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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1999
REGISTRATION NO. 333-88199
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POPMAIL.COM, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 31-1487885
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
4801 West 81st Street, Suite 112
Bloomington, MN 55437
(612) 837-9917
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Stephen D. King
Chief Executive Officer
PopMail.com, inc.
4801 West 81st Street, Suite 112
Bloomington, MN 55437
(612) 837-9917
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
William M. Mower, Esq.
Maslon Edelman Borman & Brand, LLP
3300 Norwest Center
Minneapolis, Minnesota 55402-4140
(612) 672-8200
Approximate date of the commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered 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
<TABLE>
<CAPTION>
===========================================================================================================================
PROPOSED
MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, $.01 par value (1)(2) 1,000,000 $1,770,000.00 $467.28
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value (2) 288,000 $ 509,760.00 $134.58
===========================================================================================================================
TOTAL 1,288,000 $2,279,760.00 $601.86
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</TABLE>
(1) Issuable upon exercise of certain Warrants.
(2) Fee calculated pursuant to Rule 457(c), based on the average high and
low sales price on December 2, 1999.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION; DATED DECEMBER 9, 1999
PROSPECTUS
POPMAIL.COM, INC.
4,353,049 SHARES OF
COMMON STOCK
This prospectus relates to a maximum of 4,353,049 shares of common stock of
PopMail.com, inc. issuable upon the conversion of Series D 8% Convertible
Preferred Stock (the "Series D Preferred Shares"), certain shares of common
stock issuable in lieu of payment of dividends, and certain shares issuable upon
exercise of warrants granted to the selling shareholders listed on page 13 of
this prospectus. The total proceeds to us from the exercise of the warrants
issued in connection with the sale of the Series D Preferred Shares (the "Series
D Warrants"), if the Series D Warrants are exercised in full, would be a maximum
of $1,350,000. We will receive no proceeds from the sale of the common stock by
selling shareholders.
Our common stock is listed on the Nasdaq SmallCap Market under the symbol
"POPM." On December 2, 1999, the last sale price for the Common Stock as
reported on the Nasdaq SmallCap Market was $1.9375.
The shares offered by this prospectus involve a high degree of risk. SEE
"RISK FACTORS" BEGINNING ON PAGE 5 FOR A DESCRIPTION OF FACTORS WHICH SHOULD BE
CONSIDERED BY INVESTORS BEFORE PURCHASING THE SHARES OFFERED BY THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. A REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE, AND MAY BE CHANGED.
THIS PROSPECTUS IS INCLUDED IN THE REGISTRATION STATEMENT THAT WAS FILED BY
POPMAIL WITH THE SECURITIES AND EXCHANGE COMMISSION. THE SELLING SHAREHOLDERS
CANNOT SELL THEIR SHARES UNTIL THAT REGISTRATION STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THE SHARES OR THE SOLICITATION OF AN
OFFER TO BUY THE SHARES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
The date of this Prospectus is _________, 1999.
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TABLE OF CONTENTS
PROSPECTUS SUMMARY....................................................3
RISK FACTORS..........................................................5
USE OF PROCEEDS......................................................13
SELLING SHAREHOLDERS.................................................13
PLAN OF DISTRIBUTION.................................................14
WHERE YOU CAN FIND MORE INFORMATION..................................15
NOTE REGARDING FORWARD-LOOKING STATEMENTS............................16
LEGAL MATTERS........................................................17
EXPERTS..............................................................17
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES.......................17
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in
this prospectus. You must not rely on any information or representations
not contained in this prospectus, if given or made, as having been
authorized by us. This prospectus is not an offer or solicitation in
respect to these securities in any jurisdiction in which such offer or
solicitation would be unlawful. The delivery of this prospectus shall not
under any circumstances, create any implication that there has been no
change in our affairs or that the information contained in this prospectus
is correct as of any time subsequent to the date of this prospectus.
However, in the event of a material change, this prospectus will be amended
or supplemented accordingly.
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PROSPECTUS SUMMARY
As used in this prospectus, the terms "Company","we", "us" and "our" refer
to PopMail.com,inc. and its consolidated subsidiaries.
THE COMPANY
PopMail.com, inc. (f/k/a Cafe Odyssey, Inc.) consists of two divisions, the
restaurant division and the e-mail services division.
The restaurant division develops, owns and operates restaurants with
multiple themed dining rooms designed to appeal to the upscale casual dining
market. We have a Cafe Odyssey restaurant at the Mall of America in Bloomington,
Minnesota, a suburb of Minneapolis, which opened in June 1998, and a second Cafe
Odyssey restaurant in the Denver Pavilions, an urban retail/entertainment
complex in Denver, Colorado which opened on March 15, 1999. Our first
restaurant, in the Kenwood Shopping Center in Cincinnati, Ohio, which operated
under the name "Hotel Discovery," opened in December 1996. We have recently
entered into a Letter of Intent to sell this restaurant and, accordingly, ceased
operations pending completion of this sale.
The email services division of PopMail.com, inc. is a leading provider of
email service to radio stations and their listeners. It combines the power of
the Internet with the most successful affinity-building, mass-medium ever
created: radio. By providing radio stations with an attractive email service
offered to listeners free of charge, PopMail leverages radio's proven ability to
engage audiences and attract advertisers. The company holds exclusive
relationships with more than 500 radio stations reaching 100 million listeners
each week.
On September 1, 1999, we completed the merger with popmail.com, inc., a
Delaware corporation ("Old Popmail"). Through partnerships with radio stations
nationwide, Old Popmail was a leading email provider to radio stations. We
entered into a definitive merger agreement with Old Popmail on June 1, 1999, and
the transaction closed into escrow on June 25, 1999. The shareholders of Cafe
Odyssey, Inc. approved the merger on August 19, 1999. Subsequent to the merger,
Cafe Odyssey, Inc. changed its name to PopMail.com, inc.
We began operations as Hotel Mexico, Inc., which was incorporated in Ohio
in January 1994. The Kenwood Restaurant Limited Partnership, an Ohio limited
partnership was formed in June 1995 to own and operate the Kenwood Unit. Hotel
Mexico's operations and the net assets of the Kenwood Restaurant Limited
Partnership were combined in November 1996, and in August 1997 Hotel Mexico was
reorganized as Hotel Discovery, Inc., a Minnesota corporation. On May 21, 1998,
the Company's Board of Directors and shareholders approved a change in its
corporate name from Hotel Discovery, Inc. to Cafe Odyssey, Inc.
Our executive offices are located at 4801 West 81st Street, Suite 112,
Bloomington, Minnesota 55437 and its telephone number is (612) 837-9917.
RECENT DEVELOPMENTS
On October 13, 1999, we entered into a Common Stock Subscription Agreement
to acquire approximately 1.5% of the outstanding shares of Internet Community
Concepts ("ICC"), a company providing Web content, e-commerce and advertising to
nearly 350 radio stations. This agreement will give the Company a strategic
alliance with ICC.
On October 20, 1999, we executed an Asset Purchase Agreement by and
between the Company and Werthgreen, LLC, an Ohio limited liability company,
with respect to the sale of the Hotel Discovery Restaurant in Cincinnati,
Ohio. Completion of the sale is subject to approval of the landlord.
