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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MARCH 10, 2000
REGISTRATION NO. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------
POPMAIL.COM, INC.
(Exact name of registrant as specified in 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, MINNESOTA 55437
(952) 837-9917
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
COPIES TO:
MR. STEPHEN D. KING WILLIAM M. MOWER, ESQ.
CHIEF EXECUTIVE OFFICER CHRISTOPHER J. MELSHA, ESQ.
POPMAIL.COM, INC. MASLON EDELMAN BORMAN & BRAND, LLP
4801 WEST 81ST STREET, SUITE 112 3300 NORWEST CENTER
BLOOMINGTON, MINNESOTA 55437 MINNEAPOLIS, MINNESOTA 55402-4140
(952) 837-9917 (612) 672-8200
APPROXIMATE DATE OF THE COMMENCEMENT OF PROPOSED DISTRIBUTION: 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
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE (2) PRICE(2) FEE
<S> <C> <C> <C> <C>
COMMON STOCK, PAR VALUE
$.01 PER SHARE 4,351,337 $ 4.86 $21,147,497.82 $5,582.94
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(1) Includes 4,167,637 shares issuable upon the exercise of outstanding warrants
and 225,000 shares issuable upon the conversion of Series E Convertible
Preferred Stock.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 of the Securities Act based upon a $4.86 per share
average of the high and low prices of the Registrant's common stock on the
Nasdaq National Market on March 3, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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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 MARCH , 2000
SELLING SHAREHOLDER OFFERING PROSPECTUS
POPMAIL.COM, INC.
4,351,377 SHARES OF COMMON STOCK
The 4,351,377 shares of common stock of PopMail.com, Inc. (the
"Company") offered hereby on a resale basis by the selling shareholders
identified on pages 16 and 17 include (i) 3,000,000 shares issuable upon the
exercise (at a price per share of $3.00) of warrants issued in connection with a
February 2000 private placement, (ii) 225,000 shares of our common stock
issuable upon the conversion of shares of our Series E Convertible Preferred
Stock ("Preferred Shares"), (iii) 225,000 shares issuable upon the exercise (at
a price per share of $3.00) of warrants issued in connection with the sale of
the Preferred Shares, (iv) 327,677 shares issuable upon the exercise (at various
prices) of certain warrants issued in connection with the Company's merger with
popmail.com, inc., 5,000 shares of which have already been issued pursuant to an
exercise of such warrants, (v) 570,000 shares issuable upon the exercise (at
various exercise prices) of certain other warrants issued as consideration of
financial advisory services rendered to the Company and (vi) 3,700 shares held
by a certain shareholder. We will receive no proceeds from the sale of the
common stock by the selling shareholders. Assuming all of the foregoing warrants
are exercised in their entirety, we would receive approximately $11,260,000.
Our common stock is listed on the Nasdaq SmallCap Market under the
symbol "POPM." On March 9, 2000, the last sale price for the Common Stock as
reported on the Nasdaq SmallCap Market was $5.25.
The shares offered by this prospectus involve a high degree of risk.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 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.COM 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 March , 2000.
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY........................................................ 3
RISK FACTORS.............................................................. 7
USE OF PROCEEDS...........................................................16
SELLING SHAREHOLDERS......................................................16
PLAN OF DISTRIBUTION......................................................19
WHERE YOU CAN FIND MORE INFORMATION.......................................20
NOTE REGARDING FORWARD-LOOKING STATEMENTS.................................22
LEGAL MATTERS.............................................................22
EXPERTS...................................................................22
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES............................23
</TABLE>
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 email 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
signed an agreement to sell this restaurant.
Our email services division 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, we are able to leverage radio's proven ability to engage
audiences and attract advertisers. We hold exclusive relationships with more
than 500 radio stations reaching 100 million listeners each week.
On September 1, 1999, we completed a merger with popmail.com, inc.
