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REGISTRATION NO. 333-________
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AUGUST 14, 2000
================================================================================
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)
1333 CORPORATE DRIVE, SUITE 350
IRVING, TEXAS 75038
(972) 550-5500
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
COPIES TO:
MR. GARY W. SCHNEIDER WILLIAM M. MOWER, ESQ.
CHIEF EXECUTIVE OFFICER MARTIN R. ROSENBAUM, ESQ.
POPMAIL.COM, INC. CHRISTOPHER J. MELSHA, ESQ.
1333 CORPORATE DRIVE, SUITE 350 MASLON EDELMAN BORMAN & BRAND, LLP
IRVING, TEXAS 75038 3300 NORWEST CENTER
(972) 550-5500 MINNEAPOLIS, MINNESOTA 55402-4140
(612) 672-8200
FACSIMILE: (612) 672-8397
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
<TABLE>
<CAPTION>
---------------------------- -------------------- ------------------------ ------------------------- ------------------
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 5,800,000 $.875 $5,075,000 $1,339.80
---------------------------- -------------------- ------------------------ ------------------------- ------------------
</TABLE>
(1) Includes up to a maximum of 4,800,000 shares issuable upon the exercise of
certain warrants.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) of the Securities Act based upon a $0.875 per share
average of the high and low prices of the Registrant's common stock on the
Nasdaq Small Cap Market on August 7, 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 AUGUST ____, 2000
SELLING SHAREHOLDER OFFERING PROSPECTUS
POPMAIL.COM, INC.
5,800,000 SHARES OF COMMON STOCK
The 5,800,000 shares of common stock of PopMail.com, Inc. (the
"Company") offered hereby on a resale basis by the selling shareholders
identified on page 21 include (i) 1,000,000 shares issued to four investors in
connection with June 2000 private placement; (ii) a maximum of 4,200,000 shares
issuable upon the exercise of "Adjustable Warrants" issued to the June 2000
investors; (iii) 600,000 shares issuable upon the exercise (at a price of $1.00
per share) of warrants issued to the investors and certain selling agents in
connection with the June 2000 private placement. We will receive no proceeds
from the sale of the common stock by selling shareholder.
Our common stock is listed on the Nasdaq SmallCap Market under the
symbol "POPM." On August 11, 2000, the last sale price for the Common Stock as
reported on the Nasdaq SmallCap Market was $_______.
The shares offered by this prospectus involve a high degree of risk.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 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 August __, 2000.
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TABLE OF CONTENTS
PROSPECTUS SUMMARY ........................................................ 3
RISK FACTORS .............................................................. 8
USE OF PROCEEDS ........................................................... 20
SELLING SHAREHOLDERS ...................................................... 21
PLAN OF DISTRIBUTION ...................................................... 22
WHERE YOU CAN FIND MORE INFORMATION ....................................... 24
NOTE REGARDING FORWARD-LOOKING STATEMENTS ................................. 25
LEGAL MATTERS ............................................................. 25
EXPERTS ................................................................... 25
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES ............................ 26
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 Internet division and the restaurant division. Our Internet division
consists of three companies, PopMail Network, Inc. ("PopMail Network"), based in
Dallas, Texas, a provider of permission and affinity based email services to
broadcast stations, professional sports teams and other brand name clients in
the media and entertainment industries which creates an affinity network of high
profile brands, IZ.com, Inc. ("IZ"), based in Bellevue, Washington, a provider
of digital publishing services, newsletters and technology for high end brands
and the recently-acquired Fan Asylum, Inc., based in San Francisco, California
("Fan Asylum"), a provider of official fan club sites for recording artists in
the music industry. Our Internet division is in the business of connecting
entertainment and media brands with their fans through the use of email, fan
club sites and high end publishing tools.
The restaurant division develops, owns and operates restaurants with
multiple themed dining rooms designed to appeal to the upscale casual dining
market. We have Cafe Odyssey restaurants at the Mall of America in Bloomington,
Minnesota, which opened in June 1998, and in the Denver Pavilions in Denver,
Colorado which opened in March 1999.
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.
On September 1, 1999, we completed a merger with popmail.com, inc.
("Old Popmail"). Old Popmail was a provider of Internet email services to radio
stations across the country. Following the merger, we changed our name from Cafe
Odyssey, Inc. to PopMail.com, inc.
On December 3, 1999, ROI Acquisition Corporation, a Texas corporation
and our wholly-owned subsidiary, acquired, effective as of November 30, 1999,
substantially all of the assets and assumed substantially all of the liabilities
of ROI Interactive, LLC ("ROI"), a Texas limited liability company. ROI provides
exclusive email service and permission-based, opt-in marketing services to
broadcast stations and professional sports teams and other clients.
Effective February 9, 2000, we acquired IZ.com Incorporated ("IZ.com"),
a Delaware corporation. IZ.com is developing a high end authoring tool that will
enable them to provide strong brand marketers with a multi platform tool for
private label and vertical label publishing.
Effective June 15, 2000, we acquired Fan Asylum, Inc., a California
corporation. Fan Asylum operates and manages fan clubs and official artist web
sites for some of the entertainment industry's most popular musicians and groups
through the use of newsletters, email broadcasts, travel packages, tickets,
concert hotlines and web page management. Currently, Fan Asylum manages fan
clubs for 14 musicians or groups, including Aerosmith, Boyz II Men, Melissa
Etheridge and Whitney
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Houston, among others.
Our executive offices are located at 1333 Corporate Drive, Suite 350,
Irving, Texas 75038 and our telephone number is (972) 550-5500.
RECENT DEVELOPMENTS
We completed our acquisition of IZ.com on February 9, 2000. 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. As a result of the approval of our shareholders on June 13,
2000, the shares of Series F Preferred Stock will be convertible into
approximately 7,375,000 million shares of our common stock. We also assumed
IZ.com's outstanding options and warrants, which upon exercise are convertible
into approximately 3,350,000 shares of our common stock.