On November 24, 1999, the remaining holders of the Company's Series B
Convertible Preferred Stock (the "Series B") elected to convert their Series B
into 8,533,498 shares of the Company's Common Stock. In exchange for this
conversion, the Company agreed to amend the Warrants held by the Series B
holders (which are exercisable into 4,407,098 shares of the Registrant's Common
Stock, subject to adjustment, representing the economic equivalent of all of
the Company's options, warrants, and other securities convertible into, or
exchangeable for, common stock which were outstanding on May 3, 1999) to change
the exercise price of the Warrants from various exercise prices to $0.75 per
share of Common Stock. Also in exchange for the conversion, the Company agreed
to issue to LegacyMaker, Inc. 900,000 shares of Common Stock of the Company in
exchange for warrants exercisable into an aggregate of 900,000 shares of
Company Common Stock at $3.00 per share, and for certain other consideration.
(See page 14 under the caption "Series B" for a full description of the
Series B.)
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On December 3, 1999, we completed the purchase of ROI Interactive, LLC., a
Dallas-based company. Under the terms of the acquisition, we acquired
substantially all of the assets of ROI in exchange for 2,750,000 restricted
shares of PopMail.com,inc. common stock and assumption of certain liabilities.
To finance the acquisition and provide working capital for growth, we received
$1 million from exercised warrants, $2 million from the sale of a two-year 4%
convertible debenture, and $1 million from a term loan. This acquisition gives
us ownership of ROI Interactive, its technology and client roster. It also gives
both the Company and ROI a common technology and marketing platform, which
enables us to take full advantage of ROI's powerful email marketing services. In
addition, with the completion of the acquisition, Popmail.com now has a
permission and affinity marketing database of over 1 million members.
In order to close the transaction with ROI, ROI required the Company to find a
third party for resale of the ROI shares. King Family Partners, a Limited
Partnership for the benefit of certain family members of Stephen D. King, Chief
Executive Officer of the Company, and of which Mr. King is president of the
General Partner, purchased the shares on December 1, 1999 for $2.00 per share.
To finance such purchase, the Company loaned King Family Partners $2,450,000 on
a nonrecourse basis, with interest at the lowest applicable federal rate, a
maturity date of three years, and secured by the shares purchased from the
members of ROI.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered (1) ............................4,353,049 shares
Common stock outstanding
before the offering (2).............................19,515,570 shares
Common stock outstanding
after the offering (2).............................23,868,619 shares
Nasdaq SmallCap Market symbol.........................POPM
</TABLE>
(1) Represents the maximum number of shares that can be issued under the
Securities Purchase Agreement upon conversion of the Series D Preferred
Shares, payment of dividends in connection with the Series D Preferred
Shares, shares to be sold by certain selling shareholders and shares
issuable upon exercise of certain Warrants.
(2) Does not include shares of Common Stock that are (a) reserved for
issuance upon conversion of outstanding Series C 8% Convertible
Preferred Stock (the "Series C Preferred Shares"); (b) issuable upon
exercise of the Class A Warrants issued as part of our initial public
offering; (c) issuable upon exercise of certain other warrants; or (d)
reserved for issuance under various stock option agreements, including
those issued under the 1997 Stock Option and Compensation Plan, 1998
Director Stock Option Plan and those issued to certain directors.
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RISK FACTORS
An investment in our common stock is very risky. You may lose the entire
amount of your investment. Prior to making an investment decision, you should
carefully review this entire prospectus and consider the following risk factors:
WE HAVE INCURRED LOSSES TO DATE AND IF OUR SALES DO NOT IMPROVE, WE WILL
NEED ADDITIONAL FINANCING IN ORDER TO CONTINUE OPERATIONS.
We incurred net losses of approximately $8.9 million for the 39 weeks ended
October 3, 1999, $6.7 million in 1998 and $4.0 million in 1997 and had a working
capital deficit of approximately $6.7 million as of April 4, 1999. Our ability
to continue our present operations and successfully implement our expansion
plans is contingent upon our ability to increase our revenues which are
presently limited to income from our three existing restaurants. Without
additional financing, cash generated from our current operations may not be
adequate to fund operations and make mortgage payments in 1999. There can be no
assurances that additional financing to fund current operations and expansion
will be available on terms acceptable or favorable to us. In addition, our
independent auditors have expressed a "going concern" qualification to their
audit of our financial statements for the year ended January 3, 1999.
THERE IS SIGNIFICANT POTENTIAL FOR DILUTION OF INVESTORS INTERESTS DUE TO
THE E-MAIL-RELATED ACQUISITIONS OR THE CONVERSION OF PREFERRED SHARES INTO
SHARES OF THE COMPANY'S COMMON STOCK.
In May 1999, we separately issued to an investor 2,000 shares of Series A
8% Convertible Preferred Stock (the "Series A Preferred Shares") which are
convertible into shares of common stock at a conversion price of 65% of the
market price of our common stock and a warrant to acquire 300,000 shares of
common stock at an exercise price of $3.00 per share. As of September 22, 1999,
1,015,999 shares of common stock have been issued upon the conversion of 2,000
Series A Preferred Shares, leaving no shares of Series A Preferred Shares
outstanding.
In July 1999, we also issued 2,000 shares of Series C Preferred Shares
which are also convertible into shares of common stock at a conversion price of
65% of the market price of our common stock and a warrant to acquire 300,000
shares of common stock at an exercise price of $3.00 per share (the "Series C
Warrant"). As with the Series A Preferred Shares, a decline in the stock price
of common stock could result in considerable dilution to investors if the holder
of the Series C Preferred Shares converts. No more than 1,453,818 shares of
common stock, including those already issued, may be issued in connection with
the conversion of Series C Preferred Shares and payments of dividends. As of
November 30, 1999, 193,160 shares of common stock have been issued upon the
conversion of 275 Series C Preferred Shares, leaving 1,725 shares of Series C
Preferred Shares outstanding.
Additionally, we were required to issue to LegacyMaker, Inc. securities
with substantially identical terms as any options, warrants or other securities
exchangeable for or convertible into common stock that were issued by us after
May 3, 1999 and before September 1, 1999 upon payment by LegacyMaker of the same
consideration paid by the purchaser of any such options, warrants or other
securities, the effect of which, if issued and exercised, would be additional
ownership dilution.
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OUR COMMON STOCK COULD BE DELISTED FROM THE NASDAQ SMALLCAP MARKET, WHICH
DELISTING COULD HINDER YOUR ABILITY TO OBTAIN ACCURATE QUOTATIONS AS TO THE
PRICE OF OUR COMMON STOCK, OR DISPOSE OF OUR COMMON STOCK IN THE SECONDARY
MARKET.
Although our common stock is currently listed on the Nasdaq SmallCap
Market, we cannot guarantee that an active public market for our common stock
will continue to exist. During most of December 1998 and into April 1999, our
common stock failed to maintain the minimum bid price criteria of $1.00 per
share as is required in order to trade on the Nasdaq SmallCap Market. In
addition, we have responded to various inquirers of NASDAQ expressing concern
over various matters, including but not limited to the "going concern"
qualification expressed by our independent auditors. Accordingly, our securities
may be delisted from the Nasdaq SmallCap Market or be required to reapply for
listing meeting the Nasdaq initial listing requirements, which are generally
more stringent than the requirements currently governing the Company. Additional
factors giving rise to such delisting could include, but might not be limited to
(1) a reduction of our net tangible assets to below $2,000,000, (2) a reduction
to one active market maker, (3) a reduction in the market value of the public
float in our securities to less than $1,000,000, or (4) the discretion of the
Nasdaq SmallCap Market.