("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. Our shareholders approved the
merger on August 19, 1999. As a result of the merger, we changed our name from
Cafe Odyssey, Inc. 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,
our Board of Directors and shareholders approved a change in 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.
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RECENT DEVELOPMENTS
On September 30, 1999, we and Arthur Andersen LLP mutually agreed to
the resignation of Arthur Andersen as our independent public accountants.
Effective as of that date, we engaged Grant Thornton LLP as our new independent
public accountants.
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 us a
strategic alliance with ICC.
On October 20, 1999, we executed an Asset Purchase Agreement with
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 our Common Stock. In exchange for this conversion, we
agreed to amend the Warrants held by the Series B holders (which are exercisable
into 4,407,098 shares of the our Common Stock, subject to adjustment,
representing the economic equivalent of all of our 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, we agreed to issue to LegacyMaker, Inc. 900,000 shares of Common
Stock in exchange for warrants exercisable into an aggregate of 900,000 shares
of our Common Stock at $3.00 per share, and for certain other consideration.
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 our 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, we now have a permission and affinity
marketing database of over 1 million members.
In order to close the transaction with ROI, ROI required us 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.
On January 21, 2000, we signed an agreement to acquire IZ.com,
Incorporated in an all-stock transaction. IZ.com is a convergent media business
that uses spiral marketing to promote
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consumer commerce involving cross-conventional media. On February 9, 2000, we
completed our acquisition of IZ.com. Under the terms of the acquisition, IZ
Acquisition Corporation, a Delaware corporation and our wholly-owned subsidiary,
merged into IZ.com, and IZ.com became our wholly-owned subsidiary. In connection
with the acquisition, IZ.com stockholders received shares of our Series F
Convertible Preferred Stock in exchange for their IZ.com shares. Assuming the
approval of our shareholders, the shares of Series F Preferred Stock will be
convertible into approximately 7.3 million shares of our common stock. We also
assumed IZ.com's outstanding options and warrants.
Effective January 13, 2000, our Board of Directors approved a
resolution increasing the size of the Board from seven to eight directors and
elected Gary Schneider to fill the newly-created vacancy. Mr. Schneider was
formerly chief executive officer of ROI and currently serves in the same
capacity with our PopMail division.
In connection with previous transactions, we committed to certain
individuals, including Messrs. Stephen D. King and Jerry Ruyan, to remove them
from liability on or before September 30, 1999, under the guarantees that they
had made for certain debt of the Company to the Provident Bank. We have failed
to meet such a deadline and certain default penalties have been and are
continuing to be assessed on a monthly basis. We are currently in negotiations
with the Provident Bank and the guarantors to cure such defaults.
On January 24, 2000, James L. Anderson resigned as chairman of our
Board of Directors, and effective February 1, 2000, he resigned as a director.
On February 9, 2000, Ronald "Jesse" Berst was elected the Board to fill the
vacancy created by Mr. Anderson's resignation.
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THE OFFERING
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Common stock offered (1) . . . . . . . . . . . . . . . . . . . . . 4,351,337 shares
Common stock outstanding
before the offering (2). . . . . . . . . . . . . . . . . . . . . 33,586,087 shares
Common stock outstanding
after the offering . . . . . . . . . . . . . . . . . . . . . . . 37,928,764 shares
Nasdaq SmallCap Market symbol. . . . . . . . . . . . . . . . . . . POPM
</TABLE>
(1) Represents (i) 3,000,000 shares issuable upon the exercise (at a price
per share of $3.00) of warrants issued in connection with a February
2000 private placement, (ii) 225,000 shares of our common stock
issuable upon the conversion of shares of the Preferred Shares, (iii)
225,000 shares issuable upon the exercise (at a price per share of
$3.00) of warrants issued in connection with the sale of the Preferred
Shares, (iv) 327,677 shares issuable upon the exercise (at various
prices) of certain warrants issued in connection with the Company's
merger with popmail.com, inc., 5,000 shares of which have already been
issued pursuant to an exercise of such warrants, (v) 570,000 shares
issuable upon the exercise (at various exercise prices) of certain
other warrants issued as consideration of financial advisory services
rendered to the Company and (vi) 3,700 shares held by a certain
shareholder.
