The following table sets forth, for each of the last three full fiscal years,
information concerning annual and long-term compensation, paid or accrued for
services in all capacities during the fiscal year ended December 31, 2003, for
our Chief Executive Officers during 2003 and for the two executive officers
(collectively, the "Named Executive Officers") with base salary and bonuses
exceeding $100,000 during 2003:
Summary Compensation Table
--------------------------
Annual Compensation Long-term Compensation
--------------------------------------- --------------------------------------
Other
Annual Restricted Securities
Name and Principal Fiscal Compensation Stock Underlying All Other
Position Year Salary Bonus (1)(2) Awards (3) Options (4) Compensation
-----------------------------------------------------------------------------------------------------------
Robert Pons (5) 2003 $44,000 $ -- $ -- $ -- 50,000 $16,000
Chief Executive Officer 2002 -0- -- -- -- -- --
2001 -0- -- -- -- -- --
Sebastian E. Cassetta (6) 2003 90,449 -- -- -- -- 12,941(8)
Former Chief Executive 2002 215,521 -- 7,500 -- 34,667 42,022(8)
Officer 2001 255,000 50,000 9,750 -- -- 37,218(8)
Thomas W. Haller (7) 2003 102,400 -- 4,000 -- -- 9,932(9)
Former Senior Vice 2002 134,479 -- 6,000 -- 13,250 9,932(9)
President and Chief 2001 164,558 37,500 6,000 -- 3,750 9,932(9)
Financial Officer
Richard Kerschner (10) 2003 100,000 -- -- -- -- --
Former Senior Vice 2002 131,667 -- -- -- -- --
President and General 2001 160,000 48,000 -- -- 13,333 --
Counsel
(1) Amounts shown consist of a non-accountable expense allowance.
(2) The aggregate amount of personal benefits not included in the Summary
Compensation Table does not exceed the lesser of either $50,000 or 10% of
the total annual salary and bonus paid to the Named Executive Officers.
(3) The Named Executive Officers did not receive any long-term incentive plan
payouts during fiscal 2003, 2002 or 2001.
(4) All options granted to the Named Executive Officers in 2002 were the result
of the reduction of the exercise prices of options to purchase a like
number of shares granted in previous years. The exercise price reductions
were approved by our stockholders at the Annual Meeting of Stockholders on
December 13, 2002. The previously granted options are shown in the table if
such options were granted during the reported period. Mr. Pons' warrants
were granted in 2003 pursuant to his Consulting Agreement with us dated
August 4, 2003.
(5) Salary reflects amounts paid under Mr. Pons' Consulting Agreement with us
dated August 4, 2003. Mr. Pons served as Interim Chief Executive Officer
from August 28, 2003 to January 24, 2004 pursuant to this Consulting
Agreement. He is now our Chief Executive Officer.
(6) Mr. Cassetta left our employ in August 2003.
(7) Mr. Haller left our employ in January 2004.
(8) Amount represents premiums paid by for life and disability insurance for
the benefit of Mr. Cassetta and membership dues approved by the Board of
Directors.
(9) Amounts represent premiums paid by us for life insurance for the benefit of
the employee.
(10) Mr. Kerschner left our employ in February 2004.
62
Stock Options
The following table sets forth information with respect to stock options
granted to the Named Executive Officers in fiscal year 2003:
Option Grants in Last Fiscal Year
Number of % of Total Options Granted
Securities Underlying to Employees in the fiscal Exercise Expiration
Name Options Granted(1) year(2) Price Date
----------------------------- ----------------------- --------------------------- ----------------- ---------------------
Robert Pons 41,667(1) 83.3% $2.04 August 4, 2008
8,133(1) 16.7% $2.04 August 4, 2008
(1) Represents warrants to purchase shares of our common stock issued to
Mr. Pons pursuant to his consulting arrangement with us. See
"Agreements with Named Executive Officers" for details.
(2) We did not grant any options in fiscal year 2003. However, during
fiscal year 2003 we did grant these warrants to Mr. Pons, who
subsequently became our Interim Chief Executive Officer in August
2003.
The following table sets forth information as to the number of unexercised
shares of common stock underlying stock options and the value of unexercised
in-the-money stock options at December 31, 2003:
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year End Option Value (1)(2)
Number of Unexercised Value of Unexercised
Securities Underlying In-The-Money Options
Shares Options at Fiscal Year at Fiscal Year End
Acquired on Value End Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
---------------------------------------------------------------------------------------------------
Robert Pons -- -- 50,000/0 $0/$0
Sebastian E. Cassetta -- -- 21,250/0 $0/$0
Thomas W. Haller -- -- 29,083/1,500 $0/$0
Richard Kerschner -- -- 21,667/0 $0/$0
(1) Value is based on the closing price of our common stock as reported by
the OTC Bulletin Board on December 31, 2003 ($1.40) less the exercise
price of the option.
(2) No stock options were exercised by the Named Executive Officers during
the fiscal year ended December 31, 2003.
Agreements with Named Executive Officers
We entered into a consulting agreement with Robert Pons, dated August 4, 2003
("Pons Consulting Agreement"), whereby Mr. Pons rendered consulting services to
us related to our business activities, strategic planning, and market research
and strategic due diligence on proposed business opportunities. The agreement
had an initial term of four months and was continued until he became our Chief
Executive Officer on January 24, 2004. As compensation for such services, we
agreed to pay him a cash fee of $15,000 per month ($4,000 of which was deferred
until we closed a financing on no less than $2.5 million), issued to him a
warrant to purchase 41,667 shares of our common stock, which was changed to
50,000 shares of our common stock, and agreed to pay him a transaction fee equal
to 1% of (i) any cash or securities received by us from any equity transaction
during the term of the agreement and (ii) sales revenue received and recognized
by us resulting
63
from his assistance. The warrant expires in August 2008, is convertible at the
price of $2.04 per share, and became exercisable in December 2003. The Pons
Consulting Agreement was entered into prior to Mr. Pons becoming our Interim
Chief Executive Officer on August 28, 2003.