In the event our securities are delisted from the Nasdaq SmallCap Market,
trading, if any, in our common stock would thereafter be conducted in the
over-the-counter markets in the so-called "pink sheets" or the National
Association of Securities Dealer's "Electronic Bulletin Board." Consequently,
the liquidity of our common stock would likely be impaired, not only in the
number of shares which could be bought and sold, but also through delays in the
timing of the transactions, reduction in the coverage of PopMail.com, inc. by
security analysts and the news media, and lower prices for our securities than
might otherwise prevail. In addition, our common stock would become subject to
certain rules of the Securities and Exchange Commission relating to "penny
stocks." These rules require broker-dealers to make special suitability
determinations for purchasers other than established customers and certain
institutional investors and to receive the purchasers' prior written consent for
a purchase transaction prior to sale. Consequently, these "penny stock rules"
may adversely affect the ability of broker-dealers to sell our common stock and
may adversely affect your ability to sell shares of our common stock in the
secondary market.
THERE IS THE RISK THAT DUE TO THE LIMITATIONS PLACED ON THE CONVERSION OF
THE PREFERRED SHARES, THE PREFERRED SHAREHOLDER'S INVESTMENT MAY NOT BE
CONVERTED INTO COMMON STOCK AND WOULD HAVE TO BE REDEEMED IN CASH.
The total number of shares of Common Stock (1) issuable upon conversion of
the Series D Preferred Stock, (2) as a dividend on the Series D Preferred
Shares, and (3) upon exercise of the Warrant cannot exceed 20% of the number of
shares of Common Stock of the Company issued and outstanding on September 1,
1999. In the event the holders of Preferred Shares are unable to convert shares
of Preferred Shares into common stock because these limitations have been
reached, the Company would be required to redeem the Preferred Shares in cash at
135% of the stated value plus any accrued and unpaid dividends. It is possible
that in such case the Company may not possess sufficient cash and cash
equivalents necessary to redeem the Preferred Shares in cash. A similar but
separate risk exists with the Company's Series C Preferred Shares.
WE ARE DEPENDENT ON THE ONGOING SERVICES OF CERTAIN OF OUR EXECUTIVES, THE
LOSS OF WHICH COULD HAVE A DETRIMENTAL EFFECT ON OUR PROFITABILITY AND THE
MARKET PRICE OF OUR STOCK.
Our plan of business development and our day-to-day operations rely heavily
on the experience of James Anderson, our Chairman of the Board, Stephen D. King,
our Chief Executive Officer, Ronald K. Fuller, our President and Chief Operating
Officer, and Thomas W. Orr, our Chief Financial Officer. The loss of any of them
could adversely affect the success of our operations and strategic plans and,
consequently, have a detrimental effect on the market price of our stock.
WE MAY BE UNABLE TO HIRE QUALIFIED EMPLOYEES TO HELP IMPLEMENT AND MANAGE
OUR EXPANSION PLANS, WHICH INABILITY COULD BE DETRIMENTAL TO THE VALUE OF YOUR
INVESTMENT.
Our success will depend in large part upon our ability to supplement our
existing management team. We will need to hire additional corporate level and
management employees to help implement and operate our plans for expansion of
our Internet and restaurant divisions. Any inability or delay in obtaining
additional key employees could have a material adverse effect on our expansion
plans and, consequently, the market value of our stock.
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DUE TO OUR LIMITED OPERATING HISTORY, YOU MAY FIND IT DIFFICULT YOU TO
ASSESS OUR ABILITY TO OPERATE PROFITABLY.
We have only been operating our Kenwood restaurant since December 1996, our
Mall of America restaurant since June 1998, and our Denver restaurant since
March 1999. In addition, Old Popmail was founded in December 1997, and is
considered to be in the developmental stage. Therefore, in addition to the other
risks included in this prospectus, we face the added risks, expenses and
difficulties related to developing and operating a new business enterprise.
Given our lack of significant operating history, investors may have difficulty
assessing the many factors which will determine our ability to generate future
profits.
OUR CHAIRMAN OF THE BOARD CONTROLS A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK
AND MAY INFLUENCE OUR AFFAIRS.
James Anderson was elected to the Board of Directors as Chairman, as a
condition of the merger with popmail.com, inc. on September 1, 1999. Pursuant to
a Schedule 13D filed with the Securities and Exchange Commission on September
13, 1999, Mr. Anderson indirectly or directly controlled approximately 58.9% of
our outstanding common stock. Accordingly, he has the ability to determine the
election of members of the Board of Directors and determine the approval of
corporate transactions and other matters requiring shareholder approval. Unless
and until Mr. Anderson substantially decreases his percentage ownership in our
common stock, he will continue to have significant influence over our affairs.
THERE IS A RISK THAT THE VALUE OF OUR TRADEMARKS AND OTHER PROPRIETARY
RIGHTS COULD BE DIMINISHED BY IMPROPER USE BY OTHERS.
We believe that our trademarks and other proprietary rights are important
to our success and our competitive position. Accordingly, we have filed
trademark applications with the United States Patent and Trademark Office to
register both the "Cafe Odyssey" and "PopMail" marks and designs. However, the
actions we have taken to establish and protect our trademarks and other
proprietary rights may be inadequate to prevent others from imitating our
products or claiming violations of their trademarks and proprietary rights by
us. For instance, we may not be granted trademark registration for any or all of
the proposed uses in our applications. Even if our marks are granted
registration, we may still be unable to protect such marks against prior users
in areas where we conduct or will conduct operations. We may also be unable to
prevent competitors from using the same or similar marks, concepts or
appearance.
WE MAY NOT PAY DIVIDENDS ON OUR COMMON STOCK, IN WHICH EVENT YOUR ONLY
RETURN ON INVESTMENT, IF ANY, WILL OCCUR ON THE SALE OF OUR STOCK.
To date, we have not paid any cash dividends on our common stock, and we do
not intend to do so in the foreseeable future. Rather, we intend to use any
future earnings to fund our operations and the growth of our business.
Accordingly, the only return on an investment in our common stock will occur
upon its sale.
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PURSUANT TO ITS AUTHORITY TO DESIGNATE AND ISSUE SHARES OF OUR STOCK AS IT
DEEMS APPROPRIATE, OUR BOARD OF DIRECTORS MAY ASSIGN RIGHTS AND PRIVILEGES TO
CURRENTLY UNDESIGNATED SHARES WHICH COULD ADVERSELY AFFECT YOUR RIGHTS AS A
COMMON SHAREHOLDER.
Our authorized capital consists of 100,000,000 shares of capital stock. Our
Board of Directors, without any action by the shareholders, may designate and
issue shares in such classes or series (including classes or series or preferred
stock) as it deems appropriate and establish the rights, preferences and
privileges of such shares, including dividends, liquidation and voting rights.
We currently have 19,515,570 shares of common stock, 2,000 shares of Series C 8%
Convertible Preferred Stock and 2,200 shares of Series D 8% Convertible
Preferred Stock outstanding. As of December 2, 1999, a further 16,304,712
shares of common stock have been reserved as follows:
- a maximum of 1,295,423 shares remaining to be issued upon
exercise of the Series C Preferred Shares, and as payment of
dividends upon the Series C Preferred Shares;
- a maximum of 1,578,107 shares issuable upon exercise of the
Series D Preferred Shares, and as payment of dividends upon
the Series D Preferred Shares;
- A maximum of 750,000 shares of common stock reserved for issuance
upon exercise of the Series E Preferred Shares 50,000 shares of
which are currently outstanding;
- 2,600,000 shares issuable upon the exercise of the Class A
Warrants issued as part of our initial public offering and the
partial exercise of the underwriter's over-allotment;
- 9,272,848 shares issuable upon the exercise of outstanding
warrants;
- 1,250,000 shares reserved for issuance under our 1997 Stock Option
and Compensation Plan, of which options relating to 1,422,999
shares are currently outstanding, subject to shareholder approval;
- 250,000 shares for issuance under our 1998 Director Stock
Option Plan, of which options relating to 298,333 shares are
currently outstanding, subject to shareholder approval; and
- 58,334 shares issuable upon exercise of certain directors'
stock options.