(2) Does not include shares of Common Stock that are (a) reserved for
issuance upon conversion of outstanding Series E Preferred Shares; (b)
reserved for issuance upon conversion of the outstanding Series F
Convertible Preferred Stock (the "Series F Preferred Shares"); (c)
issuable upon exercise of the Class A Warrants issued as part of our
initial public offering, which are exercisable into an aggregate of
2,600,000 shares (for which we would receive approximately $16,900,000
if all were exercised); (d) issuable upon exercise of certain other
warrants covering an aggregate of 17,437,987 shares (for which we would
receive approximately $30,860,000 if all were exercised); (e) reserved
for issuance upon conversion of the $2,000,001 of 8% convertible
debentures issued November 30, 1999, or (f) 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 RESTAURANT 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 public accountants have issued their report relating to our
financial statements for the year ended January 3, 1999, which includes an
explanatory paragraph that raises substantial doubt concerning our ability to
continue as a going concern.
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
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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.
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 Stephen D. King, our Chief Executive Officer,
Ronald K. Fuller, our President, Jesse Berst, our Chief Operating Officer,
Thomas W. Orr, our Chief Financial Officer and Gary Schneider, the CEO of our
PopMail Network division. 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.
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 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.
ONE INDIVIDUAL CONTROLS A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK AND
MAY INFLUENCE OUR AFFAIRS.
Following our merger with popmail.com, inc., James L. Anderson was
elected to our Board of Directors and served as its Chairman until his
resignation on January 24, 2000. Effective February 1, 2000, Mr. Anderson
resigned from our Board. 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 may
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have 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 beneficial 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, although
our application for "PopMail" has been suspended as a result of an alleged
confusingly similar mark in use. 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.
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 of
preferred stock) as it deems appropriate and establish the rights, preferences
and privileges of such shares, including dividends, liquidation and voting
rights. As of March 6, 2000, we had 33,586,087 shares of common stock, and
225,000 shares of Series E Convertible Preferred Stock outstanding. As of
February 25, 2000, a further 20,230,555 shares of common stock have been
reserved as follows:
- a maximum of 750,000 shares of common stock reserved for issuance
upon exercise of the Series E Preferred Shares, 225,000 shares of
which are currently outstanding;
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- 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;
- 15,100,889 shares issuable upon the exercise of outstanding
warrants;
- 250,000 shares for issuance under our 1998 Director Stock Option
Plan, of which options relating to 298,333 shares are currently
outstanding, of which 48,333 remain 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.
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.
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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,
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<PAGE> 13
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.
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 our 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
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<PAGE> 14
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; and
- 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.
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
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<PAGE> 15
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. Some members of our present management also have little or
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. We already have
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 our
inability to enter into contracts with other radio industry entities would
negatively impact our 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
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<PAGE> 16
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 affected.
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 our
management believes that it is currently the only email provider that solely
targets the radio industry. To the extent we are 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 our future business operations.
WE MAY FACE INCREASING COMPETITION FOR RADIO STATION CUSTOMERS AND
INTERNET ADVERTISERS.
As a provider of free email, we compete with numerous other email
providers, many of which have more capital than us. The principal competitors in
the private-label email service business are: CommTouch, WhoWhere, MailChek,
iName, and OnMedia. Of these providers, to the knowledge of our management, only
MailChek and OnMedia have any radio station customers. The Company 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, we face 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
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<PAGE> 17
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.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the
selling shareholders. We would receive gross proceeds in the approximate amount
of $11,260,000 from the exercise of warrants with respect to which the
underlying shares are being offered hereby. At the present time, we expect to
use such proceeds, if any, for general working capital purposes.