We entered into an Employment Agreement with Robert Pons, dated March 12, 2004.
The agreement provides for a 4 year term with a base annual salary of $210,000
in the first year of the term, subject to increases as determined by the Board
of Directors. Mr. Pons shall also be eligible for bonuses in the event we meet
certain performance goals related to raising additional capital, revenue targets
or other goals mutually set by Mr. Pons and us. Mr. Pons also received an option
to purchase 1,300,000 shares of our common stock under a non-plan option
agreement, which option has an exercise price of $1.50 per share and a term of
10 years. The option provides for 557,141 shares to vest immediately and the
remaining 742,859 shares to vest in equal amounts as of the last day of each
calendar quarter commencing March 31, 2004. The options will vest immediately
upon a Change of Control (as defined in his option agreement) or in the event
Mr. Pons is terminated Other Than for Cause or he terminates employment for Good
Reason (as each is defined under the Employment Agreement). Mr. Pons will also
receive 12 months of base salary upon termination Other Than for Cause or if he
terminates employment for Good Reason
We entered into a Separation Agreement with Sebastian E. Cassetta, our former
Chairman and Chief Executive Officer, effective as of October 21, 2003 (the
"Cassetta Separation Agreement"). The Cassetta Separation Agreement terminated
Mr. Cassetta's rights under his employment agreement, including without
limitation, any rights to compensation and severance, in exchange for the
consideration set forth therein, including the following: (i) a cash payment for
unpaid base salary and accrued vacation of $18,990.30, payable on or before
October 31, 2003, (ii) forgiveness over a 3 year period of certain loans in the
original principal amount of $500,000 plus accrued interest, (iii) extension of
the Put Right contained in Mr. Cassetta's Restricted Stock Agreement dated
December 28, 1998, allowing Mr. Cassetta 1 year instead of 60 days to either
repay a promissory note in the original principal amount of $457,496.86 plus
accrued interest, or return 94,707 restricted shares of our common stock in full
satisfaction of such promissory note and accrued interest thereon.
In connection with his retirement, we entered into a Separation Agreement with
Mario Rossi, our former Executive Vice President, Chief Technology Officer, and
Director, effective as of October 21, 2003 (the "Rossi Separation Agreement").
The Rossi Separation Agreement terminated Mr. Rossi's rights under his
employment agreement, including without limitation, any rights to compensation
and severance, in exchange for the consideration set forth therein, including
the following: (i) a cash payment for unpaid base salary and vacation of
$16,667.00 payable in two equal installments on October 31, 2003 and November
20, 2003, (ii) a cash payment for unpaid contractual base salary of $112,500.00,
of which $81,370.69 will be offset against Mr. Rossi's obligation to us of
$47,004.00 in accrued interest on a restricted stock note in the original
principal amount of $152,500 (the "Rossi Note"), and the remaining $31,129.31 to
be paid in two equal installments on April 21, 2004 and October 21, 2004, (iii)
a warrant to purchase 41,667 shares of our common stock at no less than $2.40
per share, and (iv) pursuant to Mr. Rossi's rights under a Restricted Stock
Agreement, cancellation of the principal amount of the Rossi Note upon delivery
by Mr. Rossi to us of the 34,347 shares of restricted stock securing the Rossi
Note. In January 2004, Mr. Rossi assigned and transferred all 34,397 restricted
shares of common stock to us in full satisfaction of the outstanding
non-recourse debt of $68,000.
We entered into a retention agreement with Thomas W. Haller, Senior Vice
President and Chief Financial Officer, effective as of June 20, 2003 (the
"Haller Agreement"), pursuant to which Mr. Haller would receive the following
severance benefits if he is terminated by us other than for Cause (as defined in
the Haller Agreement): (i) 12 months of Mr. Haller's then current annual base
salary (but in no event less than $165,000 per annum), plus any deferred and
unpaid salary and bonus, payable in equal quarterly installments, in advance,
(ii) continuation of health, disability, and life insurance coverage for a
period equal to the earlier of 12 months or Mr. Haller's eligibility for
replacement coverage from a new employer, and (iii) vesting of any unvested
stock options and extension of the exercise period of all stock options to one
year from the Termination Date, as defined in the Haller Agreement. Mr. Haller
left our employ in January 2004, which we believe does not trigger such
severance benefits.
64
We entered into a retention agreement with Richard D. Kerschner, Senior Vice
President, General Counsel and Secretary, effective as of June 20, 2003 (the
"Kerschner Agreement"), pursuant to which Mr. Kerschner would receive the
following severance benefits if he was terminated by us other than for Cause (as
defined in the Kerschner Agreement): (i) 9 months of Mr. Kerschner's then
current annual base salary (but in no event less than $160,000 per annum), plus
any deferred and unpaid salary and bonus, payable in equal quarterly
installments, in advance, (ii) continuation of health and disability insurance
coverage for a period equal to the earlier of 9 months or Mr. Kerschner's
eligibility for replacement coverage from a new employer, and (iii) vesting of
any unvested stock options and extension of the exercise period of all stock
options to one year from the Termination Date, as defined in the Kerschner
Agreement. In connection with him leaving our employ in February 2004, Mr.
Kerschner entered into an Employee Separation Agreement with us, dated February
2, 2003, providing for his severance compensation of continuation of his
current, reduced salary of $100,000 through June 30, 2004, a one-time payment of
$15,000 and issuance of a warrant to purchase 50,000 shares of our common stock.
The Employee Separation Agreement replaced and superceded the Kerschner
Agreement. The warrant has a term of five years, is immediately exercisable, has
an exercise price of $1.65 per share, and contains registration rights for the
shares underlying the warrants. In consideration of his severance payments, he
agreed to join our Advisory Board to provide strategic advice and transition
services until June 30, 2004.
Directors' Compensation
Each director who is not an officer or employee of SmartServ is reimbursed for
his or her out-of-pocket expenses incurred in connection with attendance at
meetings or other SmartServ business. As of January 1, 2004, each non-employee
director receives a $1,500 fee for each meeting he or she attends. Additionally,
each committee member receives up to $1,000 per committee meeting attended.
