UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO.1 ON
FORM 10-KSB/A
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1997
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER 0-28008
SMARTSERV ONLINE, INC.
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(Exact name of small business issuer 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, Connecticut 06902
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (203) 353-5950
Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $0.01 Par Value NASDAQ Stock Market
Common Stock Purchase Warrants NASDAQ Stock Market
Indicate by check mark whether the issuer: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.___
Issuer's revenues for its most recent fiscal year. $688,610
The aggregate market value of the voting stock (based on the closing price of
such stock on NASDAQ) held by non-affiliates of the issuer as of October 9,
1997, was approximately $6,126,000. All officers and directors of the issuer
have been deemed, solely for the purpose of the foregoing calculation, to be
"affiliates" of the issuer.
There were 3,695,000 shares of Common Stock outstanding at October 9, 1997.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The following table sets forth information with respect to the
executive officers and directors of SmartServ Online, Inc. (the "Company").
NAME AGE POSITION
Sebastian E. Cassetta...............49 Chief Executive Officer, Chairman of
the Board, Secretary and Class III
Director
Steven T. Francesco.................40 President, Chief Operating Officer
and Class III Director
Thomas W. Haller, CPA...............43 Vice President, Treasurer and Chief
Financial Officer
Donald J. Marino....................37 Vice President and Chief Technology
Officer
Mario F. Rossi......................59 Vice President of Operations
Bernard Baum........................48 Class II Director
Beth Bronner........................46 Class I Director
Catherine Cassel Talmadge...........45 Class I Director
Hiro R. Hiranandani................ 59 Class II Director
L. Scott Perry .....................52 Class I Director
SEBASTIAN E. CASSETTA has been Chief Executive Officer, Chairman of the
Board, Secretary and a director of the Company since inception. Mr. Cassetta was
also the Company's Treasurer from its inception until March 1996. From June 1987
to August 1992, Mr. Cassetta was the President of Burns and Roe Securacom Inc.,
an engineering and large-scale systems integration firm. From August 1992 to
January 1994, Mr. Cassetta was a consultant to Smart Phone Services, Inc. He is
also a former Vice President of Brinks, Incorporated.
STEVEN T. FRANCESCO has been President and Chief Operating Officer of
the Company since inception and a director of the Company since January 1994.
From May 1990 to October 1992, Mr. Francesco was a Senior Vice President of
Darien Development Corporation, a technology consulting firm. Mr. Francesco was
also President of Smart Phone Services, Inc. from October 1991 to December 1993.
Mr. Francesco is also a former Senior Vice President of Cantor Fitzgerald
Securities, Inc.
THOMAS W. HALLER, CPA joined the Company as Vice President, Treasurer
and Chief Financial Officer in March 1996. From December 1992 to February 1996,
Mr. Haller was a Senior Manager at Kaufman Greenhut Forman, LLP a public
accounting firm in New York City where he was responsible for technical advisory
services and the firm's quality assurance program. From June 1991 to December
1992, Mr. Haller was engaged in the practice of public accounting as a
consultant to certain entrepreneurial companies. From December 1982 to May 1991
he was a Senior Manager with Ernst & Young LLP, an international public
accounting and consulting firm, where he had responsibility for client services
and new business development in the firm's financial services practice.
DONALD J. MARINO, an information systems executive specializing in the
securities industry, joined the Company in February 1997 as Chief Technology
Officer. Prior to joining the Company he served as Vice President of Systems
Development at Deutsche Bank's New York headquarters from June 1996 to December
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1996. Prior thereto he was Director of MIS/EDP at Refco Capital Holdings from
March 1988 to May 1996 and a Vice President responsible for Systems Development
and Advanced Technologies at L.F. Rothschild & Co. Inc., an investment banking
firm, from March 1985 to March 1988.
MARIO F. ROSSI has been Vice President of Operations of the Company
since December 1994. From January 1989 to December 1994, Mr. Rossi was Vice
President of Operations of MVS Inc., a fiber optic systems company.