The rights of holders of preferred stock and other classes of common stock
that may be issued could be superior to the rights granted to holders of the
Units issued in our initial public offering. Our Board's ability to designate
and issue such undesignated shares could impede or deter an unsolicited tender
offer or takeover proposal. Further, the issuance of additional shares having
preferential rights could adversely affect the voting power and other rights of
holders of common stock.
MINNESOTA LAW MAY INHIBIT OR DISCOURAGE TAKEOVERS, WHICH COULD REDUCE THE
MARKET VALUE OF OUR STOCK.
Being a corporation organized under Minnesota law, we are subject to
certain Minnesota statutes which regulate business combinations and restrict the
voting rights of certain persons acquiring shares of our stock. By impeding a
merger, consolidation, takeover or other business combination involving
PopMail.com, inc. or discouraging a potential acquiror from making a tender
offer or otherwise attempting to obtain control of the Company, these
regulations could adversely affect the market value of our stock.
THE LIMITATIONS ON DIRECTOR LIABILITY CONTAINED IN OUR ARTICLES OF
INCORPORATION AND BYLAWS MAY DISCOURAGE SUITS AGAINST DIRECTORS FOR BREACH OF
FIDUCIARY DUTY.
As permitted by Minnesota law, our Amended and Restated Articles of
Incorporation provide that members of our Board of Directors are not be
personally liable to you or the Company for monetary damages resulting from a
breach of their fiduciary duties. These limitations on director liability may
discourage shareholders from suing directors for breach of fiduciary duty and
may reduce the likelihood of derivative litigation brought against a director by
shareholders on the Company's behalf. Furthermore, our Bylaws provide for
mandatory indemnification of directors and officers to the fullest extent
permitted by Minnesota law. All of these provisions limit the extent to which
the threat of legal action against our directors for any breach of their
fiduciary duties will prevent such breach from occurring in the first instance.
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RESTAURANT DIVISION
OUR RESTAURANT OPERATIONS OR CONTEMPLATED EXPANSION MAY PROVE UNSUCCESSFUL,
EITHER OF WHICH COULD RESULT IN CONTINUED UNPROFITABILITY AND CAUSE OUR STOCK
PRICE TO FALL.
To date, we have not generated a profit. Due to a variety of factors, many
of which are discussed in this prospectus, we may never generate significant
revenues or operate profitably. In fact, our management anticipates that net
losses will continue for the foreseeable future. Even if we succeed in expanding
our operations as contemplated, we cannot assure a successful transition to
higher volume operations. We may be unable to control our expenses, attract
necessary additional personnel, or procure the capital required to maintain
expanded operations. If our expansion is ultimately unsuccessful, the results of
our operations will suffer accordingly, and the market price of our stock may
fall.
POOR OPERATING RESULTS AT ANY OF OUR RESTAURANTS OR A DELAY IN THE PLANNED
OPENING OF NEW RESTAURANTS, COULD ADVERSELY AFFECT OUR PROFITABILITY AS A WHOLE.
We currently operate only two restaurants. Accordingly, poor operating
results at any one restaurant would materially affect the profitability and cash
flow of our operations as a whole. To a substantial extent, our ability to
increase the number of restaurants we operate and our choice of locations for
such restaurants will determine whether we will experience future growth in our
revenues and profits. However, the significant financial investment associated
with opening our restaurants may create substantial fluctuations in our
operating results. Due to the significance of such investments, the risk we face
in opening any one of our restaurants is much larger than that associated with
most other restaurant companies' venues. Consequently, a delay in any planned
restaurant opening could materially affect the profitability and cash flow of
our operations as a whole.
THEME RESTAURANTS MAY EXPERIENCE SOME DECLINE IN SAME STORE SALES.
Same store sales (sales for restaurants that have been open at least one
year) is one measure of operating results used by stock analysts to analyze a
publicly traded retail and restaurant businesses. Theme restaurants frequently
see a decline in same store sales from the first year to the subsequent year. In
addition to negatively impacting the Company's revenues, declining same store
sales has had a negative impact on the publicly traded theme restaurant's stock
price and resulted in stock price volatility.
OUR ABILITY, OR INABILITY, TO RESPOND TO VARIOUS COMPETITIVE FACTORS
AFFECTING THE RESTAURANT MAY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
The restaurant industry is highly competitive and is affected by changes in
consumer preferences, as well as by national, regional and local economic
conditions, and demographic trends. Discretionary spending priorities, traffic
patterns, tourist travel, weather conditions, employee availability and the
type, number and location of competing restaurants, among other factors, will
also directly affect the performance of our restaurants. Changes in any of these
factors in the markets where we currently operate our restaurants could
adversely affect the results of our operations. Furthermore, the restaurant
industry in general is highly competitive based on the type, quality and
selection of the food offered, price, service, location and other factors and,
as a result, has a high failure rate. The themed restaurant industry is
relatively young, is particularly dependent on tourism and has seen the
emergence of a number of new competitors. We compete with numerous
well-established competitors, including national, regional and local restaurant
chains, many of which have greater financial, marketing, personnel and other
resources and longer operating histories than us. As a result, we may be unable
to respond to the various competitive factors affecting the restaurant industry.
WE HAVE ENTERED INTO NON-CANCELABLE LEASES UNDER WHICH WE ARE OBLIGATED TO
MAKE PAYMENTS FOR TERMS OF 12 TO 15 YEARS.
We have entered into long-term leases relating to the Kenwood, Mall of
America and Denver restaurants. These leases are non-cancelable by us (except in
limited circumstances) and range in term from 12 to 15 years. We will likely be
required to enter into similar long-term, non-cancelable leases for any future
restaurants we develop. If we decide to close any of our existing restaurants or
any other future restaurant, we may nonetheless be committed to perform our
obligations under the applicable lease, which would include, among other things,
payment of the applicable base rent for the balance of the respective lease
term. Such continued obligations increase our chances of closing a restaurant
without receiving an adequate return on our investment.
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<PAGE> 11
UNPREDICTABLE RISKS ASSOCIATED WITH THE CONSTRUCTION OF ADDITIONAL
RESTAURANTS COULD RESULT IN DELAYS AND COST OVERRUNS IN THE CONTEMPLATED
EXPANSION OF OUR OPERATIONS.
As with all construction projects, we face many risks related to the
opening of additional restaurants, any of which could result in delays and cost
overruns which would negatively impact the success of any restaurant openings.
Such risks may include:
- shortages of materials or skilled labor;
- unforeseen environmental, engineering or geological problems;
- work stoppages;
- weather interference;
- floods;
- difficulties with regulatory agencies; and
- unanticipated cost increases.
IN ORDER TO FINANCE THE FUTURE DEVELOPMENT OF ADDITIONAL RESTAURANTS OR THE
ACQUISITIONS, WE MAY BE REQUIRED TO RAISE ADDITIONAL FUNDS BY ISSUING SECURITIES
ON TERMS WHICH WOULD DILUTE YOUR INTERESTS IN POPMAIL.
The cost of developing our restaurants has ranged from $4.5 to $5.1 million
per unit. We may be unable to develop future restaurants at similar costs.
In order to fund the Company's future development, and the development of
internet-related businesses, we will need to obtain financing through an
additional offering of our equity securities or by incurring indebtedness.
Such funds may not be available on terms acceptable to us or our shareholders.
Furthermore, future investors may seek and obtain, and we may be required to
offer, investment terms which are substantially better than those granted to
existing investors. The issuance of securities on such terms would dilute the
interests of existing shareholders.