The Compensation Committee has the discretionary authority to grant options to
directors. The exercise price of each share of common stock under any option
granted to a director is equal to the fair market value of a share of common
stock on the date the option was granted. On September 13, 2002, each director
was granted an option to purchase 1,667 shares of our common stock at an
exercise price of $8.52 per share, which was the average of high and low stock
prices for the preceding day. As the then Vice Chairman of the Board of
Directors, L. Scott Perry was granted an option to purchase an additional 5,000
shares at an exercise price of $8.52 per share. No options were granted to
directors in the year ended 2003. Commencing January 1, 2003, the Compensation
Committee set L. Scott Perry's compensation as Vice Chair at $5,000 per quarter,
which arrangement has continued in his current position as Chairman of the Board
of Directors.
Item 11. Security Ownership of Certain Beneficial Owners and Management and
-------- Related Stockholder Matters
The following table sets forth, as of March 1, 2004, certain information with
respect to the beneficial ownership of our common stock by (i) each person known
by us to beneficially own more than 5% of our outstanding shares of common stock
or preferred stock, (ii) each or our directors, (iii) each of the Named
Executive Officers and (iv) all of our executive officers and directors as a
group.
65
Common Stock Series A Preferred Stock
------------ ------------------------
Amount and Nature Percent of Amount and Nature Percent of
Name and Address of of Beneficial Outstanding of Beneficial Outstanding
Beneficial Owner (1) Ownership (2) Shares (3) Ownership (2) Shares (3) Total(4)
-------------------- ------------- ---------- ------------- ---------- --------
Kevin Kimberlin 4,477,402 (5) 67.16% 46,065(17) 5.27% 32.03% (5), (17)
c/o Spencer Trask
535 Madison Avenue
New York, New York 10021
Global Capital Funding Group, 257,333 (6) 9.89% 0 * 2.27% (6)
L.P.
106 Colony Park Drive, Suite 900
Cumming, Georgia 30040
Steven B. Rosner 165,012 (7) 6.79% 0 * 1.48% (7)
1220 Mirabeau Lane
Gladwyn, Pennsylvania 19035
TecCapital, Ltd. 185,958 (8) 7.93% 0 * 1.68% (8)
Cedar House
41 Cedar Avenue
Hamilton, HM 12, Bermuda
Sebastian E. Cassetta 118,598 (9) 5.01% 0 * 1.07% (9)
415 Mine Hill Road
Fairfield, Connecticut 06824
Robert M. Pons 50,000 (10) 2.09% 0 * * (10)
Richard D. Kerschner 71,667 (11) 2.97% 0 * * (11)
Thomas W. Haller 29,194 (12) 1.23% 0 * * (12)
L. Scott Perry 9,306 (13) * 0 * * (13)
Catherine Cassel Talmadge 5,119 (14) * 0 * * (14)
Charles R. Wood 5,666 (15) * 0 * * (15)
All executive officers and
directors as a group (4 persons) 70,091 (16) 2.91% 0 * * (16)
* Less than 1%
(1) Under the rules of the Securities and Exchange Commission ("SEC"),
addresses are only given for holders of 5% or more of our outstanding
common stock who are not currently officers or directors. This table
contains information furnished to us by the respective stockholders or
contained in filings made with the SEC.
(2) Under the rules of the SEC, a person is deemed to be the beneficial owner
of a security if such person has or shares the power to vote or direct the
voting of such security or the power to dispose or direct the disposition
of such security. A person is also deemed to be a beneficial owner of any
securities if that person has the right to acquire beneficial ownership
within 60 days of March 1, 2004. For purposes of beneficial ownership of
our common stock, excludes shares of common stock that may be acquired upon
the conversion of Series A preferred stock held by such person. Except as
otherwise indicated, the named entities or individuals have sole voting and
investment power with respect to the shares of common stock and preferred
stock beneficially owned.
(3) Represents the number of shares of common stock or preferred stock (as
applicable) beneficially owned as of March 1, 2004 by each named person or
group, expressed as a percentage of the sum of all of (i) the shares of
such class outstanding as of such date, and (ii) the number of shares of
such class not outstanding, but beneficially owned by such named person or
group as of such date. There were 2,344,630 shares of common stock and
874,824 shares of Series A preferred stock outstanding on March 1, 2004.
Excludes 500,002 shares of common stock yet to be issued (as of March 1,
2004) in connection with the acquisition of the outstanding stock of
nReach, Inc., which shares were issued on March 2, 2004.
66
(4) The percentage in this column is based upon the total number of shares of
common stock beneficially owned, calculated by assuming conversion of all
of the outstanding Series A preferred shares.
(5) Includes holdings of (i) Spencer Trask Ventures, Inc., a Delaware
corporation and wholly-owned subsidiary of Spencer Trask & Co., a Delaware
corporation, of which Kevin Kimberlin is the controlling shareholder, (ii)
Spencer Trask Investment Partners LLC, a Delaware limited liability
company, of which Kevin Kimberlin is the non-member manager, and (iii)
Spencer Trask Private Equity Fund I, LP, Spencer Trask Private Equity Fund
II LP, Spencer Trask Private Equity Accredited Fund III, LLC, and Spencer
Trask Illumination Fund (collectively, the "Funds"), of which Kevin
Kimberlin is an approximately 80% owner of the manager of such Funds.
Includes 4,321,848 shares of common stock subject to warrants. Excludes
80,002 shares of common stock to be issued as a finder's fee in connection
with the September and November 2003 bridge financings. If such shares were
included, Kevin Kimberlin would beneficially own 4,557,404 shares of our
common stock, representing 68.36% of the outstanding common shares and
32.55% of the total outstanding capital stock (see footnote 4 above).
(6) Consists of 257,333 shares of common stock subject to warrants.
(7) Includes 85,012 shares of common stock subject to warrants. Excludes 25,000
shares of common stock subject to warrants issued to Mr. Rosner on March
31, 2004, which warrants are currently exercisable or exercisable within
sixty (60) days.