BERNARD BAUM has been a director of the Company since March 1996. Since
May 1997, Mr. Baum has been Executive Vice President and Chief Information
Officer of Signet Bank. From March 1996 to May 1997, Mr. Baum had been Executive
Vice President and Chief Operating Officer of Southeast Switch Inc., engaged in
the ATM/POS/debit card switch and settlement business. From January 1995 to
March 1996, Mr. Baum had been Executive Vice President and Chief Information and
Operations Officer of Bank South Corporation, a bank holding company. From
January 1978 to January 1995, Mr. Baum held various positions with Citibank
N.A., including Vice President, Senior Business Manager -- Consumer Bank, Chief
Technology Officer-The Citicorp Private Bank and Executive Director -- Global
Finance.
BETH BRONNER has been a director of the Company since March 1996. Since
September 1996, Ms. Bronner has been Vice President and Director of Marketing --
United States and Europe of Citibank, engaged in the global banking business.
From July 1994 to September 1996, Ms. Bronner was Vice President --Emerging
Markets with AT&T Domestic Communications Services, the consumer service
division of AT&T Corp. From February 1992 to June 1994, she held various
executive positions with Revlon, Inc., including President of the Revlon
Professional (Salon Products) division and Executive Vice President of the
Beauty Care and Professional Products division. From October 1990 to January
1992, Ms. Bronner was President of the Sweet Goods & Dairy division of the
Slim-Fast Foods Co. She is also director of The Hain Food Group, Inc.
CATHERINE CASSEL TALMADGE has been a director of the Company since
March 1996. Since January 1994, Ms. Talmadge has been Vice President, Time
Warner Cable Programming of Time Warner Cable, a division of Time Warner
Entertainment Company, L.P. ("Time Warner"). From September 1984 to January
1994, she held various positions with Time Warner, including Director,
Programming Development; Operations Director, Financial Analyses; and Manager,
Budget Department.
HIRO R. HIRANANDANI has been a director of the Company since March
1996. Since June 1996, Mr. Hiranandani has been the President and Chief
Executive Officer of Computer Power Inc., a public company which provides
back-up power for the lighting industry. From January 1977 to December 1994, Mr.
Hiranandani held various positions with Pitney Bowes, Inc., including President,
Business Systems-International from July 1987 to May 1990 and President of
Mailing Systems from May 1990 to October 1994.
L. SCOTT PERRY has been a director of the Company since November 1996.
Since December 1995, Mr. Perry has been Vice President, Advanced Platform
Services of AT&T Corp. From January 1989 to December 1995, Mr. Perry held
various positions with AT&T including Vice President - Business Multimedia
Services, Vice President (East) - Business Communications Services and Vice
President - Marketing, Strategy and Technical Support for AT&T Data Systems
Group. Since February 1996, Mr. Perry has also been the Chief Executive Officer
of GeoSphere Communications, a networking software company. Mr. Perry serves on
the Board of Directors of Junior Achievement of New York, is a member of the
Cornell University Engineering College Advisory Council and serves on the Board
of INEA, a private financial planning software company based in Toronto, Canada.
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The Board of Directors consists of seven directors divided into three
classes of directors: Class I Directors, Class II Directors and Class III
Directors. The Company's Class I Directors, Class II Directors and Class III
Directors will serve until the annual meeting of the Company's stockholders to
be held in 1999, 1997 and 1998, respectively, and until their respective
successors are duly elected and qualified or until their earlier resignation or
removal. Directors of each Class are elected for a full term of three years (or
any lesser period representing the balance of the previous term of such Class)
and until their respective successors are duly elected and qualified or until
their earlier resignation or removal. Officers are appointed annually and serve
at the discretion of the Board for one year. Mr. Cassetta serves as Chief
Executive Officer, Chairman of the Board and Secretary of the Company and Mr.
