As filed with the Securities and Exchange Commission on August 8, 2002
Registration No. 333-90852
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SMARTSERV ONLINE, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3750708
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Station Place
Stamford, CT 06902
(203) 353-5950
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(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
Richard D. Kerschner, Esq.
Senior Vice President and General Counsel
SmartServ Online, Inc.
One Station Place
Stamford, CT 06902
(203) 353-5950
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(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copy to:
Michael J. Shef, Esq.
Jenkens & Gilchrist Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Telephone No.: (212) 704-6000
Facsimile No.: (212) 704-6288
Approximate date of commencement of proposed sale to public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. |_| ___________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| ___________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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Amount Proposed Proposed
Title of Each Class to Maximum Maximum
of Securities to be be Registered Offering Price Aggregate Amount of
Registered (1) per Share Offering Price Registration Fee
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Common Stock, $.01 par
value per share, issuable upon
exercise of callable warrants 1,428,572 $1.40 $2,000,001 $184.00(2)
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Common Stock, $.01 par
value per share, issuable upon
exercise of non-callable
warrants 294,642 $1.47 $ 433,124 $ 39.85(2)
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Common Stock, $.01 par
value per share ................ 785,714 $0.735(3) $577,500 $53.13(2)
=====================================================================================================================
(1) Pursuant to Rule 416(b), there shall be deemed covered hereby all
additional securities resulting from antidilution adjustments
(2) Previously paid.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933; based on the average
of the bid and asked price reported on the Nasdaq National Market on June
19, 2002.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
SUBJECT TO COMPLETION, DATED AUGUST 8, 2002
The information in this prospectus is not complete and may be changed. We have
filed a registration statement relating to these securities with the Securities
and Exchange Commission. The selling stockholders may not sell these securities
nor may they accept offers to buy these securities prior to the time the
registration statement becomes effective. This prospectus is not an offer to
sell these securities and is not soliciting an offer to buy these securities in
any state in which the offer or sale is not permitted.
PROSPECTUS
SmartServ Online, Inc.
2,508,928 Shares of Common Stock
o The selling stockholders are offering to sell 2,508,928 shares of
common stock of which 2,258,930 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 August 6, 2002, the last reported
bid price of our common stock was $0.75 and the last reported asked
price was $0.82.
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.
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The date of this Prospectus is August __, 2002
Table of Contents
Page
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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..................................12
Legal Matters.................................................................13
Experts.......................................................................13
-2-
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
$68,931,180. 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. On January 3, 2002 we
engaged investment bankers to assist us with the sale of equity to private
investors which led to the sale of securities to the selling stockholders (see
"Selling Stockholders" on page 8). These funds, 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 likely that wider 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 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.
-3-
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 THE 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.
-4-
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 industries 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 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.
-5-
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 May 15, 2002, there were $392,000 of our
prepaid warrants outstanding that were then convertible into 280,000 shares of
our common stock. Additionally, we have issued warrants to investors and
consultants and granted options to employees for the purchase of 3,732,100
shares of our common stock. Except for 1,735,284 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. On January 3, 2002 we engaged investment bankers to
assist us with the sale of equity to private investors which led to the sale of
securities to the selling stockholders (see "Selling Stockholders" on page 8).
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 8i 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.
-6-
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 Form 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
11). 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 $2,813,751 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.
-7-
SELLING STOCKHOLDERS
SmartServ issued the common stock and the warrants to purchase common
stock that are covered by this prospectus to the selling stockholders on June 5,
2002 pursuant to a securities purchase agreement dated May 20, 2002, as amended
on June 4, 2002. The original securities purchase agreement provided for an
initial investment amount of $2,000,000 in exchange for 761,035 shares of common
stock, non-callable warrants to purchase 190,259 shares of common stock at $2.76
per shares and callable warrants to purchase 308,706 shares of common stock at
$2.628 per share. The purchase price of the stock and the exercise prices of the
warrants were based upon the price of SmartServ's common stock on the two
business days after the date on which SmartServ filed its quarterly report on
Form 10-Q for the quarter ended March 31, 2002 (the quarterly report on Form
10-Q was filed on May 17, 2002). If all the warrants had been exercised under
the May 20, 2002 securities purchase agreement, SmartServ would have received an
additional $1,336,394. The closing of the transaction was conditioned on, among
other things, receiving notice from Nasdaq that the transaction satisfied the
requirements of the Nasdaq Marketplace Rules. The securities purchase agreement
also provided that the selling stockholders could terminate the transaction if
it did not close by May 30, 2002. It became apparent on May 29, 2002 that the
transaction would not close by May 30, 2002 because SmartServ had not received
notice from Nasdaq that the transaction satisfied the requirements of the Nasdaq
Marketplace Rules. Therefore, the parties began to negotiate a new transaction
that was accepted by Nasdaq on June 4, 2002. An amendment to the original
securities purchase agreement was signed on June 5, 2002. Pursuant to the
amendment, the selling stockholders initially invested $1,100,000, for which
they received an aggregate of 785,714 shares of common stock, callable warrants
to purchase an aggregate of 1,428,572 shares of common stock at $1.40 per
shares, non-callable warrants to purchase an aggregate of 196,428 shares of
common stock at $1.47 per share and the right to receive additional non-callable
warrants to purchase 357,144 shares of common stock at $1.47 per share upon the
exercise of the callable warrants. The purchase price of the stock and the
exercise prices of the warrants were based upon the price of SmartServ's common
stock on the day SmartServ received notice from Nasdaq that the transaction
satisfied the requirements of the Nasdaq Marketplace Rules. If all the warrants
are exercised, not including non-callable warrants to be issued on exercise of
callable warrants, SmartServ will receive an additional $2,288,749. Other than
the changes described above, there were no material changes to the terms of the
securities purchase agreement, the warrants or the registration rights agreement
between May 20, 2002 and June 5, 2002 or subsequent thereto.