AMONG OTHER ECONOMIC FACTORS OVER WHICH WE HAVE NO CONTROL, THE SUCCESS OF
OUR RESTAURANTS WILL DEPEND ON CONSUMER PREFERENCES AND THE PREVAILING LEVEL OF
DISCRETIONARY CONSUMER SPENDING.
Our success, and consequently any investment in our common stock, depends
to a significant degree on a number of economic conditions over which we have no
control, including:
- discretionary consumer spending
- the overall success of the malls, entertainment centers and other
venues where Cafe Odyssey restaurants are or will be located
- economic conditions affecting disposable consumer income
- the continued popularity of themed restaurants in general and the Cafe
Odyssey concept in particular
Furthermore, most themed restaurants are especially susceptible to shifts
in consumer preferences because they open at or near capacity and frequently
respond to such shifts by experiencing a decline in revenue growth or of actual
revenues. An adverse change in any or all of these conditions would have a
negative effect on our operations and the market value of our common stock.
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<PAGE> 12
OUR RESTAURANT DIVISION IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION WHICH
COULD NEGATIVELY IMPACT OUR BUSINESS.
The restaurant industry, and to a lesser extent, the retail merchandising
industry, are subject to numerous federal, state, and local government
regulations, including those relating to:
- the preparation and sale of food
- building and zoning requirements
- environmental protections
- minimum wage requirements
- overtime
- working and safety conditions
- the sale of alcoholic beverages
- sanitation
- relationships with employees
- unemployment
- workers compensation
- citizenship requirements
Any change in the current status of such regulations, including an increase
in employee benefits costs, workers' compensation insurance rates, or other
costs associated with employees, could substantially increase our compliance and
labor costs. Because we pay many of our restaurant-level personnel rates based
on either the federal or the state minimum wage, increases in the minimum wage
would lead to increased labor costs. In addition, our operating results would be
adversely affected in the event we fail to maintain our food and liquor
licenses. Furthermore, restaurant operating costs are affected by increases in
unemployment tax rates, sales taxes and similar costs over which we have no
control.
We may also be subject in certain states to "dram-shop" statutes, which
provide a person injured by an intoxicated person the right to recover damages
from an establishment that wrongfully served alcoholic beverages to the
intoxicated person.
INTERNET DIVISION
WE MAY BE ENTERING INTO A NEW BUSINESS VENTURE IN AN EVOLVING INDUSTRY IN
WHICH WE HAVE NO EXPERIENCE.
The email business adds a significantly different business to our business
operations. We and our present management also have no experience with the
business of providing email services. Furthermore, the internet industry is
rapidly evolving, extremely competitive, and the market place for
internet-related shares has been very volatile.
IN LIGHT OF THE CONSOLIDATION OF THE RADIO INDUSTRY, THE LOSS OF ANY
SIGNIFICANT AFFILIATE CONTRACTS WOULD NEGATIVELY IMPACT POPMAIL'S OPERATIONS.
The last few years have brought substantial concentration of power among a
few players in the radio industry. Consequently, significant portions of the
industry are controlled by a relatively few organizations. Popmail already has
affiliation contracts in place with 2 of the 5 largest organizations and is in
negotiations with the remaining players. In light of such consolidation,
however, the loss of any of these significant affiliation contracts or the
inability of Popmail to enter into contracts with other radio industry entities
would negatively impact Popmail's operations.
OUR E-MAIL BASED PRODUCTS ARE DEPENDENT UPON THE INTERNET.
The success of our services and products will depend in large part upon the
continued development and expansion of the Internet. The Internet has
experienced, and is expected to continue to experience, significant, geometric
growth in the number of users and the amount of traffic. There can be no
assurance that the Internet infrastructure will continue to be able to support
the demands placed on it by this continued growth. In addition, the Internet
could lose its viability due to delays in the development or adoption of new
standards and protocols (for example, the next-generation Internet Protocol) to
handle increased levels of Internet activity, or due to increased governmental
regulation. There can be no assurance that the infrastructure or complementary
services necessary to make the Internet a viable commercial marketplace will be
developed, or, if developed, that the Internet will become a viable commercial
marketplace for services and products such as those we offer. If the necessary
infrastructure or complementary services or facilities are not developed, or if
the Internet does not become a viable commercial marketplace, our business,
results of operations, and financial condition will be materially adversely
effected.
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<PAGE> 13
INTERNET STOCKS ARE SUBJECT TO MARKET VOLATILITY.
The stock market in general, and the market prices for Internet-related
companies in particular, have experienced extreme volatility that often has
been unrelated to the operating performance of such companies. These
fluctuations may adversely affect our stock price.
If Internet usage does not continue to grow or its infrastructure fails,
our business will suffer. If the Internet does not gain increased acceptance for
business-to-business electronic commerce, our business will not grow or become
profitable. We cannot be certain that the infrastructure or complementary
services necessary to maintain the Internet as a useful and easy means of
transferring documents and data will continue to develop. The Internet
infrastructure may not support the demands that growth may place on it and the
performance and reliability of the Internet may decline.
INCREASED COMPETITION RESULTING FROM AN INCREASE IN THE NUMBER OF FREE
EMAIL PROVIDERS THAT TARGETS THE RADIO INDUSTRY MAY HAVE AN ADVERSE EFFECT ON
POPMAIL'S FUTURE BUSINESS OPERATIONS.
Currently there are hundreds of free email providers, but Popmail
management believes that it is currently the only email provider that solely
targets the radio industry. To the extent Popmail is successful within the
radio industry, we anticipate others will attempt to compete in the radio
segment. Increased competition due to a greater number of free email providers
targeting the radio industry may have an adverse affect on Popmail's future
business operations.
WE MAY FACE INCREASING COMPETITION FOR RADIO STATION CUSTOMERS
AND INTERNET ADVERTISERS.
As a provider of free email, Popmail competes with numerous other email
providers many of which have more capital than Popmail. The principal
competitors in the private-label email service business are: CommTouch,
WhoWhere, MailChek, iName, and OnMedia. Of these providers, to the knowledge of
Popmail management, only MailChek and OnMedia have any radio station customers.
Popmail views its greatest competitive threat to its ability to establish
relationships with radio stations as the potential availability of software that
may duplicate many of the features in the Popmail email system.
In addition, Popmail faces increasing competition for internet advertisers.
THERE IS A RISK THAT GOVERNMENT REGULATION OF THE INTERNET COULD BECOME
MORE EXTENSIVE.
There are currently few laws or regulations directly applicable to access
to or commerce on the Internet. However, due to the increasing popularity and
use of the Internet, it is possible that a number of laws and regulations may be
adopted with respect to the Internet, covering issues such as user privacy,
pricing, characteristics, and quality of products and service. The
Telecommunications Reform Act of 1996 imposes criminal penalties on anyone who
distributes obscene, indecent, or patently offensive communications on the
Internet. Other nations, including Germany, have taken actions to restrict the
free flow of material deemed to be objectionable on the Internet. The adoption
of any additional laws or regulations may decrease the growth of the Internet,
which could in turn decrease the demand for our services and products, and
increase our cost of doing business or otherwise have an adverse effect on our
business, results of operations and financial condition. Moreover, the
applicability to the Internet of existing laws in various jurisdictions
governing issues such as property ownership, libel, and personal privacy is
uncertain and will take years to resolve. Any such new legislation or regulation
could have a material adverse effect on our business, results of operations, and
financial condition.