(8) Excludes 63,274 shares of common stock subject to issuance in connection
with the November 2003 bridge financing and 94,322 shares of common stock
subject to issuance in connection with the 2004 Private Placement.
(9) Includes 21,250 shares of common stock subject to options. Also includes
342 shares held in trust for the benefit of Mr. Cassetta's wife and 2,300
shares of common stock held by his children.
(10) Consists of 50,000 shares of common stock subject to warrants. Excludes
603,570 shares of common stock subject to options granted to Mr. Pons on
March 12, 2004, which options are currently exercisable or exercisable
within sixty (60) days.
(11) Consists of 50,000 shares of common stock subject to warrants and 21,667
shares of common stock subject to options.
(12) Includes 29,083 shares of common stock subject to options.
(13) Includes 9,167 shares of common stock subject to options.
(14) Includes 5,000 shares of common stock subject to options and 33 shares of
common stock held for her daughter under the Uniform Gift to Minors Act.
(15) Includes 3,333 shares of common stock subject to options.
(16) Includes 33 shares of common stock held for Ms. Talmadge's daughter under
the Uniform Gift to Minors Act and 67,500 shares of common stock subject to
options and warrants issued to all executive officers and directors.
Excludes shares of common stock beneficially owned by Messrs. Cassetta,
Haller and Kerschner as they were not officers of SmartServ as of March 1,
2004. Also excludes 325,000 shares of common stock subject to options that
were granted on March 12, 2004 to Timothy G. Wenhold, our Chief Operating
Officer since March 12, 2004, which options are currently exercisable or
exercisable within sixty (60) days.
(17) Excludes 2,612 shares of Series A preferred stock and 26,120 shares of
common stock subject to warrants issued to Adam Stern, an employee of
Spencer Trask, in connection with the 2004 Private Placement.
Equity Compensation Plan Information
The table below sets forth certain information as of our fiscal year ended
December 31, 2003 regarding the shares of our common stock available for grant
or granted under stock option plans that (i) were adopted by our stockholders
and (ii) were not adopted by our stockholders.
Number of securities remaining
available for future issuance
Number of securities to be Weighted-average under equity compensation
issued upon exercise of exercise price of plans (excluding securities in
outstanding options outstanding options the first column of this table)
------------------- ------------------- -------------------------------
Equity compensation
plans approved by
security holders 28,880 $8.40 250,000
Equity compensation plans
not approved by security
holders 157,417 $9.76 --
------- ----- -------
Total 186,297 $9.55 250,000
======= ===== =======
67
Description of Plans Not Adopted by Stockholders
The aggregate number of shares of our common stock for which options may be
granted under the 1999 Stock Option Plan ("1999 Plan") is 66,667. Such options
may be issued to key employees, officers who are our key employees, directors
and consultants. The 1999 Plan is administered by the Board of Directors. The
Board of Directors may grant only non-qualified stock options (options which do
not comply with section 422 of the Internal Revenue Code of 1986, as amended)
under the 1999 Plan. The 1999 Plan permits the administrators of the plan, in
their sole discretion, to allow the cashless exercise of options. As of December
31, 2003, there were options to purchase 40,367 shares of common stock issued
and outstanding and -0- available for grant pursuant to the 1999 Plan.
On December 28, 1999, the Board of Directors granted Stephen Lawler, then a
director, an option to purchase 3,333 shares of common stock at an exercise
price of $102.042 per share. Such option vested immediately and expires on
December 27, 2004. As of December 31, 2003, such option remained outstanding.
The aggregate number of shares of our common stock for which options may be
granted under the 2000 Stock Option Plan ("2000 Plan") is 225,000. Such options
may be issued to key employees, officers who are our key employees, directors
and consultants. The 2000 Plan is administered by the Board of Directors. The
Board of Directors may grant only non-qualified stock options (options which do
not comply with section 422 of the Internal Revenue Code of 1986, as amended)
under the 2000 Plan. The 2000 Plan permits the administrators of the plan, in
their sole discretion, to allow the cashless exercise of options. As of December
31, 2003, there were options to purchase 113,717 shares of common stock issued
and outstanding and -0- shares of common stock available for grant pursuant to
the 2000 Plan.
Footnote 13 to our financial statements, included in this Annual Report on Form
10-KSB for the fiscal year ended December 31, 2003, contains additional
information regarding each of the stock option plans described above.
Item 12. Certain Relationships and Related Transactions
Steven B. Rosner, a beneficial owner of more than 5% of our common stock,
entered into an agreement with us, dated October 25, 1999, whereby Mr. Rosner
was to provide consulting services to us. Pursuant to an amendment dated January
4, 2000, the agreement was extended until October 24, 2002 (the agreement as
amended, the "Rosner Agreement"). Pursuant to the Rosner Agreement, Mr. Rosner
received $125,000 and warrants to purchase (i) 16,667 shares of common stock at
$15.75 per share, (ii) 16,667 shares of common stock at $21.75 per share and
(iii) 1,334 shares of common stock at $110.25 per share. Mr. Rosner has
exercised warrants to purchase 33,333 shares of common stock. The remaining
warrants expire on October 25, 2004. In December 2002, we entered into a two
year consulting agreement with Mr. Rosner to replace the Rosner Agreement. As
consideration for such services, we granted Mr. Rosner a warrant to purchase
41,667 shares of common stock at an exercise price of $7.68 per share. The
warrants expire on December 4, 2005. In March 2004, we amended and restated the
December 2002 consulting agreement by extending the term by one year until March
2005. In consideration for this new agreement, we granted Mr. Rosner a warrant
to purchase 300,000 shares of common stock at an exercise price of $1.50 per
share and Mr. Rosner waived $60,000 in consulting fees that we owed him under
the December 2002 consulting agreement. This amended and restated agreement
superceded the December 2002 consulting agreement.