At our annual shareholder meeting on June 13, 2000, our shareholders
elected Stephen D. King, Jesse Berst, Thomas W. Orr, Gary Schneider, and Michael
L. Krienik to serve on the Company's board of directors until the next meeting
of shareholders or until such person's successors have been duly elected and
qualified. Our shareholders also approved amendments to the Company's 1997 Stock
Option and Compensation Plan and the 1998 Director Stock Option Plan, which
increased the number of shares available under such plans to 3,000,000 and
750,000, respectively.
In May 2000, we raised gross proceeds of $4.5 million from the private
placement offering of the Series G Preferred Shares, which have an aggregate
stated value of $6 million. The purchaser of the Series G Preferred Stock also
received a warrant to purchase up to 500,000 shares of our common stock at an
exercise price of $2.51 per share for no additional consideration. Dividends on
the Series G Preferred Stock, which are cumulative, accrue at a rate of 10
percent per annum, payable semi-annually, commencing on December 31, 2000. The
dividend rate on the Series G Preferred Stock increases to 14 percent per annum
upon any dividend payment default. At the our option, the dividends may be paid
in cash or in the Company's common stock at the applicable conversion price of
the Series G Preferred Shares.
The Series G Preferred Stock may not be converted before October 9,
2000. From October 10, 2000 to November 9, 2000, the conversion price will be
equal to 97% of the adjusted market price of the common stock; from November 10,
2000 to January 7, 2001 the conversion price will be equal to 94% of the
adjusted market price of the common stock; after January 8, 2001, the conversion
price will be equal to 91% of the adjusted market price of the common stock; and
if the common stock is delisted from Nasdaq, the conversion price will be equal
to 75% of the adjusted market price of the common stock. The number of shares of
common stock issuable upon conversion of the Series G Preferred Stock is limited
to 20 percent of the issued and outstanding shares of common stock on the date
the Series G Preferred Stock was issued, or approximately 7.2 million shares. We
have agreed to redeem for cash, at 105 percent of stated value, any shares of
Series G Preferred Stock which are not convertible into shares of common stock
as a result of the foregoing limitation.
On June 15, 2000, we completed the acquisition of Fan Asylum, Inc., a
California corporation. Fan Asylum manages Web sites and fan clubs for
approximately 14 high profile musical performers. Through its Web site
management services, Fan Asylum designs the fan club Web site graphics, creates
the Web page content, manages the on-line stores and hosts the fan club Web site
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for each of its artists. In connection with the acquisition of Fan Asylum, we
agreed to pay aggregate purchase consideration, consisting of our common stock,
valued at approximately $9 million, of which 800,000 shares valued at $2 million
(the "Initial Shares") were delivered to Tim McQuaid, the former sole
shareholder of Fan Asylum, at the closing of the transaction. The remaining
purchase consideration is payable through the issuance of a total of 2,800,000
shares of common stock valued at approximately $7 million (the "Earn Out
Shares") ratably over the next year upon Fan Asylum's satisfaction of specified
customer acquisition objectives. The Initial Shares and the Earn Out Shares may
not be transferred until March 11, 2001, and after that date, no more than 25%
of the total purchase price shares may be sold during any 270 day period until
June 14, 2003. The Earn Out Shares are subject to a reset provision under which,
on the dates they are released from the sale restrictions, the shares will be
supplemented with additional shares to bring the effective price for the shares
being released to the current market price.
Under the terms and conditions governing the acquisition, Mr. McQuaid
is entitled, in certain circumstances, to cause the Company to repurchase the
Initial Shares for $2 million in cash. Our commitment to potentially repurchase
such shares is supported by a letter of credit currently secured by a $2 million
cash deposit.
In June 2000, we sold 1,000,000 shares of common stock at a purchase
price of $3.00 per share to private investors, resulting in net proceeds to the
Company of approximately $2.7 million. At the time of the closing, the investors
received (a) five-year warrants to purchase 300,000 shares of common stock at an
exercise price of $1.00 per share and (b) so called "adjustable warrants" to
purchase additional shares of common stock at a nominal exercise price
(one-thousandth of a cent per share). The adjustable warrants, described below,
are intended to allow the investors to receive additional shares of common stock
in future periods to bring the effective price per share of the investment to a
percentage of the market value of the common stock on the date of adjustment.
The common stock purchased by the investors and any shares purchased
under the warrants may not be sold or transferred for a period of 180 days after
the closing date. However, this restriction on transfer is terminated if the
average market price of our common stock for any 20 consecutive trading days is
$4.50 or greater. We have agreed to file a registration statement for the resale
of the shares within 60 days after the closing date, and to use our best efforts
to cause the registration statement to become effective within 120 days after
the closing date.
One-third of the shares purchased by the June 2000 investors (an
aggregate 333,333 shares) are subject to adjustment in each of three "look-back"
periods, which consist of three consecutive 30-day trading periods following the
effective date of the registration statement covering the shares. However, there
is no right to such an adjustment for any look-back period if the average market
price for the lowest 10 trading days of any look-back period is greater than
$4.00 per share. The number of additional shares issuable for a look-back period
will be the amount sufficient to bring the effective purchase price for the
shares to a level equal to 75% of the average market price during the period
(with a minimum market price of $.47 that can be used for the calculation in the
first year after the investment). For example, if the average market price for
the first look-back period is $2.00 per share, the Company will adjust the
333,333 shares covered by the look-back period by issuing an additional 333,333
shares. This will bring the number of shares purchased for that portion of the
investment to a total of 666,666 shares for the first $1,000,000 of the original
investment, representing an effective price of $1.50 per share (75% of the $2.00
market price). The intention of the provision is to adjust the effective
purchase price in three equal installments over the three periods starting when
the registration statement becomes effective.
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In addition, under the adjustable warrants there is another potential
adjustment after one year from the closing date of the purchase, which is
effective in two instances: (a) if the shares for any look-back period were
adjusted but the full adjustment could not be taken because of the $.47 minimum
on the market price used in the calculation or (b) in any look-back period, the
investors elected not to exercise their rights to receive additional shares,
even though the average trading value for that period was less than $4.00 per
share.