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<PAGE> 14
USE OF PROCEEDS
The Company received gross proceeds of $2,200,000 (and net proceeds of
approximately $1,960,000) from the sale of the Series D Preferred Shares. These
net proceeds were used to fund a portion of our obligations in connection with
the merger with Old Popmail. The gross proceeds to the Company from the exercise
of the warrants, if the warrants are exercised in full, would be a maximum of
$1,350,000. The proceeds from the exercise of the warrants, if any, are intended
to be used for working capital purposes. The Company will not receive any
proceeds from the sale of the common stock by the selling shareholders.
SELLING SHAREHOLDERS
The following table sets forth the number of shares of the common stock
owned by the selling shareholders as of November 22, 1999 and after giving
effect to this offering. We will not receive any proceeds from the sale of the
common stock by the selling shareholders. The shares of common stock received
upon exercise of the warrants may be offered from time to time by the selling
shareholders.
<TABLE>
<CAPTION>
Shares Percentage Number of Percentage
Beneficially Beneficial Shares Offered by Beneficial
owned before Ownership Selling Ownership After
Name Offering Before Offering Shareholder Offering
- ------------------- -------- --------------- ------------- ---------
<S> <C> <C> <C> <C>
The Shaar Fund, Ltd. 4,278,530(1) 19.3% 2,378,107(2) 9.2%
Blake Capital Partners, LLC 500,000 2.5% 250,000(3) 1.1%
Gulfstream Financial Partners 500,000 2.5% 250,000(3) 1.1%
Progressive Group 450,000(3) 2.0% 150,000 1.3%
Andrew Green 400,000(4) 2.0% 400,000 *
Paul Martin 348,160(5) 1.8% 100,000 1.0%
Frank W. Terrizzi 338,000(6) 1.7% 338,000 *
Jeffrey P. Stebbins 150,000(3) * 150,000 *
Cunningham Construction Group Services, LLC 66,187(7) * 66,187 *
Internet Community 120,000(8) * 120,000 *
Concepts, Inc. ("ICC")
Mark Kroeger 115,000 * 100,000 *
Greg C. Mosher 40,000(4) * 40,000 *
Multi Media Productions (USA), Inc. 10,755 * 10,755 *
- ------------
*Less than 1%.
</TABLE>
(1) Includes a maximum of 1,578,107 shares issuable upon conversion of the
Series D Preferred Shares and upon payment of dividends in connection
with the Series D Preferred Shares. Also includes (i) a maximum of
1,295,423 shares remaining to be issued upon conversion of the Series C
Preferred Shares and upon payment of dividends in connection with the
Series C Preferred Shares and (ii) 1,400,000 shares issuable upon the
exercise of warrants. (See below for full description.)
(2) Represents the maximum number of shares to be issued pursuant to the
Securities Purchase Agreement by and between the Company and The Shaar
Fund, Ltd. dated August 31, 1999. Includes shares issuable upon conversion
of the Series D Preferred Shares, shares issuable upon payment of
dividends in connection with the Series D Preferred Shares, and 800,000
shares issuable upon exercise of warrants. Does not include shares
issuable upon conversion of Series C Preferred Shares.
(3) Represents shares issuable upon exercise of warrants.
(4) In connection with guaranties made by Andrew Green and Greg C. Mosher with
respect to financing provided by Provident Bank, such individuals were
issued Warrants to purchase the Company's Common Stock at an exercise price
of $.75 per share.
(5) Represents shares issuable upon conversion of Series B. (See below for full
description.)
(6) Represents 288,000 shares issued in connection with certain financings and
50,000 shares issuable upon exercise of certain warrants.
(7) Shares issued as payment of a debt owed to Cunningham Construction Group
Services, LLC
(8) Shares issued to ICC as payment of the purchase price for approximately
1.5% of the outstanding shares of ICC.
SERIES D
On August 31, 1999, the Company issued 2,200 Series D Preferred Shares with
a stated value of $1,000 per share in a private placement for total proceeds of
$2,200,000 and net proceeds after expenses of approximately $1,960,000. In
addition, the Company issued a warrant (the "Warrant") to the holder of Series D
Preferred Shares to purchase 300,000 shares of the Company's common stock at
$3.00 per share in connection with the private placement. The Warrant is
exercisable for five years. In addition to a 10% placement fee and a 3%
unallocable expense allowance, the placement agent received a warrant to acquire
150,000 shares of Common Stock at $3.00 per share.
The annual dividend of 8% is cumulative and is payable quarterly in arrears
either in cash or in registered shares of the Company's common stock. Each
Series D Preferred Share is convertible into
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<PAGE> 15
shares of the Company's common stock at a conversion price equal to 65% of the
average closing bid price for the common stock five days prior to the
conversion. The total number of shares of common stock issuable (1) upon
conversion of the Preferred Stock, (2) as a dividend on the Series D Preferred
Shares, and (3) upon exercise of the Warrant cannot exceed 1,878,107 shares (20%
of the number of outstanding shares of common stock on August 31, 1999), unless
the Company obtains shareholder approval as required by the Nasdaq SmallCap
Market. In the event a holder of Series D Preferred Shares is unable to convert
shares of Series D Preferred Shares into common stock because 1,878,107 shares
have already been issued as described in the preceding sentence, the Company
must redeem any unconverted Series D Preferred Shares presented for conversion
for cash at a price equal to 125% of the stated value. The Company has the right
to redeem the Series D Preferred Shares in cash at 135% of stated value plus
accrued and unpaid dividends. All Series D Preferred Shares which is still
outstanding on August 31, 2004 is mandatorily converted at the Conversion Price.
The Company is not required to convert Series D Preferred Stock, whether
upon request for conversion by the holder or upon the August 31, 2004 mandatory
conversion date, if and to the extent that such holder would then own in excess
of 5% of the Company's common stock. If, notwithstanding the foregoing, such
holder is deemed by a court to be the beneficial owner of more than 5% of the
Company's common stock, the Company is required to redeem for cash such number
of shares of Series D Preferred Shares as will reduce such holder's ownership to
not more than 5% at a redemption price equal to 125% of the stated value plus
accrued and unpaid dividends. In the case of mandatory conversion, the Company
may elect to pay a redemption price in cash equal to 135% of the stated value
plus accrued and unpaid dividends or may extend the mandatory conversion date
for one year.
SERIES B
Pursuant to an Agreement and Plan of Merger dated as of June 1, 1999 (the
"Agreement") by and between the Registrant, Stephen D. King (the Registrant's
principal shareholder, Chairman and Chief Executive Officer), each of the
shareholders of Popmail.com, Inc., a Delaware corporation ("Old Popmail"), and
Cafe Odyssey Acquisition Subsidiary, Inc., a Delaware corporation and
wholly-owned subsidiary of the Registrant ("Acquisition Sub"), Old Popmail
merged with and into Acquisition Sub. Pursuant to the Agreement, the parties
closed the merger transaction into escrow on June 30, 1999, at which time Old
Popmail's shareholders delivered their Old Popmail stock certificates into
escrow, and the Registrant delivered certificates for its Series B Convertible
Preferred Stock (the "Series B") to be issued to the Old Popmail shareholders as
consideration for the merger. The shares of Series B were issued upon
consummation of the merger. The Series B is convertible in the aggregate into
approximately 8,635,910, shares of the Registrant's common stock, subject to
adjustment. The Registrant also issued a warrant to the Old Popmail shareholders
(the "Warrant"). The Warrant is exercisable into 4,407,098 shares of the
Registrant's Common Stock, subject to adjustment, representing the economic
equivalent of all of the Company's options, warrants, and other securities
convertible into, or exchangeable for, common stock which were outstanding on
May 3, 1999. Also, as a condition of the merger, on the Effective Date a warrant
exercisable into 900,000 shares (subject to adjustment) of the Registrant's
Common Stock at $3.00 per share (subject to adjustment) was issued to Legacy
Maker, Inc. On September 24, 1999, one of the holders of the Series B elected to
convert 24 shares of the Series B into 102,402 shares of the Company's Common
Stock. On November 24, 1999, the remaining holders of the Series B elected to
convert all of their Series B into an aggregate of 8,533,498 shares of common
stock.