Mr. Rosner also acted as a finder in the September 2002 private placement of our
Units. For his services as a finder, Mr. Rosner received warrants to purchase
31,062 shares of common stock at $5.10 per share and a cash fee of $157,500 from
us. The warrants expire on September 8, 2007. In May and June 2003, Mr. Rosner
acted as a finder in connection with our private placement of Units consisting
of convertible notes and warrants to purchase common stock issued by us to 20
accredited investors, Mr. Rosner received a finder's fee of $10,500, warrants to
purchase 12,283 shares of common stock at $4.464 per share and 5,556 shares of
unregistered common stock. As a result of anti-dilution provisions and
subsequent financings, the exercise price of the warrants was reduced to $1.50
per share in September 2003.
68
In January 2003, we issued a note to Mr. Rosner in consideration of $70,000.
Proceeds from the note were used for working capital. The debt was evidenced by
an unsecured note bearing an interest rate of 12% per annum and was repaid in
February 2003.
In December 2000, our Board of Directors authorized the issuance of a line of
credit of up to $500,000 to Sebastian E. Cassetta, our then Chief Executive
Officer and Chairman of the Board. Mr. Cassetta issued promissory notes,
effective on January 2, 2001 and March 20, 2001, aggregating $500,000 to us in
exchange for amounts borrowed under the line of credit. Each note bears interest
at the prime rate and matures three years from the date the note was issued.
Interest for the period January 2, 2001 to June 30, 2002 has been accrued and is
payable at maturity. Commencing July 1, 2002 interest is payable semi-annually
in arrears. While these loans were to mature in December 2003 and January 2004,
in October 2003 we agreed to forgive these loans over a three-year period and we
extended the term of certain other loans pursuant to Mr. Cassetta's Separation
Agreement with us as described in the section entitled "Agreements with Named
Executive Officers".
In January 2000, we issued Mr. Mario Rossi, our then Executive Vice President
and Chief Technology Officer, 34,347 shares of restricted common stock in
exchange for Mr. Rossi's note in the amount of $152,500. Such note is secured by
the common stock issued to Mr. Rossi. In October 2003, pursuant to Mr. Rossi's
rights under his Restricted Stock Agreement and in connection with his
retirement, the principal amount of this note will be cancelled upon his
delivery to us of the 34,347 shares of restricted stock securing this note. In
January 2004, Mr. Rossi assigned and transferred all 34,397 restricted shares of
common stock to us in full satisfaction of the outstanding non-recourse debt of
$68,000. Please see the description of the Separation Agreement with Mr. Rossi
in the section entitled "Agreements with Named Executive Officers" for
additional information.
We entered into a consulting arrangement with Spencer Trask in May 2003
providing that Spencer Trask would render corporate financial consulting,
financial advisory, and investment banking services to us ("Trask Consulting
Agreement"). Under the Trask Consulting Agreement, we agreed to pay consulting
fees of $7,500 per month commencing July 1, 2003 thru May 31, 2004 and we issued
Spencer Trask 83,333 shares of our common stock. Spencer Trask is a beneficial
owner of more than 5% of our common stock.
As part of the consulting arrangement, Spencer Trask acted as a finder and
assisted us with sales of Units consisting of convertible debentures and
warrants from May 2003 through November 2003 in the aggregate amount of
$2,685,000. We paid Spencer Trask a finders fee consisting of $349,050 in cash
(including finders fees and non-accountable expenses), 152,223 shares of our
common stock (includes 9,445 shares which have yet to be issued to Spencer Trask
as of March 31, 2004) and a warrant to purchase 749,146 shares of our common
stock at exercise prices ranging from $1.50 to $1.90 per share. We also
reimbursed Spencer Trask for $20,000 of legal expenses and $5,000 of
out-of-pocket expenses. As a result of the anti-dilution provisions in the
warrant, we subsequently issued Spencer Trask an additional warrant to purchase
445,393 shares of our common stock at an exercise price of $1.50.
Under the terms of the Trask Consulting Agreement, we are obligated to pay
Spencer Trask a fee upon closing of our acquisition of nReach, based on 5% of
the first two-million dollars of the aggregate consideration of such
acquisition, 4% of the next two million dollars or portion thereof, 3% of the
third $2,000,000 or portion thereof, and 2.5% of the balance of the
consideration. For purposes of determining the aggregate consideration, the
total value of liabilities assumed are included, and fees on any contingent
payment shall be paid to Spencer Trask when such contingent payment is made.
Spencer Trask has agreed to accept shares of our common stock in lieu of cash
with respect to such fees.
Under the terms of the Trask Consulting Agreement, in the event that on or
before May 31, 2004 or 18 months thereafter (under certain conditions), we sell,
outside the ordinary course of business, our company or any of our assets,
securities or business by means of a merger, consolidation, joint venture or
exchange offer, or any transaction resulting in any change in control of us or
our assets or business, or we purchase, outside the ordinary course of business,
another company or any of its assets, securities or business by means of a
merger, consolidation, joint venture or exchange offer, or we receive an
investment in us (other than an
69
investment pursuant to an agented offering, which will be subject to
compensation pursuant to a separate arrangement with Spencer Trask), we will owe
Spencer Trask a cash fee and in some instances, warrants.
Spencer Trask served as the placement agent for the 2004 Private Placement. In
accordance with the terms of the Placement Agency Agreement, dated January 29,
2004, Spencer Trask received compensation consisting of (i) a cash fee of
$1,002,500, or 10% of the aggregate purchase price of all of the Units acquired
for cash, (ii) a non-accountable expense allowance of $300,750, or 3% of the
aggregate proceeds of all Units sold for cash in the transaction, and (iii)
warrants to purchase a number of shares of common stock equal to 20% of the
shares of common stock underlying the securities in the Units sold for cash,
constituting in the aggregate warrants to purchase 1,336,666 shares of common
stock at $1.50 per share and warrants to purchase 1,336,666 shares of common
stock at $2.82 per share.