SELLING SHAREHOLDERS
The following table sets forth the number of shares of the common stock
owned by the selling shareholders as of March 1, 2000 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 Beneficial
Owned Before Ownership by Selling Ownership After
Name Offering Before Offering Shareholder Offering
- ----------------------------------------- --------- --------------- ----------- --------
<S> <C> <C> <C> <C>
Atlantic Holdings, Ltd. 311,110 * 155,555 (1) *
Ronald D. Berst (2) 100,000 * 50,000 (1) *
Michael A. Bird 55,000 (3) * 20,000 (1) *
Herbert I. Byer 100,000 * 50,000 (1) *
CLB Investment Corp. 100,000 * 50,000 (1) *
Co Right Investments, Inc. 888,888 2.6% 444,444 (1) 1.3%
Robert & Ellen Deutschman
Family Trust dtd 8/24/93 60,000 * 30,000 (1) *
Arthur Engel Trust dtd 5/5/98 492,044 (4) 1.5% 222,222 (1) *
Fortman Cline AG 444,444 1.3% 222,222 (1) *
Free Family Trust dtd 2/10/97 53,969 (5) * 22,222 (1) *
Steven E. Garshell 44,444 * 22,222 (1) *
Thomas L. Goila Profit Sharing
Trust U/A dtd 12/1/92 50,000 * 25,000 (1) *
Richard Green 303,786 * 84,393 (1) *
Edward Hayes 20,000 * 10,000 (1) *
</TABLE>
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<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C>
A. Larry Katz 88,888 * 44,444 (1) *
Mary Kirtz 100,000 * 50,000 (1) *
Egre E. Lawallen, II 100,000 * 50,000 (1) *
Richard C. Lockwood 400,000 1.2% 200,000 (1) *
Warner C. Lusardi Family Trust
dtd 6/11/99 269,822 (6) * 111,111 (1) *
Bruce LeDuc 150,000 * 75,000 (1) *
Amended and Restated Steven
A. Lyman Trust dtd 8/27/90 44,444 * 22,222 (1) *
Stephen Marcus 452,334 1.4% 226,167 (1) *
Timothy I. Maudlin 644,292 (7) 1.9% 66,667 (1) 1.7%
Steven Mauldin 50,000 * 25,000 (1) *
Dean & Kathy Mills 20,000 * 10,000 (1) *
Gregory P. Mills Trust dtd
2/19/99 20,000 * 10,000 (1) *
George M. Nix 20,000 * 10,000 (1) *
Barry Nussbaum 77,776 * 38,888 (1) *
Opportune Investments Ltd. 1,146,666 3.4% 773,333 (8) 1.1%
Gerald W. & Sandra L. Rogers 20,000 * 10,000 (1) *
Jerry L. Ruyan (9) 500,638 (10) 1.5% 44,444 (1) 1.4%
Robert Seiler 88,888 * 44,444 (1) *
Christopher D. Snell 40,000 * 20,000 (1) *
Albert R. Swafford M.D. Inc.
Defined Benefit Pension Plan 100,000 * 50,000 (1) *
Stephen C. & Patricia A.
Tadolini 20,000 * 10,000 (1) *
Jeffrey I Werbalowsky 200,000 * 100,000 (1) *
Satya P. Garg 200,000 * 200,000 (11) *
Christopher Miller 69,200 * 50,000 (11) *
Leonard H. Timmel 100,000 * 100,000 (11) *
Hank Schneider 100,000 * 100,000 (11) *
Blake Capital Partners, LLC (12) 1,420,000 (13) 4.2% 150,000 (14) 3.7%
Wayne L. Tiedge 20,000 * 20,000 (15) *
The Montgomery Fund 247,677 * 247,677 (16) *
W. Keith Webb 30,000 * 30,000 (17) *
The Rearden Trust 30,000 * 30,000 (17) *
Andrew Baum 50,000 (18) * 10,000 (19) *
Kevin Scannell 10,000 * 10,000 (17) *
N C Capital Markets Inc. 3,700 * 3,700 *
- ------------
*Less than 1%.