PLAN OF DISTRIBUTION
Pursuant to the terms of the Series D Preferred Shares, we are registering
the underlying common stock offered by this prospectus on behalf of the selling
shareholders. We agreed to file a registration statement under the Securities
Act of 1933, as amended (the "Securities Act") covering resale by the selling
shareholders of the shares and to use our best efforts to cause such
registration statement to be declared effective as soon as possible thereafter.
As used in this paragraph, the term "selling shareholders" includes The Shaar
Fund, Ltd., Progressive Group, and their respective donees, pledgees,
transferees and other successors in interest selling shares received from a
selling shareholder after the date of this prospectus. We will pay all costs and
expenses in connection with the preparation of this prospectus and the
registration of the shares offered by it. Any brokerage commissions and similar
selling expenses attributable to the sale of shares will be borne by the selling
shareholders. Sales of shares may be effected by the selling shareholders at
various times in one or more types of transactions (which may include block
transactions) on the Nasdaq SmallCap Market, in negotiated transactions, through
put or call options transactions relating to the shares, through short sales of
shares, or a combination of such methods of sale at market prices prevailing at
the time of sale or at negotiated prices. Such transactions may or may not
involve brokers or dealers. The selling shareholders have advised us that they
have not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of the shares, nor is there an
underwriter or coordinating broker acting in connection with the proposed sale
of shares by the selling shareholders. We have agreed to indemnify The Shaar
Fund, Ltd. and Progressive Group and their officers, directors, employees and
agents, and each person who controls any such selling shareholder, in certain
circumstances against certain liabilities, including liabilities arising under
the Securities Act. Each such selling shareholder has agreed to indemnify the
Company and its directors and officers in certain circumstances against certain
liabilities, including liabilities arising under the Securities Act.
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<PAGE> 16
With respect to the remaining selling shareholders, we are registering the
underlying common stock offered by this prospectus on behalf of the selling
shareholders. Pursuant to certain piggyback registration rights, we agreed to
file a registration statement under the Securities Act covering resale by the
selling shareholders. As used in this paragraph, the term "selling shareholders"
includes the selling shareholders listed above (other than The Shaar Fund, Ltd.
and Progressive Group), and their donees, pledgees, transferees and other
successors in interest selling shares received from a selling shareholder after
the date of this prospectus. We will pay all costs and expenses in connection
with the preparation of this prospectus and the registration of the shares
offered by it. Any brokerage commissions and similar selling expenses
attributable to the sale of shares will be borne by the selling shareholders.
Sales of shares may be effected by the selling shareholders at various times in
one or more types of transactions (which may include block transactions) on the
Nasdaq SmallCap Market, in negotiated transactions, through put or call options
transactions relating to the shares, through short sales of shares, or a
combination of such methods of sale at market prices prevailing at the time of
sale or at negotiated prices. Such transactions may or may not involve brokers
or dealers.
The selling shareholders and any broker-dealers that act in connection with
the sale of securities might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the securities sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act.
Because selling shareholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the selling shareholders will be
subject to the prospectus delivery requirements of the Securities Act. We have
informed the selling shareholders that the anti-manipulative provisions of
Regulation M promulgated under the Securities Exchange Act of 1934, as amended,
may apply to their sales in the market.
Selling shareholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of that Rule.
MINNESOTA ANTI-TAKEOVER LAW
The Company is governed by the provisions of Sections 302A.671 and 302A.673
of the Minnesota Business Corporation Act. In general, Section 302A.671 provides
that the shares of a corporation acquired in a "control share acquisition" have
no voting rights unless voting rights are approved in a prescribed manner. A
"control share acquisition" is an acquisition, directly or indirectly, of
beneficial ownership of shares that would, when added to all other shares
beneficially owned by the acquiring person, entitle the acquiring person to have
voting power of 20% or more in the election of directors. In general, Section
302A.673 prohibits a publicly-held Minnesota corporation from engaging in a
"business combination" with an "interested shareholder" for a period of four
years after the date of transaction in which the person became an interested
shareholder, unless the business combination is approved in a prescribed manner.
"Business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested shareholder. An "interested
shareholder" is a person who is the beneficial owner, directly or indirectly, or
10% or more of the corporation's voting stock or who is an affiliate or
associate of the corporation and at any time within four years prior to the date
in question was the beneficial owner, directly or indirectly, of 10% or more of
the corporation's voting stock.
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires PopMail to file information with the
Securities and Exchange Commission concerning its business and operations.
Accordingly, we file annual, quarterly, and special reports, proxy statements
and other information with the Commission. You can inspect and copy this
information at the Public Reference Facility maintained by the Commission at
Judiciary Plaza, 450 5th Street, N.W., Room 1024, Washington, D.C. 20549. You
can also do so at the following regional offices of the Commission:
(1) New York Regional Office, 7 World Trade Center, Suite 1300, New York,
New York 10048.
(2) Chicago Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661.
You can receive additional information about the operation of the
Commission's Public Reference Facilities by calling the Commission at
1-800-SEC-0330. The Commission also maintains a website at
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<PAGE> 17
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding companies that, like PopMail, file information
electronically with the Commission.
The Commission allows us to "incorporate by reference" information that has
been filed with it, which means that we can disclose important information to
you by referring you to the other information we have filed with the Commission.
The information that we incorporate by reference is considered to be part of
this prospectus, and related information that we file with the Commission will
automatically update and supersede information we have included in this
prospectus. We also incorporate by reference any future filings we make with the
Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, as amended, until the selling shareholders sell all of their shares
or until the registration rights of the selling shareholders expire. This
prospectus is part of a registration statement that we filed with the Commission
(Registration No. 333-88199). The following are specifically incorporated
herein by reference:
1. Annual Report on Form 10-KSB for the fiscal year ended January 3,
1999;
2. Quarterly Reports on Form 10-QSB for the quarters ended April 4,
1999, July 4, 1999 and October 3, 1999;
3. Current Reports on Form 8-K filed on July 23, 1999, September 16, 1999
and October 1, 1999; and Amendment to Current Report on Form 8-K/A
filed on November 15, 1999;
4. The description of common stock included under the caption
"Securities to be Registered" in the Company's registration
statement on Form 8-A, File No. 0-23243, dated October 21, 1997,
including any amendments or reports filed for the purpose of
updating such description.
You can request a free copy of the above filings or any filings
subsequently incorporated by reference into this prospectus by writing or
calling us at the following address:
PopMail.com, inc.
Attention: Thomas Orr, Chief Financial Officer
4801 West 81st Street, Suite 112
Bloomington, Minnesota 55437
(612) 837-9917
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement or amendment to this prospectus.
We have not authorized anyone else to provide you with different information or
additional information. Selling shareholders will not make an offer of our
common stock in any state where the offer is not permitted. You should not
assume that the information in this prospectus, or any supplement or amendment
to this prospectus, is accurate at any date other than the date indicated on the
cover page of such documents.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus and in the documents
incorporated by reference in this prospectus are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward-looking statements can be
identified by the use of predictive, future-tense or forward-looking
terminology, such as "believes," "anticipates," "expects," "estimates," "may,"
"will" or similar terms. Forward-looking statements also include projections
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<PAGE> 18
of financial performance, statements regarding management's plans and objectives
and statements concerning any assumption relating to the foregoing. Important
factors regarding PopMail.com, inc.'s business, operations and competitive
environment which may cause actual results to vary materially from these
forward-looking statements are discussed under the caption "Risk Factors."