Pursuant to the securities purchase agreement, prior to December 5,
2002 SmartServ may not sell any of its common stock or securities which are
convertible into its common stock to a third party purchaser unless (i) the
selling stockholders are given notice of SmartServ's intention to enter into the
transaction and (ii) SmartServ gives the selling stockholders the opportunity to
purchase the securities being offered to the third party purchaser, or such
portion thereof as the selling stockholders determine, on the same terms as
SmartServ would have given to the third party purchaser. The securities purchase
agreement also provided that, on the closing date, the selling stockholders
would be reimbursed an aggregate of $80,000 to cover their fees and expenses and
those of their counsel. Additionally, SmartServ must reimburse the selling
stockholders an aggregate of $50,000 to cover their fees and expenses on the
earlier of (i) December 5, 2002, or (ii) the date SmartServ provides notice to
the selling stockholders calling the callable warrants (described below).
The callable warrants are exercisable at $1.40 per share and provide
that SmartServ may call the warrants for exercise or cancellation at any time
after the earlier of (i) the date a registration statement has been continuously
effective for ten trading days and (ii) November 2,
-8-
2002. Once SmartServ provides the selling stockholders with notice calling the
callable warrants, the selling stockholders have ten days to decide whether to
exercise the warrants or have them canceled. Additionally, the callable warrant
provides that when the selling stockholders exercise the warrant the selling
stockholders are entitled to receive a non-callable warrant exercisable for 25%
of the number of shares the callable warrant is exercisable for. The new warrant
will be exercisable at the same price as the previous non-callable warrant. The
non-callable warrants are exercisable at $1.47 per share and provide that the
exercise price be adjusted downwards if SmartServ engages in sales of its common
stock or other securities convertible into its common stock at a price per share
less than the exercise price of the non-callable warrants. The callable and
non-callable warrants expire on June 5, 2007. Both warrants provide for
equivalent adjustments in the event of stock splits, dividends or similar
events, and provide that in the event of a consolidation, merger or pro-rata
distribution of cash or property, the selling stockholders will be entitled to
receive cash or property as if they owned common stock of SmartServ.
The registration rights agreement entered into by SmartServ and the
selling stockholders on June 5, 2002, provided that SmartServ was required to
file a registration statement registering the number of shares offered for
resale in this prospectus within 15 days of the closing of the transaction
indicated in the above paragraph. In addition, SmartServ is required to have the
registration statement, of which this prospectus is a part, declared effective
within 90 days of the closing of the private placement and maintain the
effectiveness of the registration statement for as long as the selling
stockholders own common stock of SmartServ or until all the unsold shares may be
sold without the use of a prospectus. SmartServ will bear all fees relating to
the filing of the registration statement and will pay $10,000 to the special
counsel of the selling stockholders to cover fees and expenses related to the
review of the registration statement. If SmartServ violates the provisions of
the registration rights agreement, it is required to pay liquidated damages to
the selling stockholders. To date, SmartServ has not violated any of the
provisions of the registration rights agreement.
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 August 8, 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 and common stock underlying callable and
non-callable warrants issued in the June 5, 2002 private placement described
above. The non-callable warrants are subject to certain anti-dilution
adjustments and the number registered is an estimate of the number of shares
that will be issued upon exercise of such warrants. 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. No shares of common stock underlying the non-callable warrants
issuable upon exercise of the callable warrants are registered for resale
pursuant to the registration statement of which this prospectus is a part or are
included in this prospectus.