On July 27, 2000, Gary Schneider was appointed Chief Executive Officer
of the Company, replacing Stephen D. King, who was appointed Chairman of the
Board of Directors. On July 28, 2000, the Board of Directors approved Steve
Mauldin as a Director of the Company. Effective August 4, 2000, the Board of
Directors appointed Stephen Spohn as interim Chief Financial Officer. Mr. Spohn
replaced Thomas W. Orr, who resigned from that position effective June 30, 2000.
Mr. Orr remains a Director of the Company.
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THE OFFERING
Common stock offered (1)................... 5,800,000 shares
Common stock outstanding
before the offering (2).................. 40,273,932 shares
Common stock outstanding
after the offering....................... 46,073,932 shares
Nasdaq SmallCap Market symbol.............. POPM
(1) Includes: (i) 1,000,000 shares issued in connection with our June 2000
private placement; (ii) up to 4,200,000 shares issuable upon the
exercise of "adjustable warrants" issued to the investors of our June
2000 private placement; and (iii) 600,000 shares issuable (at a price
of $1.00 per share) upon the exercise of warrants issued to the
investors and selling agents in connection with the June 2000 private
placement.
(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)
reserved for issuance upon conversion of the outstanding Series G
Preferred Stock; (d) 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; (e) issuable upon exercise of
other privately-issued warrants covering an aggregate of 17,600,997
shares; or (f) reserved for issuance under various stock option
agreements, including those issued under the 1997 Stock Option and
Compensation Plan and 1998 Director Stock Option Plan.
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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 REVENUES DO NOT IMPROVE, WE
WILL NEED ADDITIONAL FINANCING IN ORDER TO CONTINUE OPERATIONS AND PURSUE OUR
BUSINESS PLAN.
We incurred net losses of approximately $24.2 million during 1999, $6.7
million in 1998 and $4.0 million in 1997 and had a working capital deficit of
approximately $8.7 million as of January 2, 2000. Our ability to continue our
present operations and successfully implement our expansion plans is contingent
upon our ability to increase our revenues and ultimately attain and sustain
profitable operations. Even though financing activity subsequent to January 2,
2000 has improved our working capital position (see Note N to the financial
statements) without additional financing, the cash generated from our current
operations will not be adequate to fund operations and service our indebtedness
during 2000. There can be no assurance that additional financing will be
available on terms acceptable to the Company or on any terms whatsoever. In the
event that we are unable to fund our operations and our business plan, or if we
fail to achieve or sustain profitable operations, the market price of our stock
will suffer.
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. We have responded to numerous inquiries from Nasdaq
expressing concern over various matters, including but not limited to a "going
concern" qualification expressed by our former independent auditors as of
January 3, 1999. 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's listing. Additional factors giving rise to
such delisting could include, but are not 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 of our securities to
less than $1,000,000, (4) a reduction of the trading price of our Common Stock
to less than $1.00 per share for 30 consecutive trading days or (5) the
discretion of the Nasdaq SmallCap Market. For the past seven trading days, the
trading price of our common stock has been less than $1.00.
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 our securities 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
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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 Chairman, Gary Schneider, our
Chief Executive Officer, Jesse Berst, the Chief Operating Officer, and Stephen
Spohn, 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. The demand for individuals with
management skills is high and many other businesses, most of which have greater
name recognition and resources than the Company, compete for their services. 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 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 ROI commenced operations in June 1998, while
IZ.com Incorporated was incorporated in February 1999. Consequently, 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. on September 1, 1999, 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. Based upon a Schedule 13D filed with the
Securities and Exchange Commission on September 13, 1999, Mr. Anderson
controlled indirectly or directly, as of that date, approximately 59.6 percent
of our outstanding common stock. As of August 4, 2000, Mr. Anderson indirectly
or directly controlled approximately 22.6 percent of our outstanding common
stock. Accordingly, he may 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
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substantially decreases his percentage beneficial ownership in our common stock,
he will continue to have significant influence over our affairs.
DUE TO THE LARGE NUMBER OF OUTSTANDING OPTIONS AND WARRANTS, OUR
SHAREHOLDERS FACE A RISK OF SUBSTANTIAL FUTURE DILUTION AND DOWNWARD PRESSURE ON
THE TRADING PRICE OF OUR COMMON STOCK.
We have a total of 42,649,174 shares of our common stock reserved for
issuance pursuant to our stock option plans, outstanding preferred stock and
common purchase warrants. Most of these shares have either been registered for
resale or are subject to agreements providing for their registration for resale
under certain circumstances. Accordingly, our existing shareholders face a
substantial risk of dilution and the trading price of our common stock may
decrease as these convertible securities are exercised or converted into shares
of common stock and subsequently offered for sale through the Nasdaq SmallCap
Market.
THERE IS A RISK THAT DUE TO THE LIMITATIONS PLACED ON THE CONVERSION OF
THE SERIES G 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 issuable upon conversion of
the Series G Preferred Stock and upon exercise of the Series G Warrant cannot
exceed 20 percent of the number of shares of Common Stock of the Company issued
and outstanding on May 2, 2000. In the event the holders of the Series G
Preferred Stock and Warrant are unable to convert preferred shares into common
stock because these limitations have been reached, we would be required to
redeem the Series G Preferred Shares in cash at 105 percent of the stated value
plus any accrued and unpaid dividends. It is possible that in such case we may
not have sufficient cash and cash equivalents necessary to redeem the Series G
Preferred Shares in cash.
WE RELY HEAVILY ON OUR INTELLECTUAL PROPERTY RIGHTS AND OTHER
PROPRIETARY INFORMATION; FAILURE TO PROTECT AND MAINTAIN THESE RIGHTS AND
INFORMATION COULD PREVENT US FROM COMPETING EFFECTIVELY.
Our success and ability to compete are substantially dependent on our
internally developed technologies and trademarks, which we seek to protect
through a combination of trade secret and trademark law, as well as
confidentiality or license agreements with our employees, consultants, and
corporate and strategic partners. If we are unable to prevent the unauthorized
use of our proprietary information or if our competitors are able to develop
similar technologies independently, the competitive benefits of our
technologies, intellectual property rights and proprietary information will be
diminished.