LEGAL MATTERS
Legal matters in connection with the validity of the shares offered by this
Prospectus will be passed upon for the Company by Maslon Edelman Borman & Brand,
LLP, Minneapolis, Minnesota.
EXPERTS
The consolidated financial statements of PopMail.com (formerly known as
Cafe Odyssey, Inc.) as of January 3, 1999 and December 28, 1997 and for the
years then ended incorporated by reference in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated herein in
reliance upon the authority of that firm as experts in giving said report.
Reference is made to said report, which includes an explanatory paragraph with
respect to the uncertainty regarding the Company's ability to continue as a
going concern as discussed in Note 1 to the financial statements.
On September 30, 1999, the Company, with the approval of its Board of
Directors, engaged Grant Thornton LLP as the independent public accountants for
Cafe Odyssey (d/b/a PopMail.com). Prior to the engagement of Grant Thornton
LLP, Arthur Andersen LLP had served as the principal independent public
accountants for the Company. The report prepared by Arthur Andersen LLP as of
January 3, 1999 and December 28, 1997 and for the years then ended contained no
adverse opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty of audit scope or accounting principles. However, reference is made
to said report which includes an explanatory paragraph with respect to the
uncertainty regarding the Company's ability to continue as a going concern as
discussed in Note 1 to the financial statements. In connection with the audits
as of January 3, 1999 and through September 30, 1999, there have been no
disagreements with Arthur Andersen LLP on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of Arthur Andersen LLP,
would have caused Arthur Andersen LLP to make reference to the subject matter of
the disagreements in its reports.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Minnesota Statutes Section 302A.521 provides that a corporation shall
indemnify any person made or threatened to be made a party to any proceeding by
reason of the former or present official capacity of such person against
judgments, penalties, fines, including, without limitation, excise taxes
assessed against such person with respect to an employee benefit plan,
settlements, and reasonable expenses, including attorney's fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person has not been indemnified by another organization or
employee benefit plan for the same expenses with respect to the same acts or
omissions; acted in good faith; received no improper personal benefit and
Section 302A.255, if applicable, has been satisfied; in the case of a criminal
proceeding, had no reasonable cause to believe the conduct was unlawful; and in
the case of acts or omissions by persons in their official capacity for the
corporation, reasonably believed that the conduct was in the best interests of
the corporation, or in the case of acts or omissions by persons in their
capacity for other organizations, reasonably believed that the conduct was not
opposed to the best interests of the corporation. Subdivision 4 of Section
302A.521 of the Minnesota Statutes provides that a corporation's articles of
incorporation or bylaws may prohibit such indemnification or place limits upon
the same. The Company's articles and bylaws do not include any such prohibition
or limitation. As a result, the Company is bound by the indemnification
provisions set forth in Section 302A.521 of the Minnesota Statutes. As permitted
by Section 302A.251 of the Minnesota Statutes, the Articles of Incorporation of
the Company provide that a director shall, to the fullest extent permitted by
law, have no personal liability to the Company and its shareholders for breach
of fiduciary duty as a director.
To the extent that indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
17
<PAGE> 19
4,353,049 SHARES
POPMAIL.COM, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
DECEMBER , 1999
18
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution of
the securities registered hereby are set forth in the following table:
<TABLE>
<S> <C>
SEC registration fee...................................... $2,144
Nasdaq SmallCap Market additional listing fee............. 7,500
Legal fees and expenses................................... 50,000
Accounting fees and expenses.............................. 10,000
Miscellaneous............................................. 356
-------
Total $70,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is governed by Minnesota Statutes Chapter 302A. Minnesota
Statutes Section 302A.521 provides that a corporation shall indemnify any person
made or threatened to be made a party to any proceeding by reason of the former
or present official capacity of such person against judgments, penalties, fines,
including, without limitation, excise taxes assessed against such person with
respect to an employee benefit plan, settlements, and reasonable expenses,
including attorney's fees and disbursements, incurred by such person in
connection with the proceeding, if, with respect to the acts or omissions of
such person complained of in the proceeding, such person has not been
indemnified by another organization or employee benefit plan for the same
expenses with respect to the same acts or omissions; acted in good faith;
received no improper personal benefit and Section 302A.255, if applicable, has
been satisfied; in the case of a criminal proceeding, had no reasonable cause to
believe the conduct was unlawful; and in the case of acts or omissions by
persons in their official capacity for the corporation, reasonably believed that
the conduct was in the best interests of the corporation, or in the case of acts
or omissions by persons in their capacity for other organizations, reasonably
believed that the conduct was not opposed to the best interests of the
corporation. Subdivision 4 of Section 302A.521 of the Minnesota Statutes
provides that a company's articles of incorporation or bylaws may prohibit such
indemnification or place limits upon the same. The Company's articles and bylaws
do not include any such prohibition or limitation. As a result, the Company is
bound by the indemnification provisions set forth in Section 302A.521 of the
Minnesota Statutes.
As permitted by Section 302A.251 of the Minnesota Statutes, the Articles of
Incorporation of the Company provide that a director shall have no personal
liability to the Company and its shareholders for breach of his fiduciary duty
as a director, to the fullest extent permitted by law. The Agency Agreement
contains provisions under which the Company, on the one hand, and the Placement
Agent, on the other hand, have agreed to indemnify each other (including
officers and directors of the Company and the Placement Agent, and any person
who may be deemed to control the Company or the Placement Agent) against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
19
<PAGE> 21
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
<S> <C>
5 Opinion of Maslon Edelman Borman & Brand, LLP*
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Maslon Edelman Borman & Brand, LLP (included in Exhibit 5).*
24 Power of Attorney (included on page II-3).
- -------------------
* Previously filed
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Commission 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 such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant 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, the Registrant 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 Act and will be governed by the final adjudication of
such issue.
(b) 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; (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; and (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; and
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in the registration statement 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.
20
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Bloomington, State of
Minnesota, on December 6, 1999.
PopMail.com, inc., Registrant
By s/ Stephen D. King
-----------------------------
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
Chairman of the Board December 6, 1999
- ---------------------------------------
James L. Anderson
/s/ Stephen D. King Chief Executive Officer December 6, 1999
- --------------------------------------- (Principal Executive Officer)
Stephen D. King
/s/ Ronald K. Fuller President, Chief Operating Officer December 6, 1999
- --------------------------------------- and Director
Ronald K. Fuller
/s/ Thomas W. Orr Chief Financial Officer, Executive December 6, 1999
- --------------------------------------- Vice President and Director
Thomas W. Orr (Principal Financial Officer)
/s/ Mark D. Dacko Controller and Secretary December 6, 1999
- --------------------------------------- (Principal Accounting Officer)
Mark D. Dacko
* Director December 6, 1999
- ---------------------------------------
Michael L. Krienik
* Director December 6, 1999
- ---------------------------------------
Jerry L. Ruyan
Director December 7, 1999
- ---------------------------------------
Frank Wood
* by Stephen D. King as Attorney-in-fact
</TABLE>
21
<PAGE> 23
EXHIBITS
EXHIBIT DESCRIPTION OF DOCUMENT PAGE NO.
------- ----------------------- --------
23.1 Consent of Arthur Andersen LLP
22
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 19, 1999
included in Cafe Odyssey, Inc.'s Form 10-KSB for the year ended January 3, 1999
and to all references to our firm included in this registration statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
December 8, 1999
