As filed with the Securities and Exchange Commission on December 20, 2002
Registration No. 333-100417
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SMARTSERV ONLINE, INC.
-----------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3750708
- ------------------------------ ----------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Station Place
Stamford, CT 06902
(203) 353-5950
-----------------------------------------------------------------
(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
-----------------------------------------------------------------
(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
======================================================================================================================
Proposed Proposed
Amount Maximum Maximum
Title of Each Class to be Offering Price Aggregate Amount of
of Securities to be Registered Registered (1) per Share Offering Price Registration Fee
Common Stock, $.01 par
value per share ................... 129,990 $.85 $110,491.50 $10.17(2)
======================================================================================================================
(1) Pursuant to Rule 416(b), there shall be deemed covered hereby all
additional securities resulting from antidilution adjustments
(2) Previously paid
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 DECEMBER 20, 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.
129,990 Shares of Common Stock
o The selling stockholders are offering to sell 129,990 shares of common
stock, all of which 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 SmallCap Market
under the symbol "SSOL." On December 18, 2002, the last reported bid
price of our common stock was $1.62 and the last reported asked
price was $1.64.
The address and telephone number of SmartServ's principal executive offices are:
One Station Place
Stamford, CT 06902
(203) 353-5950
SmartServ is also registering 7,027,296 shares of common stock and shares of
common stock issuable upon the exercise of warrants on a separate Registration
Statement on Form S-3 (333-100193). The concurrent registration of the 7,027,296
shares of common stock and shares of common stock issuable upon exercise of
warrants should not affect the shares registered pursuant to this prospectus.
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 4 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 December ___, 2002
Table of Contents
Page
----
Summary of Prospectus........................................................3
Risk Factors.................................................................4
Special Information About Forward Looking Statements.........................9
The Company.................................................................10
Recent Developments.........................................................10
Use of Proceeds.............................................................10
Selling Stockholders........................................................11
Plan of Distribution........................................................12
Indemnification for Securities Act Liabilities..............................14
Where You Can Find More Information About Us................................15
Legal Matters...............................................................16
Experts.....................................................................16
-2-
SUMMARY OF PROSPECTUS
You should read the following summary together with the more detailed
information contained in this prospectus. Because this is only a summary, it
does not contain all of the information that you should consider before buying
shares of our common stock. You should read the entire prospectus and any
documents incorporated by reference carefully before purchasing SmartServ common
stock.
Summary of the Company
SmartServ commenced operations on August 20, 1993, and had its initial
public offering on March 21, 1996. We offer wireless applications, development,
and hosting services that allow enterprises, wireless carriers and financial
services firms to deliver content to their work forces and customers. Our
products deliver proprietary information, as well as delayed and real-time
financial market data, business and financial news, national weather reports and
other business and entertainment information in a user-friendly manner.
We deliver mobile data solutions designed to generate additional revenue,
increase operating efficiency, and extend brand awareness for wireless carriers,
enterprises and content providers. We offer standard and custom-built
applications designed for a vast array of wireless platforms and devices. Our
applications can be delivered via Java(TM) 2 Platform, Micro Edition (J2ME(TM)),
QUALCOMM's Binary Runtime Environment for Wireless(TM) (BREW(TM)) architecture,
WAP and SMS, as well as RIM Blackberry and Pocket PC devices.
Our plan of operation focuses on licensing our applications and related
services to wireless carriers and financial services firms. For wireless
carriers, we deliver data and branded content that can increase wireless data
revenue and customer retention. For financial services firms, we offer solutions
that can increase productivity and customer retention through the mobile
delivery of proprietary data, as well as market data and other useful content.
Management believes that SmartServ's primary source of revenues will be derived
from revenue-share licensing contracts with its wireless carrier and financial
services customers.