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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<PAGE> 12
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 July 28, 2000, we have 40,273,932 shares of common stock, 275,000
shares of Series E Convertible Preferred Stock, 287,408 shares of Series F
Convertible Preferred Stock outstanding and 600,000 shares of Series G 10%
Convertible Preferred Stock. As of July 28, 2000, a further 42,649,174 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, 275,000 shares of
which are currently outstanding;
- a maximum of 7,375,000 shares of common stock reserved for
issuance upon conversion of Series F Convertible Preferred Stock;
- a maximum of 7,224,282 shares of common stock reserved for
issuance in connection with the Series G 10% Convertible Preferred
Stock and upon exercise of certain warrants issued in connection
with the Series G Preferred Stock;
- 3,348,895 shares of common stock issuable upon exercise of options
granted under the IZ.com Incorporated stock option plan assumed by
the Company;
- 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;
- 17,600,997 shares issuable upon the exercise of outstanding
warrants (excluding the warrants issued in connection with the
sale of the Series G Preferred Stock);
- 3,000,000 shares reserved for issuance under our 1997 Stock Option
and Compensation Plan, of which options relating to 2,033,333
shares are currently outstanding;
- 750,000 shares for issuance under our 1998 Director Stock Option
Plan, of which options relating to 290,000 shares are currently
outstanding.
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.
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<PAGE> 13
MINNESOTA LAW MAY INHIBIT OR DISCOURAGE TAKEOVERS, WHICH COULD REDUCE
THE MARKET VALUE OF OUR STOCK.
As 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 its stock. By impeding a
merger, consolidation, takeover or other business combination involving the
Company 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 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.
PURSUING AND COMPLETING POTENTIAL ACQUISITIONS COULD DIVERT MANAGEMENT
ATTENTION AND FINANCIAL RESOURCES AND MAY NOT PRODUCE THE DESIRED BUSINESS
RESULTS.
We do not have specific personnel dedicated solely to pursuing and
completing acquisitions. As a result, if we pursue any acquisition, our
management, in addition to fulfilling their operational responsibilities, could
spend significant time, management resources and financial resources to pursue
and complete the acquisition and integrate the acquired business with our
existing business.
To finance any acquisition, we may use capital stock or cash or a
combination of both. Alternatively, we may borrow money from a bank or other
lender. If we use capital stock, our shareholders may experience dilution. If we
use cash or debt financing, our financial liquidity would be reduced. In
addition, acquisitions may result in nonrecurring charges or the amortization of
significant goodwill that could adversely affect our ability to achieve and
maintain profitability.
Despite the investment of these management and financial resources and
completion of due diligence with respect to these efforts, an acquisition may
fail to produce the expected revenues, earnings or business and an acquired
service or technology may not perform as expected for a variety of reasons,
including:
- Difficulties in the assimilation of the operations, technologies,
products and personnel of the acquired company,
- Risks of entering markets in which we have no or limited prior
experience,
- Expenses of any undisclosed or potential legal liabilities of the
acquired company,
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<PAGE> 14
- The applicability of rules and regulations that might restrict our
ability to operate, and
- The potential loss of key employees of the acquired company.
If we make acquisitions in the future and the acquired businesses fail
to perform as expected, our business operating results and financial condition
may be materially adversely affected.
FAILURE TO MANAGE OUR GROWTH MAY ADVERSELY AFFECT OUR BUSINESS.
We have grown rapidly and expect to continue the growth both by hiring
new employees and serving new business and markets. Our growth has placed, and
will continue to place, a significant strain on our management and our operating
and financial systems.
Our personnel, systems, procedures and controls may be inadequate to
support our future operations. In order to accommodate the increased size of our
operations, we will need to hire, train and retain the appropriate personnel to
manage our operations. We will also need to improve our financial and management
controls, reporting systems and operating systems, all of which will require
significant ongoing investments of the efforts of key personnel.
IF WE FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND
INVESTORS, THE MARKET PRICE OF OUR COMMON STOCK MAY FALL SIGNIFICANTLY.
The market price of publicly traded securities generally reflects, to a
large degree, the expectations of industry analysts and significant investors
with respect to the short and long-term operating results of the issuers. When
issuers fail to meet such expectations, the market price of their publicly
traded securities usually decreases, sometimes significantly, and may not
recover. There can be no assurance that we will be able to satisfy the
expectations of market analysts and investors to avoid a precipitous drop in the
market price of our common stock.
INTERNET DIVISION
WE HAVE ENTERED INTO NEW BUSINESS VENTURES IN AN EVOLVING INDUSTRY IN
WHICH THERE REMAIN UNPROVEN BUSINESS AND REVENUE MODELS.
The Internet, music and email industry is rapidly evolving, extremely
competitive, and the market place for internet-related shares has been very
volatile. Furthermore, the music and email business continues to indicate
changing revenue models in the market place. Consequently, there can be no
assurance that sufficient revenues will be generated to support our current
operations and other capital requirements.
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<PAGE> 15
IN LIGHT OF RECENT CONSOLIDATION IN THE BROADCAST INDUSTRY AND RECENT
DEVELOPMENTS IN THE MUSIC INDUSTRY, THE LOSS OF ANY SIGNIFICANT AFFILIATE OR
ARTIST CONTRACTS WOULD NEGATIVELY IMPACT OUR OPERATIONS.
The last few years have brought substantial concentration of power
among a few players in the broadcast industry. Consequently, significant
portions of the industry are controlled by relatively few organizations. We
currently have over 500 clients. As consolidation increases, these contracts may
be merged or lost due to the landscape of the industry. In light of such
consolidation, however, the loss of any of these significant affiliation
contracts or our inability to enter into contracts with other clients in the
broadcast industry would negatively impact our operations.
The reduction of artists touring and releasing new recording can
significantly impact the level of activity on the fan club sites, membership and
potential advertising associated with such.
OUR EMAIL BASED PRODUCTS AND FAN CLUB SERVICES 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 and
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 affected.