</TABLE>
(1) Represents shares issuable upon the exercise (at a per share price of
$3.00) of warrants issued in connection with a private placement.
(2) In connection with our merger with Iz.com, Incorporated, Mr. Berst was
elected a director of PopMail.com, inc.
(3) Includes 15,000 shares issuable upon the exercise (at a price per share
of $2.00) of a warrant issued in October 1999.
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<PAGE> 19
(4) Includes 47,600 shares issuable upon conversion of shares of Series F
Convertible Preferred Stock, which were issued in connection with the
merger with IZ.com, Incorporated.
(5) Includes 9,525 shares issuable upon conversion of shares of Series F
Convertible Preferred Stock, which were issued in connection with the
merger with IZ.com, Incorporated.
(6) Includes 47,600 shares issuable upon conversion of shares of Series F
Convertible Preferred Stock, which were issued in connection with the
merger with IZ.com, Incorporated.
(7) Includes (i) 50,000 shares issuable upon the exercise (at a price of
$.75 per share) of a warrant issued in connection with a guaranty of a
Company loan, (ii) 60,000 shares issuable upon the exercise (at a price
of $6.50 per share) of a public warrant, (iii) 57,731 shares held by
Mr. Maudlin's spouse and children,
(8) Represents (i) 373,333 shares issuable upon the exercise (at a price of
$3.00 per share) of warrant issued in connection with a recent private
placement, and (ii) 400,000 shares issuable upon the exercise (at a
price of $2.0265 per share) of a warrant issued in October 1999 in
connection with financial advisory services provided to the Company.
(9) Mr. Ruyan is a director of the Company.
(10) In addition to the shares reflected in Note 1, Mr. Ruyan's holdings
include (i) 36,000 shares issuable upon the exercise (at a price of
$6.50 per share) of a public warrant, (ii) 115,000 shares issuable upon
the exercise (at a price of $.75 per share) of two warrants issued in
connection with a guaranty of certain indebtedness of the Company, and
(iii) 25,000 shares issuable upon the exercise (at a price of $.75 per
share) of an option granted in October 1998 pursuant to the Company's
Director Stock Option Plan.
(11) Represents (i) shares issuable upon conversion of the Series E
Preferred Stock and (ii) shares issuable upon exercise (at a price of
$3.00 per share) of warrants issued in connection with the sale of the
Series E Preferred Stock.
(12) The sole member of Blake Capital Partners, LLC is Wayne W. Mills. Mr.
Mills is the sole trustee of the Gregory P. Mills Trust dated 2/19/99,
which is also a selling shareholder.
(13) Represents: (i) warrants held by Blake Capital Partners to purchase an
aggregate of 1,260,000 shares at various exercise prices, (ii) 10,000
shares held by the Gregory P. Mills Trust dated 2/19/99, of which Mr.
Mills is the trustee, and (iii) 10,000 shares issuable upon the
exercise (at a per share price of $3.00) of a warrant held by the
Gregory P. Mills Trust.
(14) Represents shares issuable upon the exercise (at a price of $2.25 per
share) of a warrant issued in connection with a financial advisory
services agreement upon the completion of the Iz.com merger.
(15) Represents shares issuable upon the exercise (at a price of $1.65625
per share) issued in December 1999.
(16) Represents (i) 247,677 shares issuable upon the exercise (at a price of
$.75 per share) of warrants issued in connection with the Company's
merger with popmail.com, inc. and (ii) 16,666 shares issuable upon the
exercise (at a price of $2.00 per share) issued in connection with
financial advisory services rendered to the Company.
(17) Represents shares issuable upon the exercise (at a price of $.75 per
share) of warrants issued in connection with the Company's merger with
popmail.com, inc.
(18) Includes 40,000 shares issuable upon the exercise (at a price of $2.00
per share) of a warrant.