Due to the substantial expenses and negative cash flows from operations
that we have incurred, our auditors, in their report contained in our December
31, 2001 financial statements, have indicated that there is substantial doubt
about our ability to continue as a going concern. Although the Company's
financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities and
commitments in the normal course of business, unless we are able to increase
revenue and raise additional capital from investors, we may not be able to
support our operations for an extended period of time.
Selected Financial Data
The selected financial data presented below have been derived from and
should be read in conjunction with the financial statements of the Company
incorporated by reference herein (See "Where you can find more information about
us" on page 15).
(In thousands) Nine Months Ended Year Ended Six Months
September 30, December 31, Ended December 31, Year Ended June 30,
----------------------------- --------------- ------------------ -------------------------------
2002 2001 2001 2000 2000 1999
--------------- ------------ --------------- ------------------ -------------- ---------------
(unaudited)
Revenue $ 146 $ 3,273 $ 3,298 $ 2,232 $ 3,696 $ 1,444
Net Income (Loss) $ (4,833) $ (10,354) $ (14,820) $ 2,938 $ (30,994) $ (7,124)
Accumulated Deficit $ (69,655,266) $(60,356,051) $ (64,821,833) $ (50,001,973) $(52,939,564) $ (21,946,005)
-3-
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
SmartServ has, since its inception, incurred substantial recurring operating
losses, including a net loss of $4,833,433 for the nine month period ended
September 30, 2002, a net loss of $14,819,860 for the year ended December 31,
2001, and net losses of $30,993,559 and $7,124,126 for the years ended June 30,
2000 and 1999, respectively. Additionally, we had an accumulated deficit of
$69,655,266 at September 30, 2002. We have incurred substantial expenses and
commitments and continue to have negative cash flows from operations. We
currently use approximately $675,000 per month to sustain our operations. We can
give no assurance that we will be able to generate sufficient revenues or raise
additional capital on satisfactory terms to support our operations.
OUR AUDITORS HAVE INDICATED THAT THERE IS SUBSTANTIAL DOUBT ABOUT SMARTSERV'S
ABILITY TO CONTINUE AS A GOING CONCERN
Due to the substantial expenses and negative cash flows from operations that we
have incurred, our auditors, in their report contained in our December 31, 2001
financial statements, have indicated that there is substantial doubt about our
ability to continue as a going concern. Although SmartServ's financial
statements have been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business, unless we are able to increase revenue, raise
substantial capital from investors, or both, we may not be able to support our
operations for an extended period of time. Our financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of these uncertainties. The
conditions cited by our auditors may adversely affect the willingness of
potential clients and investors to do business with or invest in us.
WE MAY BE DELISTED FROM THE NASDAQ SMALLCAP MARKET, WHICH COULD ADVERSELY AFFECT
THE LIQUIDITY AND VOLATILITY OF OUR COMMON STOCK
We were recently moved from the Nasdaq National Market to the Nasdaq SmallCap
Market. While we currently satisfy the Nasdaq SmallCap listing requirements, we
cannot guarantee that we will be successful in remaining listed on the Nasdaq
SmallCap Market. Delisting from the Nasdaq SmallCap Market could require us to
move our common stock to the OTC Bulletin Board. The move to the OTC Bulletin
Board would decrease the number of investors willing to trade in our common
stock, and therefore could decrease the liquidity and trading 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
-4-
our common stock would occur. As a result, there is a risk that stockholders
will not be able to obtain price quotes that reflect the actual value of our
common stock. Increases in the volatility of our common stock due to the
decreased number of individuals willing to trade in it could also make it more
difficult to pledge the common stock as collateral, if stockholders sought to do
so, because a lender might be unable to accurately value the common stock.
If we are delisted from the SmallCap market, we may become subject to the SEC's
penny stock rules. Penny stocks are securities with a price of less than $5.00
per share, other than securities that are registered on certain national
securities exchanges, that are quoted on Nasdaq or that meet certain conditions.