-9-
Shares of Shares of Beneficial Percent of Class
Common Stock Common Ownership After Owned After
Beneficially Stock Offering If All Offering if All
Selling Stockholders Owned to be Sold Shares Are Sold Shares Are Sold
- ------------------------------------ ------------ ---------- --------------- ----------------
Vertical Ventures Investments LLC(1) 1,205,357 1,254,464 0 *
Bonanza Master Fund, LLC(2) 1,205,357 1,254,464 0 *
------------ ---------- --------------- ----------------
Total 2,410,714 2,508,928 0 *
- ---------------
* Less than 1%.
1. We have been advised by Vertical Ventures Investments LLC that Joshua
Silverman, an authorized signatory of Vertical Ventures Investments LLC,
has voting and investment control over the securities beneficially owned by
Vertical Ventures Investments LLC. Shares of common stock beneficially
owned consists of 392,857 shares of common stock issued in the private
placement, 714,286 shares of common stock issuable upon exercise of
callable warrants and 98,214 shares of common stock issuable upon exercise
of non-callable warrants. Shares of common stock to be sold consists of
392,857 shares of common stock issued in the private placement, 714,286
shares of common stock issuable upon exercise of callable warrants, 98,214
shares of common stock issuable upon exercise of outstanding non-callable
warrants and 49,107 shares of common stock issuable upon potential
anti-dilution adjustments to the non-callable warrants.
2. We have been advised by Bonanza Master Fund LLC that Bernay Box is the
controlling person of Bonanza Master Fund LLC. Shares of common stock
beneficially owned consists of 392,857 shares of common stock issued in the
private placement, 714,286 shares of common stock issuable upon exercise of
callable warrants and 98,214 shares of common stock issuable upon exercise
of non-callable warrants. Shares of common stock to be sold consists of
392,857 shares of common stock issued in the private placement, 714,286
shares of common stock issuable upon exercise of callable warrants, 98,214
shares of common stock issuable upon exercise of outstanding non-callable
warrants and 49,107 shares of common stock issuable upon potential
anti-dilution adjustments to the non-callable warrants.
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
-10-
The selling stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders may from time to time pledge or grant a
security interest in some or all of the shares of common stock or warrants owned
by them and, if they default in the performance of their secured obligations,
the pledgees or secured parties may offer and sell the shares of common stock
from time to time under this prospectus, or under an amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act of 1933 amending the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this
prospectus.
The selling stockholders also may transfer the shares of common stock
in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act of 1933. Each selling
stockholder has informed SmartServ that it does not have any agreement or
understanding, directly or indirectly, with any person to distribute the common
stock.
SmartServ is required to pay all fees and expenses incident to the
registration of the shares, including $10,000 of fees and disbursements of
special counsel for the selling stockholders. SmartServ has agreed to indemnify
the selling stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act of 1933.
SmartServ has agreed to indemnify the selling stockholders and their
directors, officers, shareholders, partners, employees and agents for any
liability that any such person may incur because of any breach of the securities
purchase agreement or any action brought against such persons due to the
execution of the securities purchase agreement and the documents relating to the
securities purchase agreement. SmartServ will also indemnify each of the persons
indicated in the immediately preceding sentence for legal fees and other
expenses incurred in connection with a breach of the securities purchase
agreement or an action relating to the securities purchase agreement brought
against such person.
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.
-11-
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,
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.
-12-
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 a registration statement on Form S-3 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.
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.
-13-
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 contains an explanatory
paragraph describing conditions that raise substantial doubt about SmartServ'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 herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
-14-
====================================================================================================================
------------------------------------------------------
SmartServ Online, Inc.
2,508,928 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 ___________, 2002.
-------------------------- --------------------
PROSPECTUS
--------------------
--------------------------
Until _____, all dealers that effect transactions in
these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a
prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
====================================================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses which we will pay
in connection with the issuance and distribution of the securities being
registered on this registration statement. The selling stockholders will not
incur any of the expenses set forth below. All amounts shown are estimates.
Filing fee for registration statement ..................$ 309.58
----------
Legal fees and expenses ...............................$ 15,000.00
----------
Accounting expenses.....................................$ 7,500.00
----------
Miscellaneous...........................................$ 10,690.42
----------
Total...................................................$ 33,500.00
----------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware ("DGCL")
provides that directors, officers, employees or agents of Delaware corporations
are entitled, under certain circumstances, to be indemnified against expenses
(including attorneys' fees) and other liabilities actually and reasonably
incurred by them in connection with any suit brought against them in their
capacity as a director, officer, employee or agent, 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. Section 145 also provides that directors, officers, employees and
agents may also be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by them in connection with a derivative suit
bought against them in their capacity as a director, 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, except that no indemnification may be made without
court approval if such person was adjudged liable to the corporation.
