only as authorized in each specific case upon a determination by the
stockholders or disinterested directors that indemnification is proper because
the indemnitee has met the applicable standard of conduct. SmartServ's By-Laws
entitle officers and directors of SmartServ to indemnification to the fullest
extent permitted by the DGCL.
SmartServ has agreed to indemnify each of its directors and certain
officers against certain liabilities, including liabilities under the Securities
Act of 1933. In addition, SmartServ maintains an insurance policy with respect
to potential liabilities of its directors and officers, including potential
liabilities under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
SmartServ pursuant to the provisions described above, or otherwise, SmartServ
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by SmartServ of expenses incurred or paid by
a director, officer or controlling person of SmartServ in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, SmartServ
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
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WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. Our SEC filings are also available to the public from the
SEC's Website at "http://www.sec.gov."
We have filed with the SEC amendment no. 1 on Form S-3 to our
post-effective amendment no. 1 to the registration statement on Form SB-2 to
register shares of our common stock. This prospectus is part of that
registration statement and, as permitted by the SEC's rules, does not contain
all the information included in the registration statement. For further
information with respect to us or our common stock, you may refer to the
registration statement and to the exhibits filed as part of that registration
statement. You can review and copy the registration statement and its exhibits
at the public reference facilities maintained by the SEC as described above. The
registration statement, including its exhibits, is also available on the SEC's
web site.
This prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and information that we file later
with the SEC will automatically update or supersede this information. We
incorporate by reference the documents listed below and any future filing we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended:
o Quarterly Report on Form 10-QSB for the quarter ended March 31,
2002 filed with the SEC on May 17, 2002
o Amended Annual Report on Form 10-KSB/A for the fiscal year ended
December 31, 2001 filed with the SEC on April 30, 2002
o Annual Report on Form 10-KSB for the fiscal year ended December
31, 2001 filed with the SEC on April 16, 2002
o The description of SmartServ's common stock contained in
Post-Effective Amendment No. 1 to the Registration Statement on
Form SB-2 (333-34940) filed with the SEC on January 31, 2002
You may request a copy of these filings, at no cost, by writing to us
at our executive offices at One Station Place, Stamford, CT 06902, Attention:
Thomas W. Haller, or by calling us at (203) 353-5950.
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LEGAL MATTERS
The validity of the shares of common stock offered in this prospectus
has been passed upon for us by Jenkens & Gilchrist Parker Chapin LLP, The
Chrysler Building, 405 Lexington Avenue, New York, New York 10174. Its telephone
number is (212) 704-6000.
EXPERTS
The consolidated financial statements of SmartServ Online, Inc.
appearing in SmartServ Online, Inc.'s Annual Report (Form 10-KSB) for the year
ended December 31, 2001 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which contain an explanatory
paragraph describing conditions that raise substantial doubt about the Company's
ability to continue as a going concern as described in Note 1 to the
consolidated financial statements) included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated by reference
in reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
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SMARTSERV ONLINE, INC.
1,986,138 SHARES OF
COMMON STOCK
WE HAVE NOT AUTHORIZED
ANY DEALER, SALESPERSON OR ANY
OTHER PERSON TO GIVE ANY
INFORMATION OR TO REPRESENT
ANYTHING NOT CONTAINED IN THIS
PROSPECTUS. YOU MUST NOT RELY
ON ANY UNAUTHORIZED
INFORMATION. THIS PROSPECTUS
DOES NOT OFFER TO SELL OR BUY
ANY SHARES IN ANY JURISDICTION
WHERE IT IS UNLAWFUL. THE
INFORMATION IN THIS PROSPECTUS
IS CURRENT AS OF JULY 11,
2002.
_________________ _________________
PROSPECTUS
_________________ _________________
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