In February 2003, we issued a convertible note to Global Capital Funding Group,
LP ("Global") in consideration for the receipt of $1 million. Global is the
beneficial owner of more than 5% of our common stock. The note bore interest at
the rate of 10% per annum, and was secured by our assets, exclusive of our
internally developed software products. The note matured on February 14, 2004,
contained certain anti-dilution provisions, and could have been converted into
shares of our common stock at $6.60 per share. As additional consideration, we
issued Global a warrant for the purchase of 33,333 shares of our common stock at
an exercise price of $9.68 per share. In April 2003, we borrowed an additional
$250,000 from Global and amended the convertible note to include such amount. As
additional consideration, we issued Global a warrant for the purchase of 3,333
shares of our common stock at an exercise price of $7.20 per share. The warrants
issued to Global contain certain antidilution provisions and expire on February
14, 2006. Proceeds from the notes were used for working capital purposes.
In connection with a September 2003 sale of Units (comprised of convertible
debentures and warrants to purchase common stock), we required the consent of
Global, the holder of $1.25 million of our convertible debentures issued in
February and April 2003, and of 51% or more of the holders of our $1.5 million
convertible debentures issued in connection with the bridge financings in May
and June 2003. As an inducement to obtain their consent, such holders received
(a) a change in the conversion price of their convertible debentures equal to
the lowest conversion price of the debentures issued in September 2003 financing
($1.896 per share) and (b) an increase in the number of shares purchasable
pursuant to the warrant to reflect a full ratchet dilution formula with a
decrease in the exercise price of the warrants to the exercise price of the
warrants issued in such September financing ($1.50). In November, 2003, as an
inducement to obtain Global's consent to the sale of Units (comprised of
convertible debentures and warrants to purchase common stock) in the November
2003 transaction and the sale of Units in the 2004 Private Placement
transaction, we issued Global a warrant to purchase 16,667 shares of common
stock at an exercise price of $2.40 per share.
On February 13, 2004, we paid $1,391,504 to Global in full satisfaction of our
convertible debentures issued in February and April 2003 in the principal amount
of approximately $1.25 million plus accrued interest of $141,504.
Pursuant to Robert Pons' Consulting Agreement and Employment Agreement, he was
entitled to a transaction fee equal to 1% of any cash or securities received by
us from any equity transaction. Based on this, he received $100,000 from us in
2004 in connection with the 2004 Private Placement transaction. Mr. Pons is
currently our Chief Executive Officer, but he was neither a director nor Chief
Executive Officer at the time the Consulting Agreement was executed.
We believe that the terms of the transactions described above were no less
favorable to us than would have been obtained from a non-affiliated third party
for similar transactions at the time of entering into such transactions. In
accordance with our policy, such transactions were approved by a majority of our
independent disinterested directors.