OUR FUTURE SUCCESS WILL DEPEND ON INCREASED ACCEPTANCE OF THE INTERNET
AS A MEDIUM OF COMMERCE.
The market for Internet email, fan club sites, private label
newsletters and other services is relatively new and evolving rapidly. Our
future success will depend, in part, upon our ability to provide services that
are accepted by our existing and future clients as an integral part of their
business model in providing content and information to their fans and viewers.
The level of demand for Internet email, fan club sites, private label
newsletters and other services will depend upon a number of factors, including
the following:
- the growth in consumer access to, and acceptance of, new
interactive technologies such as the Internet;
- the adoption of Internet-based business models;
- the development of technologies that facilitate two-way
communications between companies and target audiences; and
- acquiring members to the brands services.
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<PAGE> 16
Significant issues concerning the commercial use of Internet
technologies, including security, reliability, privacy, cost, ease of use and
quality of service, may inhibit the growth of services that use these
technologies. Our future success will depend, in part, on our ability to meet
these challenges, which must be met in a timely and cost-effective manner. We
cannot be sure that we will succeed in effectively meeting these challenges, and
our failure to do so could materially and adversely affect our business.
Industry analysts and others have made many predictions concerning the
growth of the Internet as a business medium. Many of these historical
predictions have overstated the growth of the Internet. These predictions should
not be relied upon as conclusive. The market for our Internet email and fan club
services may not continue to grow, our services may not be adopted and
individual personal computer users in business or at home may not use the
Internet or other interactive media for commerce, interaction and communication.
If the market for Internet email, fan club sites and other services fails to
sustain growth, or develops more slowly than expected, or if our services do not
achieve market acceptance, our business would be materially and 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-consumer 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 EMAIL
FAN CLUB AND BRANDED LABEL NEWSLETTERS PROVIDERS MAY HAVE AN ADVERSE EFFECT ON
POPMAIL'S FUTURE BUSINESS OPERATIONS.
Currently there are a growing number of email providers, artist web
sites, newsletters providers and competitors to our business. To the extent we
can execute our plan and are successful within the current target vertical
markets in which we compete (i.e., broadcast, media, sports, music and
entertainment), we anticipate continued growth of clients and members to our
email services, newsletters and artist fan club sites. Others currently are
competing and will attempt to compete in these Affinity vertical markets, which
may have an adverse affect on our future business operations.
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
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<PAGE> 17
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.
WE MAY NOT BE ABLE TO GENERATE SUFFICIENT REVENUE IF THE ACCEPTANCE OF
ONLINE ADVERTISING, WHICH IS NEW AND UNPREDICTABLE, DOES NOT DEVELOP AND EXPAND
AS WE ANTICIPATE.
We plan to derive a substantial portion of our future revenues from
online advertising and direct marketing in our branded email, fan club
newsletters, artist web sites and Web-based programs. If these services do not
continue to achieve market acceptance, we may not generate sufficient revenue to
support our continued operations. The Internet has not existed long enough as an
advertising medium to demonstrate its effectiveness relative to traditional
advertising. Advertisers and advertising agencies that have historically relied
on traditional advertising remain slow to adopt online advertising. Many
potential advertisers have limited or no experience using email or the Web as an
advertising medium. They may have allocated only a limited portion of their
advertising budgets to online advertising, or may find online advertising to be
less effective for promoting their products and services than traditional
advertising media. If the market for online advertising fails to develop or
develops more slowly than we expect, we may not sustain revenue growth or
achieve or sustain profitability.
The market for email advertising in general is vulnerable to the
negative public perception associated with unsolicited email, known as "spam."
Public perception, press reports or governmental action related to spam could
reduce the overall demand for email advertising in general, which could reduce
our revenue and prevent us from achieving or sustaining profitability.
IF WE DO NOT MAINTAIN AND EXPAND OUR CLIENT AND MEMBER BASE WE MAY NOT
BE ABLE TO COMPETE EFFECTIVELY FOR ADVERTISERS.
Our revenue has been derived primarily from the licensing of our email
services, set up and hosting fees through PopMail Network, creating content
through IZ.com for specific brands and from management fees, ticket fees,
commerce fees and artist travel packages through Fan Asylum. All three copies
are seeking to provide timely and relevant information to their clients
customers, fans and viewers with personalized content and information that is of
most interest to the opt-in member or fan, through targeted email, personalized
newsletters and fan club sites. If we are unable to maintain and expand our
affinity brand member base and add clients to our "affinity brand network,"
advertisers could find our audience less attractive and effective for promoting
their products and services and we could experience difficulty retaining our
existing advertisers and attracting additional advertisers. To date, we have
relied on referral-based marketing activities to attract a portion of our
members and will continue to do so for the foreseeable future. This type of
marketing is largely outside of our control and there can be no assurance that
it will generate rates of growth in our member base comparable to what we have
experienced to date.
We would also be unable to grow our member base if a significant number
of our current members and clients stopped using our service. Members may
discontinue using our service if they object to having their online activities
tracked or they do not find our content useful. In addition, our
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service allows our members to easily unsubscribe at any time by clicking through
a link appearing at the bottom of our email messages and selecting the
particular categories from which they want to unsubscribe.
OUR BUSINESS DEPENDS ON OUR ABILITY TO PROVIDE SERVICES THAT CREATE,
DELIVER AND DISTRIBUTE RELEVANT AND APPEALING CONTENT FROM AND FOR OUR CLIENTS
THROUGH OUR AFFINITY EMAIL SERVICES, PUBLISHING TOOLS AND FAN CLUB SITES; IF WE
ARE NOT ABLE TO CONTINUE TO DELIVER SUCH CONTENT OR TO PROVIDE SUCH SERVICES, WE
MAY BE NOT ABLE TO MAINTAIN AND EXPAND OUR MEMBER AND FAN BASE, WHICH COULD
NEGATIVELY AFFECT OUR ABILITY TO RETAIN AND ATTRACT THE ADVERTISERS WE NEED TO
GENERATE ADDITIONAL REVENUES.