The penny stock rules require delivery, by a broker-dealer prior to any
transaction in a penny stock, of a disclosure schedule about commissions payable
to both the broker-dealer and the registered representative and current
quotations for the securities. The rules also require that broker-dealers send
monthly statements disclosing recent price information for each penny stock held
in the account and information on the limited market in penny stocks. Because of
the burden placed on broker-dealers to comply with the penny stock rules, if we
are delisted from Nasdaq and become subject to the penny stock rules,
stockholders may have difficulty selling our common stock in the open market.
IN THE PAST WE GENERATED REVENUES PRIMARILY FROM ONE LICENSING AGREEMENT THAT
HAS BEEN TERMINATED
Our revenues in the last two years were generated primarily from a licensing
agreement with Data Transmission Network Corporation. The licensing agreement
terminated on August 31, 2001. Since that time we have been unable to replace
the revenues lost by the termination of the agreement with Data Transmission
Network Corporation. Our revenues have declined from $3,273,000 in the nine
months ended September 30, 2001 to $146,500 in the nine months ended September
30, 2002. In order for SmartServ's financial condition to improve, we will need
to enter into new licensing agreements to replace the lost revenues and existing
agreements will have to produce greater revenues. We can give no assurance that
our current or future license agreements will generate sufficient revenues to
support our operations.
SUBSTANTIALLY ALL OF OUR CURRENT REVENUE COMES FROM ONE CUSTOMER, AND THE LOSS
OF SUCH CUSTOMER WOULD ADVERSELY AFFECT OUR REVENUES
Currently, substantially all of our revenues are generated through our licensing
arrangement with one customer. If the licensing agreement with this one customer
were terminated, our revenues would be adversely affected. We anticipate that,
in the future, our results from operations will depend upon numerous factors
including the introduction and market acceptance of new products and services,
execution of new licensing agreements, 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 REVENUE-SHARE AGREEMENTS WITH CARRIERS AND ENTERPRISE
CUSTOMERS AND SUCH REVENUES MAY NOT MATERIALIZE
We intend to sell our products and services primarily by entering into
non-exclusive agreements with carriers and enterprise customers who would
promote such products and services to their subscribers, employees and clients.
Our success will depend on:
-5-
o our ability to continue to enter into these agreements with carriers
and enterprise customers;
o the ultimate success of these carriers and enterprise customers; and
o their ability to successfully market, sell and generate revenues from
our products and services.
Our failure to successfully maintain these relationships or the failure of our
customers to develop and sustain a market for our products and services would
have a material adverse affect on our overall performance.
WE INSTITUTED A REALIGNMENT OF OUR INFRASTRUCTURE AND COST REDUCTION PROGRAM,
WHICH MAY LIMIT OUR ABILITY TO EFFECTIVELY COMPETE IN THE FUTURE
In May 2002, we commenced an effort to realign our infrastructure and related
overhead to correlate with reductions in projected revenue. As part of this
effort, we closed our United Kingdom and Hong Kong sales offices and downsized
domestic operations through staff and other cost reductions to a level
sufficient to support our projected operations through the remainder of 2002.
Personnel have been reduced from 66 in May to 44 in November 2002. The closure
of our sales offices in the United Kingdom and Hong Kong and the overall
reduction in staff may prevent us from effectively competing in markets
overseas. Additionally, if the economy improves, our staff reductions may
prevent us from fully exploiting opportunities in the United States. Our
inability to compete and take advantage of opportunities may prevent us from
generating sufficient revenues to support our operations.
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 mobile phones and
other wireless devices. 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.
WE COMPETE AGAINST LARGER, WELL KNOWN COMPANIES WITH GREATER RESOURCES
The market for wireless data 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 wireless data
delivery. We face competition
-6-
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., Everypath, and Infospace. We expect competition to increase from existing
competitors and from new competitors, including telecommunications companies.
The market data and other content provided in our products is generally licensed
through non-exclusive content 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 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.