(19) Includes 5,000 shares issuable upon the exercise (at a price of $.75
per share) of a warrant issued in connection with the Company's merger
with popmail.com, inc.
In connection with a private placement, we issued to certain investors
225,000 shares of our Series E Preferred Stock and 5-year warrants for the
purchase of an aggregate of 225,000 shares of common stock at an exercise price
of $3.00 per share. The total proceeds to the Company in connection with this
offering were $450,000. Each Series E Preferred Share is convertible into common
stock by dividing $2.00 by the lesser of (i) $2.00, or (ii) 70 percent of the
average market
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<PAGE> 20
price per share of our common stock for the ten days preceding
the filing of a registration statement covering the resale of the shares
issuable upon conversion of the Series E Preferred Shares.
PLAN OF DISTRIBUTION
Pursuant to the terms of the subscription agreements in connection with
the unit private placement, and various other agreements with and warrants
issued to the selling shareholders, we are registering the shares offered by
this prospectus in part 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 and, with respect
to some of the selling shareholders, use our best efforts to cause such
registration statement to be declared effective as soon as possible thereafter.
As used in this prospectus, the term "selling shareholders" includes: Atlantic
Holdings, Ltd; Ronald D. Berst; Michael A. Bird; Herber I. Byer; CLB
Investments, Inc.; Co Right Investments, Inc.; The Robert and Ellen Deutschman
Family Trust dtd. 8/24/93; The Arthur Engel Trust dtd 5/5/1998; Fortman Cline
AG; the Free Family Trust dtd. 2/10/97; Steven E. Garshell; Thomas L. Goila
Profit Sharing Trust U/A dtd 12/1/92; Richard Green; Edward Hayes; A. Larry
Katz; Mary Kirtz; Egre E. Lawallen, II; Richard C. Lockwood; Warner C. Lusardi
Family Trust dtd 6/11/93; Bruce Le Duc; Amended and Restated Steven A. Lyman
Trust dtd 8/27/90; Stephen Marcus; Timothy I. Maudlin; Steven Mauldin; Dean and
Kathy Mills; Gregory P. Mills Trust dtd 2/19/99; George M. Nix; Barry Nussbaum;
Opportune Investments Ltd.; Gerald W. and Sandra L. Rogers; Jerry L. Ruyan;
Robert Seiler; Christopher D. Snell; Albert R. Swafford M.D. Inc. Defined
Benefit Pension Plan; Stephen C. and Patricia A. Tadolini; Jeffrey I.
Werbalowsky; Satya P. Garg; Christopher Miller; Leonard H. Timmel; Hank
Schneider; Blake Capital Partners, LLC; Wayne L. Tiedge; The Montgomery Fund; W.
Keith Webb; The Rearden Trust; Andrew Baum; Kevin Scannell; and each of 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 selling shareholders and their
officers, directors, employees and agents, and each person who controls any
selling shareholder, in certain circumstances against certain liabilities,
including liabilities arising under the Securities Act. Each 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.
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
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<PAGE> 21
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 us 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.
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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 web site at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding companies that, like PopMail.com, 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-______). 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 Report on Form 10-QSB for the quarters ended April
4, 1999, July 4, 1999 and October 3, 1999;
3. Amendment to Current Report on Form 8-K/A filed on November
15, 1999, Current Report on Form 8-K filed on December 17,
1999, Current Report on Form 8-K filed on January 25, 2000,
and Current Report on Form 8-K filed on February 24, 2000; and
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 W. 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
22
<PAGE> 23
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 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, inc. (f/k/a Cafe
Odyssey, Inc.) as of January 3, 1999, and December 28, 1997, for the years then
ended incorporated by reference in this prospectus and elsewhere in the
registration statement of which this prospectus is a part 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 said 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 as the independent public accountants for
PopMail.com, inc. Prior to the engagement of Grant Thornton, 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 December 27,
1997 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
23
<PAGE> 24
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 report.
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.
24
<PAGE> 25
4,351,337 SHARES
POPMAIL.COM, INC.