Through IZ.com and Fan Asylum, we have relied on our editorial staff to
identify and develop substantially all of our content utilizing content derived
from other parties and from our clients. Because our members' preferences are
constantly evolving, our editorial staff may be unable to accurately and
effectively identify and develop content that is relevant and appealing to our
members. As a result, we may have difficulty maintaining and expanding our
member base, which could negatively affect our ability to retain and attract
advertisers. If we are unable to retain and attract advertisers our revenue will
decrease. Additionally, we license a small percentage of our content from third
parties. The loss, or increase in cost, of our licensed content may impair our
ability to assimilate and maintain consistent, appealing content in our email
messages or maintain and improve the services we offer to consumers. We intend
to continue to strategically license a portion of our content for our emails
from third parties, including content that is integrated with internally
developed content. These third-party content licenses may be unavailable to us
on commercially reasonable terms, and we may be unable to integrate third-party
content successfully. The inability to obtain any of these licenses could result
in delays in product development or services until equivalent content can be
identified, licensed and integrated. Any delays in product development or
services could negatively affect our ability to maintain and expand our member
base.
IF WE DO NOT RESPOND TO OUR COMPETITION EFFECTIVELY, WE MAY LOSE
CURRENT CLIENTS AND MEMBERS AND FAIL TO ATTRACT NEW ADVERTISERS, REDUCING OUR
REVENUES AND HARMING OUR FINANCIAL RESULTS.
We face intense competition from both traditional and online
advertising and direct marketing businesses. If we do not respond to this
competition effectively, we may not be able to retain current advertisers or
attract new advertisers, which would reduce our revenue and harm our financial
results. Currently, several companies offer competitive email direct marketing
services, such as coolsavings.com, MyPoints.com, NetCreations, YesMail.com,
Digital Impact and Exactis. We also expect to face competition from online
content providers, list aggregators as well as established online portals and
community Web sites that engage in direct marketing programs. Additionally, we
may face competition from traditional advertising agencies and direct marketing
companies that may seek to offer online products or services.
We also compete in high profile industries where our email services,
publishing tools and fan club site offerings must meet the demands of our fans
and clients. It is imperative that we continue to make enhancements to the email
services, publishing tool and fan club site offerings if we are to continue
growing our client and member base. Failure to make service and product
enhancements could significantly impact our financial results.
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WE DEPEND HEAVILY ON OUR NETWORK INFRASTRUCTURE AND IF THIS FAILS IT
COULD RESULT IN UNANTICIPATED EXPENSES AND PREVENT OUR MEMBERS FROM EFFECTIVELY
UTILIZING OUR SERVICES, WHICH COULD NEGATIVELY IMPACT OUR ABILITY TO ATTRACT AND
RETAIN MEMBERS AND ADVERTISERS.
Our ability to successfully create and deliver our email messages and
private label newsletters and to keep fan club sites current depends in large
part on the capacity, reliability and security of our networking hardware,
software and telecommunications infrastructure. Failures within our network
infrastructure could result in unanticipated expenses to address such failures
and could prevent our members from effectively utilizing our services, which
could prevent us from retaining and attracting members and advertisers. While
our technology platform is considered state of the art, we do not currently have
fully redundant systems or a formal disaster recovery plan in place for all
companies. Our system is susceptible to natural and man-made disasters,
including earthquakes, fires, floods, power loss and vandalism. Further,
telecommunications failures, computer viruses, electronic break-ins or other
similar disruptive problems could adversely affect the operation of our systems.
Our insurance policies may not adequately compensate us for any losses that may
occur due to any damages or interruptions in our systems. Accordingly, we could
be required to make capital expenditures in the event of unanticipated damage.
In addition, our members depend on Internet service providers, or ISPs, for
access to our Web site. Due to the rapid growth of the Internet, ISPs and Web
sites have experienced significant system failures and could experience outages,
delays and other difficulties due to system failures unrelated to our systems.
These problems could harm our business by preventing our members from
effectively utilizing our services.
OUR FUTURE SUCCESS WILL DEPEND ON INCREASED ACCEPTANCE OF THE INTERNET
AS A MEDIUM OF COMMERCE.
The market for Internet email and other services is relatively new and
evolving rapidly. Our future success will depend, in part, upon our ability to
provide services that are accepted by our existing and future members as an
integral part of their business model. The level of demand for Internet email
and other services will depend upon a number of factors, including the
following:
- the growth in consumer access to, and acceptance of, new
interactive technologies such as the Internet;
- the adoption of Internet-based business models; and
- the development of technologies that facilitate two-way
communication between companies and target audiences.
Significant issues concerning the commercial use of Internet
technologies, including security, reliability, cost, ease of use and quality of
service, remain unresolved and may inhibit the growth of services that use these
technologies. Our future success will depend, in part, on our ability to meet
these challenges, which must be met in a timely and cost-effective manner. We
cannot be sure that we will succeed in effectively meeting these challenges, and
our failure to do so could materially and adversely affect our business.
Industry analysts and others have made many predictions concerning the
growth of the Internet as a business medium. Many of these historical
predictions have overstated the growth of the Internet. These predictions should
not be relied upon as conclusive. The market for our Internet email
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services may not develop, our services may not be adopted and individual
personal computer users in business or at home may not use the Internet or other
interactive media for commerce and communication. If the market for Internet
email and other services fails to develop, or develops more slowly than
expected, or if our services do not achieve market acceptance, our business
would be materially and adversely affected.
WE MAY INCUR LIABILITY FOR THE INVASION OF PRIVACY.
The Federal Trade Commission has investigated businesses that have used
personally identifiable information without permission or in violation of a
stated privacy policy. We have established and communicated to our members a
privacy policy. In the event that we convey personally identifiable information
to our corporate customers without permission or in violation of our stated
privacy policy, we may incur liability for the unlawful invasion of privacy.