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, warrants and convertible notes 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 November 21, 2002, there were $392,000 of
our prepaid warrants outstanding that were then convertible into 470,701 shares
of our common stock. Additionally, we have issued convertible debt and warrants
to investors and consultants and granted options to employees for the purchase
of 6,362,893 shares of our common stock. Except for 1,250,000 shares subject to
employee 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 sales could occur may cause the
-7-
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 THE PAST WE HAVE RELIED UPON DEBT AND EQUITY FINANCING TO SUSTAIN OUR
OPERATIONS AND MAY CONTINUE TO DO SO IN THE NEAR FUTURE
In the past we have relied upon debt and equity financing to sustain our
operations. Although we are currently attempting to sell SmartServ securities to
support our operations, the current economic climate, as well as our current
operating and financial condition, makes it difficult to locate purchasers. If
we are unable to sell a sufficient number of SmartServ securities, we may be
unable to sustain our operations for an extended period of time. Even if there
are potential investors currently willing to purchase our securities, we will
need additional investment in the future. We can give no assurance that we will
be able to raise sufficient capital now or in the future through the sale of
SmartServ securities to support our operations.
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS
SmartServ has designed and developed its own "device agnostic" information
platform, made up of its patent-pending W2W MiddlewareTM and its content and
processing engines. This platform is comprised of the W2W MiddlewareTM, based on
the Windows NT operating system and the authorization, quote, news and
transaction engines, based on Hewlett-Packard Company's Unix operating system
and Oracle Corp.'s version 9i parallel server database. This platform supports a
wide array of browsers and client side environments operating on wireless and
wired networks.
SmartServ relies upon a combination of contract provisions, trade secret,
patent, trademark and copyright laws to protect its proprietary rights.
SmartServ licenses its products and related services under agreements that
contain terms and conditions prohibiting the unauthorized use or reproduction of
those products and services. Although SmartServ intends to protect its rights
vigorously, there can be no assurance that any of the foregoing measures will be
successful.
We believe that our registered marks "SmartServ Online", "SmartServ" and
"MobileMarkets" 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.
SmartServ believes that none of its products, services, trademarks or other
proprietary rights 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.
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
On or about June 4, 1999, Michael Fishman, our former Vice President of Sales,
commenced an action against us, Sebastian E. Cassetta (our Chairman of the Board
and Chief Executive Officer), Steven Francesco (our former President) and four
others in the Connecticut Superior Court for the Judicial
-8-
District of Stamford/Norwalk at Stamford alleging breach of his employment
contract, breach of duty of good faith and fair dealing, fraudulent
misrepresentation, negligent misrepresentation, intentional misrepresentation
and failure to pay wages. The defendants have answered the complaint and filed
counterclaims for fraudulent inducement and breach of contract. The fraud and
misrepresentation claims have been dismissed. The parties have filed motions for
summary judgment that will be subject to oral argument in December 2002.
Although we are vigorously defending this action, there can be no assurance that
we will be successful. The unfavorable outcome of such action could have a
material adverse effect on our results of operations, financial condition and
cash flows.
On or about February 29, 2000, Commonwealth Associates, L.P. ("Commonwealth")
filed a complaint against us in the Supreme Court of the State of New York,
County of New York. The complaint alleges that on or about August 19, 1999,
Commonwealth and SmartServ entered into an engagement letter pursuant to which
Commonwealth was to provide financial advisory and investment banking services
to SmartServ in connection with a possible combination between SmartServ and
Data Link Systems Corporation. The engagement letter provided for a
nonrefundable fee of $15,000 payable in cash or common stock at SmartServ's
option. The complaint alleges that SmartServ elected to pay the fee in stock and
seeks 13,333 shares of common stock or at least $1,770,000 together with
interest and costs. We have denied the material allegations of the complaint,
including the allegation that we elected to pay in stock. A trial was held in
New York Supreme Court on November 7 and 8, 2002. The parties have until
December 16, 2002 to file post-trial pleadings and a decision is expected soon
thereafter. Although we are vigorously defending this action, there can be no
assurance that we will be successful. The unfavorable outcome of such action
could have a material adverse effect on our results of operations, financial
condition and cash flows.