Francesco serves as President and Chief Operating Officer of the Company
pursuant to employment agreements.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), officers, directors and holders of more than 10%
of the outstanding shares of the Company's Common Stock ("Reporting Persons")
are required to file periodic reports of their ownership of, and transactions
involving, the Company's Common Stock with the Securities and Exchange
Commission (the "SEC"). Based solely upon a review of Forms 3, 4 and 5 and
amendments thereto furnished to the Company during and with respect to fiscal
year ended June 30, 1997, the Company believes that its Reporting Persons
complied with all Section 16 filing requirements applicable to them with respect
to the Company's fiscal year ended June 30, 1997.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information concerning annual and
long-term compensation, paid or accrued, for the Chief Executive Officer and for
each other executive officer of the Company whose compensation exceeded $100,000
in fiscal 1997 (the "Named Executive Officers") for services in all capacities
to the Company during the last three fiscal years:
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- ------------
OTHER
ANNUAL SECURITIES
NAME AND FISCAL COMPEN- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS SATION(2)(3) OPTIONS COMPENSATION
------------------ ---- ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C>
Sebastian E. Cassetta 1997 $125,000 -- $ 9,750 100,000 --
Chief Executive Officer 1996 $125,000 -- $ 9,750 100,000(5) --
1995 $125,000 -- $ 9,750 -- --
Steven T. Francesco 1997 $125,000 -- $ 9,750 100,000 --
President and Chief 1996 $125,000 $22,000 $11,750 100,000(5) $20,000(4)
Operating Officer 1995 $125,000 -- $ 9,750 -- --
</TABLE>
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(1) None of the Named Executive Officers received any Restricted Stock Awards
or LTIP Payouts in 1995, 1996 or 1997.
(2) As to each Named Executive Officer, the aggregate amount of personal
benefits not included in the Summary Compensation Table does not exceed
the lesser of either $50,000 or 10% of the total annual salary and bonus
paid to such Named Executive Officer.
(3) Amounts shown consist of a non-accountable expense allowance.
(4) Represents a payment by the Company to Mr. Francesco of an aggregate
amount equal to the additional income taxes and penalties resulting from
the early withdrawal by him from an IRA of $35,000 which he loaned to the
Company.
(5) On July 16, 1996 the Compensation Committee of the Board of Directors
canceled the stock options representing these underlying shares and
granted new options to Messrs. Cassetta and Francesco.
STOCK OPTIONS
The following table sets forth information with respect to stock
options granted to the Named Executive Officers during fiscal year 1997:
OPTION GRANTS IN FISCAL 1997
(INDIVIDUAL GRANTS)(1)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE EXPIRATION
NAME GRANTED IN FISCAL 1997 PRICE DATE (2)
---- --------- -------------- ------- ------------
Sebastian E. Cassetta 100,000 23.6% $5.0625 July 15, 2006
Steven T. Francesco 19,753 4.7% $5.56875 July 15, 2001
80,247 18.9% $5.0625 July 15, 2006
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(1) No stock appreciation rights ("SARs") were granted to any of the Named
Executive Officers during fiscal 1997. On September 24, 1997, the
Compensation Committee granted new stock options to employees conditional
upon cancellation of all of their existing stock options. As a consequence
of this action and upon cancellation of the options described above, Mr.
Cassetta received an option to purchase 100,000 shares of the Company's
Common Stock exercisable at a price of $2.00 per share expiring on
September 23, 2007 and Mr. Francesco received an option to purchase 45,454
shares of the Company's Common Stock exercisable at a price of $2.20 per
share expiring on September 23, 2002 and an option to purchase 54,546
shares of the Company's Common Stock exercisable at a price of $2.00 per
share expiring on September 23, 2007. The options become exercisable in
full on the first anniversary of the grant date.
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<PAGE>
(2) The options become exercisable in full on the first anniversary of the
grant date.
The following table sets forth information as to the number of
unexercised shares of Common Stock underlying stock options at fiscal year end
and the value of unexercised in-the-money stock options at fiscal year
end:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUE (1)
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED
SECURITIES VALUE OF
SHARES UNDERLYING OPTIONS UNEXERCISED IN-THE-
ACQUIRED AT FISCAL YEAR END MONEY YEAR END
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE (2)
---- -------- -------- --------------- -----------------
<S> <C> <C> <C>
Sebastian E. Casetta..... -- -- 0/100,000 $0/$0
Steven T. Francesco...... -- -- 0/100,000 $0/$0
</TABLE>
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(1) No SARs were granted to, or exercised by, any of the Named Executive
Officers during fiscal 1997.