Article Tenth of the registrant's Certificate of Incorporation
provides that the registrant shall indemnify any and all persons whom it shall
have power to indemnify to the fullest extent permitted by the DGCL. Article VI
of the registrant's by-laws provides that the registrant shall indemnify
authorized representatives of the registrant to the fullest extent permitted by
the DGCL. The registrant's by-laws also permit the registrant to purchase
insurance on behalf of any such person against any liability asserted against
such person and incurred by such person in any capacity, or out of such person's
status as such, whether or not the registrant would have the power to indemnify
such person against such liability under the foregoing provision of the by-laws.
The registrant maintains a directors and officers liability insurance
policy with National Union Fire Insurance Company of Pittsburgh, PA. The policy
insures the directors and officers of the registrant against loss arising from
certain claims made against such directors or officers by reason of certain
wrongful acts.
ITEM 16. EXHIBITS.
Exhibit Description
- ------- -----------
4.1 Specimen Certificate of SmartServ's Common Stock*
4.2 Securities Purchase Agreement dated as of May 20, 2002 among
SmartServ, Vertical Ventures Investments LLC and Bonanza Master
Fund**
4.3 Amendment No. 1 to Securities Purchase Agreement dated as of June
4, 2002 among SmartServ, Vertical Ventures Investments LLC and
Bonanza Master Fund**
4.4 Form of callable warrant**
4.5 Form of non-callable warrant**
II-1
4.6 Registration Rights Agreement dated as of June 5, 2002 among
SmartServ, Vertical Ventures Investments LLC and Bonanza Master
Fund**
5 Opinion of Jenkens & Gilchrist Parker Chapin LLP**
23.1 Consent of Ernst & Young LLP**
23.2 Consent of Jenkens & Gilchrist Parker Chapin LLP (included in
Exhibit 5)**
24 Power of Attorney (included on page II-3)**
- ----------
* Filed as an exhibit to the Company's registration statement on
Form SB-2 (Registration Number 333-114)
** Previously filed herewith
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement, or the most recent
post-effective amendment thereof, which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, if the total dollar
value of securities offered would not exceed that which was registered, any
increase or decrease in the volume of securities offered and any deviation
from the low or high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
securities act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the
securities act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the SEC, such
indemnification is against public policy as expressed in the securities act and
is, therefore, unenforceable.
In the event that a claim for indemnification against liabilities is
asserted by a director, officer or controlling person in connection with the
securities being registered, other than the payment by the small business issuer
of expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding, the small business issuer 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 the issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 2 to the Registration Statement on Form S-3 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Stamford,
State of Connecticut on August 8, 2002.
SmartServ Online, Inc.
By:/s/ Thomas W. Haller
-------------------------------------
Thomas W. Haller
Senior Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement on Form S-3 has been signed by the
following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Sebastian E. Cassetta* Chairman of the Board, August 8, 2002
- --------------------------------------- Chief Executive Officer,
Sebastian E. Cassetta and Director
/s/ Thomas W. Haller Senior Vice President and August 8, 2002
- --------------------------------------- Chief Financial Officer
Thomas W. Haller (Chief Financial and
Accounting Officer)
/s/ Mario F. Rossi* Executive Vice President, August 8, 2002
- --------------------------------------- Chief Technology Officer
Mario F. Rossi and Director
Director August 8, 2002
- ---------------------------------------
Stephen Lawler
/s/ L. Scott Perry* Director August 8, 2002
- ---------------------------------------
L. Scott Perry
/s/ Robert H. Steele* Director August 8, 2002
- ---------------------------------------
Robert H. Steele
II-3
/s/ Catherine Cassel Talmadge* Director August 8, 2002
- ---------------------------------------
Catherine Cassel Talmadge
/s/ Charles R. Wood* Director August 8, 2002
- ---------------------------------------
Charles R. Wood
* By: /s/ Thomas W. Haller
----------------------------------
Thomas W. Haller as
Attorney-in-Fact
II-4
EXHIBIT INDEX
-------------
Exhibit Description
- ------- -----------
4.1 Specimen Certificate of SmartServ's Common Stock*
4.2 Securities Purchase Agreement dated as of May 20, 2002 among
SmartServ, Vertical Ventures Investments LLC and Bonanza Master
Fund**
4.3 Amendment No. 1 to Securities Purchase Agreement dated as of June
4, 2002 among SmartServ, Vertical Ventures Investments LLC and
Bonanza Master Fund**
4.4 Form of callable warrant**
4.5 Form of non-callable warrant**
4.6 Registration Rights Agreement dated as of June 5, 2002 among
SmartServ, Vertical Ventures Investments LLC and Bonanza Master
Fund**
5 Opinion of Jenkens & Gilchrist Parker Chapin LLP**
23.1 Consent of Ernst & Young LLP**
23.2 Consent of Jenkens & Gilchrist Parker Chapin LLP (included in
Exhibit 5)**
24 Power of Attorney (included on page II-3)**
- ----------
* Filed as an exhibit to the Company's registration statement on
Form SB-2 (Registration Number 333-114)
** Previously filed herewith
E-1