70
Item 13. Exhibits and Reports on Form 8-K
(a) Index to Exhibits
Exhibit Description
2.1 Reorganization and Stock Purchase Agreement dated as of January 29, 2004
by and among nReach, SmartServ and the shareholders of nReach set forth
on Schedule A thereto /12/
3.1 Amended and Restated Certificate of Incorporation of SmartServ, as
amended /16/
3.2 By-laws of SmartServ, as amended /8/
4.1 Specimen Certificate of SmartServ's Common Stock /8/
4.2 Stock Purchase Agreement, dated May 12, 2000, between SmartServ and
TecCapital, Ltd., The Abernathy Group and Conseco Equity Fund /11/
4.3 Convertible Note, dated February 14, 2003, between SmartServ and Global
Capital Funding Group, LP /2/
4.4 Security Agreement dated February 14, 2003, between SmartServ and Global
Capital Funding Group, LP /2/
4.5 Amendment No. 1 to the Convertible Note between SmartServ and Global
Capital Funding Group, LP /15/
4.6 Amendment No. 1 to the Security Agreement between SmartServ and Global
Capital Funding Group, LP /15/
4.7 Amendment No. 2 to the Convertible Note between SmartServ and Global
Capital Funding Group, LP /15/
4.8 Amendment No. 2 to the Security Agreement between SmartServ and Global
Capital Funding Group, LP /15/
4.9 Form of Warrant for the Investors in the September 2003 Placement (the
"September Investors") /13/
4.10 Form of Registration Rights Agreement between SmartServ and the
September Investors /13/
4.11 Form of Warrant for the Investors in the November 2003 Placement (the
"November Investors") /13/
4.12 Form of Registration Rights Agreement between SmartServ and the November
Investors /13/
4.13 Form of Warrant for the Investors in the May 2003 Placement (the "May
Investors") /14/
4.14 Form of Registration Rights Agreement, dated May 19, 2003, between
SmartServ and the May Investors /14/
4.15 Form of Warrant for the Investors in the June 2003 Placement (the "June
Investors") /14/
4.16 Form of Registration Rights Agreement, dated June 13, 2003, between
SmartServ and the June Investors /14/
4.17 Form of Letter Agreement Extending the Maturity Date of Convertible
Debentures from November 19, 2003 to February 19, 2004, between
SmartServ and each of the May, June and September Investors /16/
4.18 Form of Letter Agreement Extending the Maturity Date of Convertible
Debentures from December 19, 2003 to February 19, 2004, between
SmartServ and the November Investors /16/
4.19 Form of Warrant for the Investors in the 2004 Private Placement (the
"2004 Private Placement Investors") /16/
4.20 Form of Registration Rights Agreement, dated February 13, 2004, between
SmartServ and the Investors in the 2004 Private Placement /16/
4.21 Specimen Certificate of SmartServ's Series A Convertible Preferred Stock
/16/
4.22 Form of Warrant for Spencer Trask issued pursuant to the 2004 Private
Placement /16/
10.1 Information Distribution License Agreement dated as of July 18, 1994
between SmartServ and S&P ComStock, Inc. /8/
10.2 New York Stock Exchange, Inc. Agreement for Receipt and Use of Market
Data dated as of August 11, 1994 between SmartServ and the New York
Stock Exchange, Inc. /8/
10.3 The Nasdaq Stock Market, Inc. Vendor Agreement for Level 1 Service and
Last Sale Service dated as of September 12, 1994 between SmartServ and
The Nasdaq Stock Exchange, Inc. ("Nasdaq") /8/
10.4 Amendment to Vendor Agreement for Level 1 Service and Last Sale Service
dated as of October 11, 1994 between SmartServ and Nasdaq. /8/
71
10.5 Lease Agreement dated as of March 4, 1994, between SmartServ and One
Station Place, L.P. regarding SmartServ's Stamford, Connecticut,
offices /8/
10.6 Lease Modification and Extension Agreement, dated February 6, 1996,
between SmartServ and One Station Place, L.P. regarding SmartServ's
Stamford, Connecticut, offices /9/
10.7 Second Lease Modification and Extension Agreement, dated June 29, 2000,
between SmartServ and One Station Place, L.P. regarding SmartServ's
Stamford, Connecticut, offices /6/
10.8 License Agreement between SmartServ and Salomon Smith Barney
(Confidential treatment has been requested with respect to certain
portions of this agreement) /4/
10.9 1996 Stock Option Plan /10/ *
10.10 1999 Stock Option Plan /11/ *
10.11 2000 Stock Option Plan /6/ *
10.12 2002 Stock Option Plan /3/ *
10.13 Separation Agreement between SmartServ and Sebastian Cassetta, effective
as of October 21, 2003 /13/ *
10.14 Restricted Stock Purchase Agreement between SmartServ and Sebastian E.
Cassetta, dated December 29, 1999 /7/*
10.15 Separation Agreement between SmartServ and Mario F. Rossi, effective as
of October 21, 2003 /13/ *
10.16 Restricted Stock Purchase Agreement between SmartServ and Mario F.
Rossi, dated December 29, 1999 /7/ *
10.17 Amended Restricted Stock Purchase Agreement between SmartServ and
Sebastian E. Cassetta, dated December 31, 1999 /11/ *
10.18 Amended Promissory Note between SmartServ and Sebastian E. Cassetta,
dated January 4, 2000 /11/ *
10.19 Amended Security Agreement between SmartServ and Sebastian E. Cassetta,
dated January 4, 2000 /11/ *
10.20 Promissory Note, dated January 2, 2001, between SmartServ and Sebastian
E. Cassetta /5/ *
10.21 Promissory Note, dated March 20, 2001, between SmartServ and Sebastian
E. Cassetta /5/ *
10.22 Amended Restricted Stock Purchase Agreement between SmartServ and Mario
F. Rossi, dated December 31, 1999 /11/ *
10.23 Amended Promissory Note between SmartServ and Mario F. Rossi, dated
January 4, 2000 /11/ *
10.24 Amended Security Agreement between SmartServ and Mario F. Rossi, dated
January 4, 2000 /11/ *
10.25 Form of Securities Purchase Agreement between SmartServ and the
September Investors /13/
10.26 Form of Convertible Debenture for the September Investors /13/
10.27 Form of Securities Purchase Agreement between SmartServ and the November
Investors /13/
10.28 Form of Convertible Debenture for the November Investors /13/
10.29 Form of Securities Purchase Agreement, dated May 19, 2003, between
SmartServ and the May Investors /14/
10.30 Form of Convertible Debenture for the May Investors /14/
10.31 Form of Securities Purchase Agreement, dated June 13, 2003, between
SmartServ and the June Investors /14/
10.32 Form of Convertible Debenture for the June Investors /14/
10.33 Consulting Agreement, dated May 15, 2003, between SmartServ and Spencer
Trask Ventures, Inc. /14/
10.34 Severance Agreement, dated June 20, 2003, between SmartServ and Richard
Kerschner /14/ *
10.35 Severance Agreement, dated June 20, 2003, between SmartServ and Thomas
Haller /14/ *
10.36 Form of Amendment Agreement, dated June 13, 2003, to the May 19, 2003
Securities Purchase Agreement between SmartServ and the May Investors
/14/
10.37 Consulting Agreement between SmartServ and Robert Pons, dated August 4,
2003, as amended /16/ *
10.38 Consulting Agreement between SmartServ and Timothy G. Wenhold, dated
August 1, 2003 /16/ *
10.39 Placement Agency Agreement, dated January 29, 2004, between SmartServ
and Spencer Trask in connection with the 2004 Private Placement /16/
16 Letter from Ernst & Young, LLP to the Securities and Exchange Commission
dated November 13, 2003 on April 13, 2004 /1/
21 List of Subsidiaries /16/
23.1 Consent of Grant Thornton, LLP +
23.2 Consent of Ernst & Young LLP +
72
31.1 Certification of Robert Pons pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 +
31.2 Certification of Len von Vital pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 +
32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+
+ Filed herewith
1 Filed as an exhibit to our Form 8-K, dated November 13, 2003
2 Filed as an exhibit to our Form 8-K, dated March 3, 2003
3 Filed as an exhibit to our Proxy Statement for the 2002 Annual Meeting of
Stockholders
4 Filed as an exhibit to Amendment No. 3 to our registration statement on
Form S-3 (Registration No. 333-100193) on February 11, 2003
5 Filed as an exhibit to our Annual Report on Form 10-KSB for the year ended
December 31, 2001
6 Filed as an exhibit to our Annual Report on Form 10-KSB for the fiscal year
ended June 30, 2000
7 Filed as an exhibit to our Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1999
8 Filed as an exhibit to our registration statement on Form SB-2
(Registration No. 333-114)
9 Filed as an exhibit to our Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1996
10 Filed as an exhibit to our Proxy Statement dated October 10, 1996
11 Filed as an exhibit to our Registration Statement on Form SB-2
(Registration No. 333-43258) on August 7, 2000
12 Filed as an exhibit to our Form 8-K, dated February 28, 2004
13 Filed as an exhibit to our Quarterly Report on Form 10-QSB for the quarter
ended September 30, 2003
14 Filed as an exhibit to our Quarterly Report on Form 10-QSB for the quarter
ended June 30, 2003
15 Filed as an exhibit to our Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2002
16 Filed as an exhibit to our Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2003 on April 13, 2004
* Management contract or compensation plan or arrangement required to be
noted as provided in Item 13(a) of the Form 10-KSB rules.