RESTAURANT DIVISION
OUR ABILITY, OR INABILITY, TO RESPOND TO VARIOUS COMPETITIVE FACTORS
AFFECTING THE RESTAURANT INDUSTRY 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. Although we have
closed the Kenwood restaurant and assigned the related lease to an unrelated
third party who is currently making the required lease payments, we remain the
primary obligor under the lease. If we decide to close any of our existing
restaurants, 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.
AMONG OTHER ECONOMIC FACTORS OVER WHICH WE HAVE NO CONTROL, THE SUCCESS
OF OUR RESTAURANTS WILL DEPEND ON CONSUMER PREFERENCES
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AND THE PREVAILING LEVEL OF DISCRETIONARY CONSUMER SPENDING.
The success of our restaurant division 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 HAVE A NEGATIVE EFFECT ON 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.
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USE OF PROCEEDS
We will not receive any proceeds from the resale of the shares offered
by this prospectus.
SELLING SHAREHOLDERS
The following table sets forth the number of shares of the common stock
owned by the selling shareholders as of August 4, 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>
Percentage Percentage
Shares Beneficial Number of Beneficial
Beneficially Ownership Shares Offered by Ownership
Owned Before Before Selling After
Name Offering(1) Offering Shareholder(1) Offering
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Atlantis Capital Fund LTD 1,833,333(2) 4.4% 1,833,333(2) *
CALP II LP 916,667(3) 2.2% 916,667(3) *
Cache Capital (USA) LP 2,557,500(4) 6.0% 2,557,500(4) *
Arab Commerce Bank Ltd. 192,500(5) * 192,500(5) *
J.P. Carey Securities, Inc. 180,000(6) * 180,000(6) *
Fiji Capital 155,000(7) * 110,000(6) *
Metropolitan Capital Partners, Inc. 210,000(6) * 10,000(6) *
</TABLE>
------------
*Less than 1%.
(1) Although included in the number of shares offered by this prospectus,
the shares issuable to the Investors in the June 2000 private placement
upon exercise of the adjustable warrants are not deemed beneficially
owned by such investors because the adjustable warrants are
exercisable, if at all, upon the occurrence of certain contingencies,
the happening of which is outside the control of the investors.
(2) Includes: (i) up to 1,400,000 shares issuable which may be issued upon
the exercise (at a price of $.0001 per share) of "Adjustable Warrants"
issued in connection with the June 2000 private placement and (ii)
100,000 shares issuable upon the exercise (at a price of $1.00 per
share) of warrants issued in connection with the June 2000 private
placement.
(3) Includes: (i) up to 700,000 shares issuable which may be issued upon
the exercise (at a price of $.0001 per share) of "Adjustable Warrants"
issued in connection with the June 2000 private placement and (ii)
50,000 shares issuable upon the exercise (at a price of $1.00 per
share) of warrants issued in connection with the June 2000 private
placement.
(4) Includes: (i) up to 1,953,000 shares issuable which may be issued upon
the exercise (at a price of $.0001 per share) of "Adjustable Warrants"
issued in connection with the June 2000 private placement and (ii)
139,500 shares issuable upon the exercise (at a price of $1.00 per
share) of warrants issued in connection with the June 2000 private
placement.
(5) Includes: (i) up to 147,000 shares issuable which may be issued upon
the exercise (at a price of $.0001 per share) of "Adjustable Warrants"
issued in connection with the June 2000 private placement and (ii)
10,500 shares issuable upon the exercise (at a price of $1.00 per
share) of warrants issued in connection with the June 2000 private
placement.
(6) Represents shares issuable upon the exercise (at a price of $1.00 per
share) of warrants issued in connection with the June 2000 private
placement.
(7) Includes 40,000 shares issuable upon the exercise (at a price of $2.00
per share) of warrants and 5,000 shares issuable upon the exercise (at
a price of $0.75 per share) of warrants issued to Andrew Baum, a
principal of Fiji Capital.
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<PAGE> 23
In connection with a private placement in June 2000, we issued to four
investors 1,000,000 shares of our common stock for which we received total gross
proceeds of $3,000,000 cash and net proceeds after expenses of approximately
$2,700,000. In addition, as part of the private placement, we issued to the
investors warrants for an aggregate of 300,000 shares of common stock and issued
warrants for an additional 300,000 shares to three selling agents as
consideration for their services in connection with the private placement, all
of which warrants have an exercise price of $1.00 per share. In addition, we
issued to the investors "adjustable warrants," as described more fully below.
All of the warrants issued in connection with the June 2000 private placement
are exercisable for a period of five years.
The June 2000 investors also received adjustable warrants to purchase
additional shares of common stock at a nominal exercise price (one-thousandth of
a cent per share). The adjustable warrants, described below, are intended to
allow the investors to receive additional shares of common stock in future
periods to bring the effective price per share of the investment to a percentage
of the market value of the common stock on the date of adjustment.
The common stock purchased by the investors and any shares purchased
under any of the warrants issued in connection with the June 2000 private
placement may not be sold or transferred for a period of 180 days after the
closing date. However, this restriction on transfer is terminated if the average
market price of our common stock for any 20 consecutive trading days is $4.50 or
greater. Pursuant to a registration rights agreement between us and the June
2000 investors, we have agreed to file a registration statement covering the
resale of at least 5,500,000 shares within 60 days after the closing date, and
to use our best efforts to cause the registration statement to become effective
within 120 days after the closing date.
One-third of the shares purchased by the June 2000 investors (an
aggregate 333,333 shares) are subject to adjustment in each of three "look-back"
periods, which consist of three consecutive 30-day trading periods following the
effective date of the registration statement covering the shares. However, there
is no right to such an adjustment for any look-back period unless the average
market price for the lowest 10 trading days of any look-back period is less than
$4.00 per share. The number of additional shares issuable for a look-back period
will be the amount sufficient to bring the effective purchase price for the
shares to a level equal to 75% of the average market price during the period
(with a minimum market price of $.47 that can be used for the calculation in the
first year after the investment). For example, if the average market price for
the first look-back period is $2.00 per share, the Company will adjust the
333,333 shares covered by the look-back period by issuing an additional 333,333
shares. This will bring the number of shares purchased for that portion of the
investment to a total of 666,666 shares for the first $1,000,000 of the original
investment, representing an effective price of $1.50 per share (75% of the $2.00
market price). The intention of the provision is to adjust the effective
purchase price in three equal installments over the three periods starting when
the registration statement becomes effective.