COMMON STOCK
----------------------
PROSPECTUS
----------------------
MARCH , 2000
----
25
<PAGE> 26
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 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,583
Nasdaq SmallCap Market additional listing fee. . . . . . . . . . . . . . 7,500
Legal fees and expenses. . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . 5,000
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550
----------
Total $43,633
==========
</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.
ITEM 16. EXHIBITS.
EXHIBIT DESCRIPTION OF DOCUMENT
5 Opinion of Maslon Edelman Borman & Brand, LLP
26
<PAGE> 27
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).
*To be filed by amendment.
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.
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<PAGE> 28
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 March 10, 2000.
PopMail.com, inc., Registrant
By /s/ Stephen D. King
---------------------------------------
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Stephen D. King, Ronald K. Fuller or William M. Mower, each or any of them, such
person's true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution for such person and in such person's name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
necessary or desirable to be done in and about the premises, as fully to all
intents and purposes as such person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
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>
/s/ Stephen D. King
- --------------------------- Chief Executive Officer March 10, 2000
Stephen D. King (Principal Executive Officer)
/s/ Ronald K. Fuller
- --------------------------- President and Director March 10, 2000
Ronald K. Fuller
/s/ Thomas W. Orr
- --------------------------- Chief Financial Officer, Executive March 10, 2000
Thomas W. Orr Vice President and Director
(Principal Financial Officer)
/s/ Ronald D. "Jesse" Berst
- --------------------------- Director and Chief Operating March 10, 2000
Ronald D. "Jesse" Berst Officer
</TABLE>
28
<PAGE> 29
<TABLE>
<S> <C> <C>
/s/ Mark D. Dacko
- --------------------------- Secretary and Controller March 10, 2000
Mark D. Dacko (Principal Accounting Officer)
/s/ Michael L. Krienik
- --------------------------- Director March 10, 2000
Michael L. Krienik
- --------------------------- Director March 10, 2000
Jerry L. Ruyan
- --------------------------- Director March 10, 2000
Frank Wood
- --------------------------- Director March 10, 2000
Gary Schneider
</TABLE>
29
<PAGE> 30
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT PAGE NO.
- ------- ----------------------- --------
<S> <C> <C>
5 Opinion of Maslon Edelman Borman & Brand, LLP 30
</TABLE>
<PAGE> 1
Exhibit 5
March 8, 2000
PopMail.com, inc.
4801 West 81st Street, Suite 112
Bloomington, Minnesota 55437
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted on behalf of PopMail.com, inc. (the "Company") in
connection with a Registration Statement on Form S-3 (the "Registration
Statement") to be filed by the Company with the Securities and Exchange
Commission on March 10, 2000 relating to the registration under the Securities
Act of 1933, as amended, of a maximum of 4,451,337 shares of common stock, par
value $.01 per share (the "Common Stock"), issuable by the Company as follows:
(a) 3,000,000 shares issuable upon exercise of warrants, issued in connection
with a recent private placement; (b) 275,000 shares of Common Stock issuable
upon conversion of the Company's Series E Preferred Stock; (c) 275,000 shares
issuable upon the exercise of certain warrants issued to the holders of the
Series E Preferred Stock; (d) 322,677 shares issuable upon the exercise of
certain warrants issued to the former shareholders of popmail.com, inc. ("Old
Popmail") in connection with the Company's merger with Old Popmail; (e) 570,000
shares issuable upon the exercise of certain other warrants; and (f) 8,700
shares held by certain shareholders of the Company.
Upon examination of such corporate documents and records as we have
deemed necessary or advisable for the purposes hereof and including and in
reliance upon certain certificates by the Company, it is our opinion that:
1. The Company is a validly existing corporation in good standing
under the laws of the State of Minnesota.
2. The Common Stock has been duly authorized and, when issued as
described in the registration statement, will be legally
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
Maslon Edelman Borman & Brand, LLP