(2) Value is based on the closing price of the Company's Common Stock as
reported by the National Association of Securities Dealers' Automated
Quotation System ("NASDAQ") on June 30, 1997 ($2.00) less the exercise
price of the option.
EMPLOYMENT AGREEMENTS
The Company and Sebastian E. Cassetta are parties to an Employment
Agreement (the "Cassetta Agreement"), effective January 31, 1994, which expires
on January 31, 1999. The Cassetta Agreement provides for (i) an annual base
salary of $125,000, (ii) a performance bonus for each fiscal year between June
30, 1995 and June 30, 1998, payable in cash and Common Stock of the Company, in
the event the Company achieves the levels of earnings before interest, income
taxes, depreciation and amortization ("EBITDA") provided therein and (iii) any
additional amount as determined by the Board or an outside compensation board.
The EBITDA goals are $7,000,000 and $10,500,000 for 1997 and 1998, respectively.
If any goal is achieved, Mr. Cassetta will receive a cash bonus of one-half of
one percent of the goal and approximately 22,000 shares of Common Stock.
Pursuant to the Cassetta Agreement, Mr. Cassetta is also entitled to participate
in any present or future insurance, pension, retirement, profit sharing or bonus
plan or other compensation or incentive plan adopted by the Company for the
general and overall benefit of full-time principal executives of the Company,
such participation to be upon the same terms and conditions as generally relate
to such full-time principal executives. Pursuant to the Cassetta Agreement, in
the event that Mr. Cassetta's employment is terminated without cause, the
Company is obligated to make a severance payment to Mr. Cassetta in the amount
of $250,000 within 30 days following the date of such termination.
The Company and Steven T. Francesco are parties to an Employment
Agreement (the "Francesco Agreement"), effective January 31, 1994, which expires
on January 31, 1999. The Francesco Agreement provides for (i) an annual base
salary of $125,000, (ii) a performance bonus for each fiscal year between June
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30, 1995 and June 30, 1998, payable in cash and Common Stock of the Company, in
the event the Company achieves the levels of EBITDA provided therein and (iii)
any additional amount as determined by the Board or an outside compensation
board. The EBITDA goals and bonuses are the same as those in the Cassetta
Agreement. Pursuant to the Francesco Agreement, Mr. Francesco is also entitled
to participate in any present or future insurance, pension, retirement, profit
sharing or bonus plan or other compensation or incentive plan adopted by the
Company for the general and overall benefit of full-time principal executives of
the Company, such participation to be upon the same terms and conditions as
generally relate to such full-time principal executives. Pursuant to the
Francesco Agreement, in the event that Mr. Francesco's employment is terminated
without cause, the Company is obligated to make a severance payment to Mr.
Francesco in the amount of $250,000 within 30 days following the date of such
termination.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of October 24, 1997, certain
information with respect to the beneficial ownership of the Common Stock by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares, (ii) each director of the Company, (iii) each Named
Executive Officer and (iv) all executive officers and directors of the Company
as a group. Except as otherwise indicated, each person listed below has sole
voting and investment power with respect to the shares of Common Stock set forth
opposite such person's name.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) OUTSTANDING SHARES (3)
-------------------- ------------------------ ----------------------
<S> <C> <C>
Steven T. Francesco
c/o SmartServ Online, Inc.
Metro Center, One Station Place
Stamford, CT 06902 .................. 839,445 22.7%
Sebastian E. Cassetta
c/o SmartServ Online, Inc.
Metro Center, One Station Place
Stamford, CT 06902 .................. 376,250 10.2%
InterBank Communications, Inc.
1733 Connecticut Avenue, N.W.
Washington, DC 20009 ................ 204,250(4) 5.5%
Bernard Baum......................... 5,000(5) *
Beth Bronner......................... 10,000(5) *
Catherine Cassel Talmadge............ 7,500(5) *
Hiro R. Hiranandani.................. 20,000(5)(6) *
L. Scott Perry....................... 10,000(5) *
All executive officers and directors
as a group (10 persons).............. 1,280,695(7) 34.3%
</TABLE>
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* Less than 1%
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<PAGE>
(1) Under the rules of the SEC, addresses are only given for holders of 5% or
more of the outstanding Common Stock of the Company.