In addition, under the Adjustable Warrants there is another potential
adjustment after one year from the closing date of the purchase, which is
effective in two instances: (a) if the shares for any look-back period were
adjusted but the full adjustment could not be taken because of the $.47 minimum
on the market price used in the calculation or (b) in any look-back period, the
investors elected not to exercise their rights to receive additional shares,
even though the average trading value for that period was less than $4.00 per
share.
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<PAGE> 24
PLAN OF DISTRIBUTION
Pursuant to the terms of a Stock Purchase Agreement and a Registration
Rights Agreement, both dated as of June 15, 2000, we are registering the shares
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
within 60 days from June 15, 2000, and to use our best efforts to cause such
registration statement to be declared effective as soon as possible thereafter,
but in no event later than 120 days from June 15, 2000. As used in this section,
the term "selling shareholder" means Atlantis Capital Fund, LTD; CALP II LP;
Cache Capital (USA) LTD; Arab Commerce Bank Ltd.; J.P Carey Securities, Inc.;
Fiji Capital; Metropolitan Capital Partners, Inc.; and each of their respective
donees, pledgees, transferees and other successors in interest selling shares
received from the 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 shareholder. Sales of shares may be effected by the selling shareholder
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 shareholder 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 shareholder.
We have agreed to indemnify the selling shareholder and their officers,
directors, employees and agents, and each person who controls the selling
shareholder, in certain circumstances against certain liabilities, including
liabilities arising under the Securities Act. The 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 shareholder 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 the selling shareholder may be deemed to be an "underwriter"
within the meaning of Section 2(11) of the Securities Act, the selling
shareholder will be subject to the prospectus delivery requirements of the
Securities Act. We have informed the selling shareholder 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 shareholder 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
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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.
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. 333-32232). The following are specifically
incorporated herein by reference:
1. Annual Report on Form 10-KSB for the fiscal year ended January 2,
2000;
2. Quarterly Report on Form 10-QSB filed on May 17, 2000;
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<PAGE> 26
3. Current Report on Form 8-K/A filed on April 24, 2000; Current
Report on Form 8-K filed on May 8, 2000; and Current Report on
Form 8-K filed on June 30, 2000.
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: Stephen Spohn, Chief Financial Officer
1333 Corporate Drive, Suite 350
Irving, TX 75038
(972) 550-5500
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 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
On September 30, 1999, with the approval of our Board of Directors, we
engaged Grant Thornton LLP as our independent public accountants. Prior to the
engagement of Grant Thornton LLP, Arthur Andersen LLP had served as our
principal independent public accountants. The report prepared by Arthur Andersen
LLP as of January 3, 1999 and for the year then ended, contained no adverse
opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty of audit
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<PAGE> 27
scope or accounting principles. However, such report included an explanatory
paragraph with respect to the uncertainty regarding our 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 had 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 report.
The consolidated financial statements of PopMail.com, inc. (f/k/a Cafe
Odyssey, Inc.) as of and for the year ended January 3, 1999, 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 its report with respect thereto,
and are incorporated herein in reliance upon the authority of Arthur Andersen
LLP as experts in giving said report.
The consolidated financial statements of PopMail.com, inc. (f/k/a Cafe
Odyssey, Inc.) as of and for the year ended January 2, 2000, incorporated by
reference in this prospectus and elsewhere in the registration statement of
which this prospectus is a part, have been audited by Grant Thornton LLP,
independent certified public accountants, as indicated in its report with
respect thereto, and are incorporated herein in reliance upon the authority of
Grant Thornton LLP as experts in giving such 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
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<PAGE> 28
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.
27
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5,800,000 SHARES
POPMAIL.COM, INC.
COMMON STOCK
----------------------
PROSPECTUS
----------------------
August ____, 2000
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<PAGE> 30
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:
SEC registration fee $1,325
Nasdaq SmallCap Market additional listing fee 17,500
Legal fees and expenses 25,000
Accounting fees and expenses 5,000
Miscellaneous 1,175
-------
Total $50,000
=======
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.
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<PAGE> 31
ITEM 16. EXHIBITS.
Exhibit Description of Document
5 Opinion of Maslon Edelman Borman & Brand, LLP
23.1 Consent of Arthur Andersen LLP (to be filed by amendment)
23.2 Consent of Grant Thornton LLP
23.3 Consent of Grant Thornton LLP
23.4 Consent of Ernst & Young LLP
23.5 Consent of Maslon Edelman Borman & Brand, LLP (included in
Exhibit 5).
24 Power of Attorney (included on page II-3).
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> 32
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 Irving,
State of Texas, on August 11, 2000.
PopMail.com, inc., Registrant
By: /s/ Gary W. Schneider
-----------------------------------
Gary W. Schneider
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Stephen
D. King, Gary W. Schneider, Mark D. Dacko 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 Chairman August 11, 2000
------------------------------------
Stephen D. King
/s/ Gary W. Schneider
------------------------------------ Chief Executive Officer and Director August 11, 2000
Gary W. Schneider (Principal Executive Officer)
/s/ Jesse Berst Chief Operating Officer and August 11, 2000
------------------------------------ Director
Jesse Berst
/s/ Stephen Spohn Chief Financial Officer August 11, 2000
------------------------------------ (Principal Financial Officer)
Stephen Spohn
</TABLE>
31
<PAGE> 33
<TABLE>
<S> <C> <C>
/s/ Thomas W. Orr Director August 11, 2000
------------------------------------
Thomas W. Orr
/s/ Mark D. Dacko Controller and Secretary August 11, 2000
------------------------------------ (Principal Accounting Officer)
Mark D. Dacko
/s/ Michael L. Krienik Director August 11, 2000
------------------------------------
Michael L. Krienik
Director August 14, 2000
------------------------------------
Steve Mauldin
</TABLE>
32