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.
-9-
THE COMPANY
SmartServ commenced operations on August 20, 1993, and had its initial
public offering on March 21, 1996. SmartServ offers wireless applications,
development and hosting services that allow enterprises, wireless carriers and
financial services firms to deliver content to their work forces and customers.
SmartServ's products deliver proprietary information, as well as delayed and
real-time financial market data, business and financial news, national weather
reports and other business and entertainment information in a user-friendly
manner.
SmartServ delivers mobile data solutions designed to generate additional
revenue, increase operating efficiency, and extend brand awareness for wireless
carriers, enterprises and content providers. SmartServ offers standard and
custom-built applications designed for a vast array of wireless platforms and
devices. Our applications can be delivered via Java(TM) 2 Platform, Micro
Edition, QUALCOMM's Binary Runtime Environment for Wireless(TM) architecture,
WAP and SMS, as well as RIM Blackberry and Pocket PC devices.
SmartServ's plan of operation focuses on licensing our applications and
related services to wireless carriers and financial services firms. For wireless
carriers, SmartServ delivers data and branded content that can increase wireless
data revenue and customer retention. For financial services firms, we offer
solutions that can increase productivity and customer retention through the
mobile delivery of proprietary data, as well as market data and other useful
content. Management believes that SmartServ's primary source of revenues will be
derived from revenue-share licensing contracts with its wireless carrier and
financial services customers.
Currently SmartServ's customer and distribution relationships exist across
a network of wireless carriers, strategic partners and a major financial
institution, including Verizon Wireless, AT&T Wireless, Nextel, Motorola, U.S.
Cellular, QUALCOMM, TELUS Mobility and Salomon Smith Barney. SmartServ also
offers content branded by Forbes.com, BusinessWeek Online, Dow Jones, The Wall
Street Journal Online, and S&P Comstock.
RECENT DEVELOPMENTS
In May 2002, SmartServ commenced an effort to realign its infrastructure
and related overhead. As part of this effort, SmartServ closed its United
Kingdom and Hong Kong sales offices and downsized domestic operations through
staff and other cost reductions to a level sufficient to support our projected
operations through the remainder of 2002. Personnel have been reduced from 66 in
May 2002 to 44 in November 2002.
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 $110,492 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.
-10-
SELLING STOCKHOLDERS
The shares being registered are shares of common stock underlying
non-callable warrants issued in a June 5, 2002 private placement. On June 5,
2002, each of the selling stockholders was issued a non-callable warrant
exercisable for 98,214 shares of common stock at $1.47 per share. The
non-callable warrants expire on June 5, 2007, 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 non-callable warrants also
provide that their exercise price be adjusted downwards if SmartServ engages in
sales of its common stock or other securities convertible or exercisable into
its common stock at a price per share less than the exercise price of the
non-callable warrants.
On September 9, 2002, SmartServ sold warrants exercisable at $.85 per share
as part of units consisting of common stock and warrants. This sale triggered
the anti-dilution provisions of the non-callable warrants owned by the selling
stockholders. The non-callable warrants owned by each of the selling
stockholders may now be exercised for 169,853 shares of SmartServ common stock
at $.85 per share. SmartServ is registering the shares being sold by the selling
stockholders pursuant to a registration rights agreement entered into by
SmartServ and the selling stockholders on June 5, 2002. Pursuant to the
registration rights agreement, SmartServ is required to file a registration
statement registering 125% of the total number of shares the selling
stockholders may sell at any time that the number of shares the selling
stockholders beneficially own is greater than 85% of the total number of shares
registered for resale by the 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 October 3, 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 underlying non-callable warrants issued in a June 5, 2002
private placement. 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.