(2) Under the rules of the SEC, a person is deemed to be the beneficial owner
of a security if such person has or shares the power to vote or direct the
voting of such security or the power to dispose or direct the disposition
of such security. A person is also deemed to be a beneficial owner of any
securities if that person has the right to acquire beneficial ownership
within 60 days of the date hereof. Unless otherwise indicated by footnote,
the named entities or individuals have sole voting and investment power
with respect to the shares of Common Stock beneficially owned.
(3) Represents the number of shares of Common Stock beneficially owned as of
October 24, 1997, by each named person or group, expressed as a percentage
of the sum of all of the shares of such class outstanding as of such date
and the number of shares not outstanding but beneficially owned by such
named person or group.
(4) Includes 10,000 shares subject to currently exercisable warrants.
(5) Includes 5,000 shares subject to currently exercisable options.
(6) Includes 10,000 shares subject to currently exercisable warrants.
(7) Includes 36,000 shares subject to currently exercisable options and
warrants.
CHANGES IN CONTROL
The Company and each of Messrs. Cassetta and Francesco have entered
into an agreement with Zanett Capital, Inc. ("Zanett") dated September 29, 1997
which provides, among other things, that for a period of 5 years, at the request
of Zanett the Company will appoint such number of designees of Zanett to its
Board of Directors so that the designees of Zanett will constitute a majority of
the members of the Board of Directors of the Company. Further, Messrs. Cassetta
and Francesco have agreed to vote their shares of Common Stock, representing
approximately 32.5% of the outstanding stock of the Company, and any shares they
may acquire in the future, in favor of the designees of Zanett at each Annual
Meeting of Stockholders of the Company at which Directors are elected.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In March 1996, upon the consummation of the Company's Initial Public
Offering, the Company and InterBank Communications, Inc. ("InterBank") agreed to
terminate a Consulting Agreement entered into on June 1, 1995 and, in
consideration therefor, the Company issued 10,000 warrants to InterBank and paid
InterBank $50,000. The Company also paid InterBank $36,000 in full settlement of
all amounts past due under the Consulting Agreement. On the date of the
execution and delivery of the Consulting Agreement, InterBank beneficially owned
more than 5% of the Company's Common Stock and Simon A. Hershon, Ph.D.,
President of InterBank, was a director of the Company. Mr. Hershon was a
director of the Company until November 1996.
In March 1996, upon the consummation of the Company's Initial Public
Offering, the Company repaid $707,780 principal amount of certain convertible
subordinated notes (and accrued interest thereon), and the
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balance of the notes and accrued interest thereon was converted into 427,735
shares of Common Stock or more than 5% of the then outstanding shares of Common
Stock. Holders of such notes were present or former investment advisory clients
of Laifer Capital Management, Inc.
In connection with a private placement of securities made by the
Company in 1995, Sebastian E. Cassetta and Steven T. Francesco, each an officer,
director and beneficial owner of more than 5% of the Common Stock of the
Company, entered into a Non-Recourse Guaranty and Pledge Agreement, dated
October 2, 1995 (the "Pledge Agreement"), with the placement agent for such
securities as agent for the subscribers named therein, pursuant to which Messrs.
Cassetta and Francesco each pledged 250,000 shares of Common Stock, which shares
secured the repayment of the $1,200,000 principal amount of promissory notes
sold by the Company to such subscribers. The notes were repaid in March 1996
upon the consummation of the Company's Initial Public Offering, whereupon the
Pledge Agreement was terminated.
The Company believes that the terms of the transactions described above
between the Company and its officers, directors or other affiliates were no less
favorable to the Company than would have been obtained from a non-affiliated
third party for similar transactions at the time of entering into such
transactions. In addition, the Company has adopted a policy whereby all future
transactions and/or loans between the Company and its officers or directors will
be on terms that the Company believes are no less favorable than could be
obtained from unaffiliated third parties (at the time such transactions and/or
loans are entered into) and will be approved by a majority of the independent
disinterested directors of the Company.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
October 28, 1997 SMARTSERV ONLINE, INC.
Registrant
By: /S/SEBASTIAN E. CASSETTA
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Sebastian E. Cassetta
Chairman of the Board
Chief Executive Officer
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