-11-
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) 169,853 64,995 0(3) *
Bonanza Master Fund, Ltd.(2) 64,995 64,995 0 *
------------ ------------ --------------- ----------------
Total 234,848 129,990 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 non-callable warrants. Shares of common stock to be sold
consists of 22,532 shares of common stock issuable upon exercise of
non-callable warrants and 42,463 shares of common stock issuable upon
potential anti-dilution adjustments to the non-callable warrants.
2. We have been advised by Bonanza Master Fund Ltd. that Bernay Box is the
controlling person of Bonanza Master Fund LLC. Shares of common stock
beneficially owned consist of non-callable warrants. Shares of common stock
to be sold consists of 22,532 shares of common stock issuable upon exercise
of non-callable warrants and 42,463 shares of common stock issuable upon
potential anti-dilution adjustments to the non-callable warrants.
3. Assumes that 147,321 shares of common stock underlying non-callable
warrants registered under registration statement number 333-90852 will also
be sold.
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.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, if available, rather than under this prospectus.
-12-
Broker-dealers engaged by the selling stockholders may arrange for other
broker-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 of 1933 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. 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.
-13-
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.
-14-
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 September 30,
2002 filed with the SEC on November 18, 2002
o Current Report on Form 8-K dated September 9, 2002 filed with the SEC
on September 13, 2002
o Quarterly Report on Form 10-QSB for the quarter ended June 30, 2002
filed with the SEC on August 14, 2002
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.
-15-
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 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.
-16-
======================================================= ======================================================
------------------------------------------------------
SmartServ Online, Inc.
129,990 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 December 20, 2002
--------------------
------------------------ PROSPECTUS
--------------------
------------------------
======================================================= ======================================================
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 ...................$ 10.17
Legal fees and expenses ................................$ 5,000.00
Accounting expenses......................................$ 5,000.00
Miscellaneous............................................$ 989.83
------------
Total.................................................. $ 11,000.00
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Incorporated by reference to the Company's Registration Statement on Form
S-3 filed October 8, 2002 (Registration Number 333-100417), under "Item 15.
Indemnification of Directors and Officers" on page II-1.
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 non-callable warrant**
4.5 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)
** Filed as an exhibit to the Company's registration statement on Form S-3
(Registration Number 333-90852)
*** Previously filed
ITEM 17. UNDERTAKINGS.
Incorporated by reference to the Company's Registration Statement on Form
S-3 filed September 30, 2002 (Registration Number 333-100417), under "Item 17.
Undertakings" on page II-2.
II-1
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. 1 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 December 20, 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. 1 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, December 20, 2002
- --------------------------------------- Chief Executive Officer,
Sebastian E. Cassetta and Director
/s/ Thomas W. Haller Senior Vice President and December 20, 2002
- --------------------------------------- Chief Financial Officer
Thomas W. Haller (Chief Financial and
Accounting Officer)
/s/ Mario F. Rossi* Executive Vice President, December 20, 2002
- --------------------------------------- Chief Technology Officer
Mario F. Rossi and Director
/s/ Stephen Lawler* Director December 20, 2002
- ---------------------------------------
Stephen Lawler
/s/ L. Scott Perry* Director December 20, 2002
- ---------------------------------------
L. Scott Perry
/s/ Robert H. Steele* Director December 20, 2002
- ---------------------------------------
Robert H. Steele
II-2
/s/ Catherine Cassel Talmadge* Director December 20, 2002
- ---------------------------------------
Catherine Cassel Talmadge
/s/ Charles R. Wood* Director December 20, 2002
- ---------------------------------------
Charles R. Wood
*By: /s/ Thomas W. Haller
----------------------------------
Thomas W. Haller as
Attorney-in-Fact
II-3
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 non-callable warrant**
4.5 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)
** Filed as an exhibit to the Company's registration statement on Form S-3
(Registration Number 333-90852)
*** Previously filed
E-1