73
(b) Reports on Form 8-K
On November 14, 2003, we filed a report on Form 8-K which included,
pursuant to Items 4 and 7 thereof, an announcement of the resignation of
Ernst & Young LLP as our independent auditors, and the Audit Committee's
prior authorization to our management to seek to retain another accounting
firm.
On December 2, 2003, we filed a report on Form 8-K which included, pursuant
to Item 4, an announcement of the engagement of Grant Thornton, LLP as our
new independent accountant to audit our financial statements for the fiscal
year ended December 31, 2003.
Item 14. Principal Accountant Fees and Services
Audit and Other Fees Paid to Independent Auditors
The following table presents fees billed by E&Y and Grant Thornton for
professional services rendered to us in fiscal years ended December 31, 2002 and
December 31, 2003.
* E&Y served as our independent auditors during fiscal year 2002 and until
November 6, 2003. Grant Thornton was engaged as our new independent auditors on
November 24, 2003 and performed the audit for fiscal year 2003. See Item 8 -
"Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure" for more details.
Audit Fees
The audit fees are billed for professional services rendered for the audit of
our annual financial statements, the reviews of the financial statements
included in our Quarterly Reports on Form 10-Q, and services provided in
connection with SEC registration statements. Of the fiscal 2003 amount, $11,910
was billed by Grant Thornton relating to its review of our Quarterly Report on
Form 10-Q for the quarter ended September 30, 2003 and meeting with our Audit
Committee, and the remaining $60,000 billed by Grant Thornton relates to its
audit of our financial statements for the fiscal year ended December 31, 2003.
All other amounts were billed by E&Y.
Audit-Related Fees
We did not incur any audit-related fees from our independent auditors for fiscal
years 2002 and 2003.
Tax Fees
Tax fees for fiscal year 2002 consisted principally of preparing our U.S.
federal, state and local income tax returns for the tax year ended June 30,
2001.
All Other Fees
We did not incur any fees from our independent auditors for all other services
(other than audit services, audit-related services and tax services) in fiscal
years 2002 and 2003.
74
Pre-Approval Policy for Services by Independent Auditors
Our Audit Committee has implemented pre-approval policies and procedures for our
engagement of the independent auditors for both audit and permissible non-audit
services. Under these policies and procedures, all services provided by the
independent auditors must be approved by the Audit Committee prior to the
commencement of the services, subject to certain de minimis non-audit service
(as described in Rule 2-01(c)(7)(C) of Regulation S-X) that do not have to be
pre-approved as long as management promptly notifies the Audit Committee of such
service and the Audit Committee approves it prior to the service being
completed. Since May 6, 2003, the effective date of the SEC's rules requiring
Audit Committee pre-approval of all audit and non-audit services performed by
our independent auditors, all of the services provided by our independent
auditors have been approved in accordance with our pre-approval policies and
procedures.
75
Signatures
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SMARTSERV ONLINE, INC.
Registrant
By: /s/Robert M. Pons
-----------------
Robert M. Pons
Chief Executive Officer
Date: May 12, 2004
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert M. Pons Chief Executive Officer, May 12, 2004
-------------------------------- (Principal Executive Officer)
Robert M. Pons
/s/ Len von Vital Chief Financial Officer May 12, 2004
-------------------------------- (Principal Financial and
Len von Vital Accounting Officer)
/s/ L. Scott Perry Chairman of the Board May 12, 2004
-------------------------------- of Directors
L. Scott Perry
Director May __, 2004
--------------------------------
Catherine Cassel Talmadge
/s/ Charles R. Wood Director May 12, 2004
--------------------------------
Charles R. Wood
76
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 24, 2004, accompanying the consolidated
financial statements incorporated by reference in the Annual Report of SmartServ
Online, Inc. and Subsidiaries on Form 10-KSB/A for the year ended December 31,
2003. We hereby consent to the incorporation by reference of said report in the
Registration Statements of SmartServ Online, Inc. on Form S-8 (File Nos.
333-47936, effective October 13, 2000; 333-91583, effective November 24, 1999).
/s/ Grant Thornton, LLP
Philadelphia, PA
March 24, 2004
EXHIBIT 23.2
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-91583) of SmartServ Online, Inc. pertaining to its Amended And
Restated 1996 Stock Option Plan, Non-Qualified Stock Option Agreements Between
The Registrant And Its Employees, and Non-Qualified Stock Option Agreements
Between The Registrant And Its Non-Employee Directors and the Registration
Statement of SmartServ Online, Inc. (Form S-8 No. 333-47936) pertaining to its
Non-Qualified Stock Option Contract Between The Registrant And Alan G. Bozian
and the 1999 Stock Option of our report dated April 23, 2003, except for the
second paragraph of Note 1 as to which the date is March 24, 2004, with respect
to the consolidated financial statements and schedules of SmartServ Online, Inc.
included in the Annual Report (Form 10-KSB/A) for the year ended December 31,
2003.
/s/ Ernst & Young LLP
May 11, 2004
Exhibit 31.1
Certification of Chief Executive Officer
I, Robert M. Pons, certify that:
1. I have reviewed this annual report on Form 10-KSB/A of SmartServ
Online, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: May 12, 2004 /s/ Robert M. Pons
------------ ------------------------
Robert M. Pons
Chief Executive Officer
Exhibit 31.2
Certification of Chief Financial Officer
I, Len von Vital, certify that:
1. I have reviewed this annual report on Form 10-KSB/A of SmartServ
Online, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: May 12, 2004 /s/ Len von Vital
------------ ------------------------
Len von Vital
Chief Financial Officer
Exhibit 32.1
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the filing of the Annual Report on Form 10-KSB/A for the
fiscal year ended December 31, 2003 (the "Report") by SmartServ Online, Inc.
("Registrant"), each of the undersigned hereby certifies that:
1. The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Registrant.
/s/ Robert M. Pons
----------------------------------------
Robert M. Pons
Chief Executive Officer
Dated: May 12, 2004
/s/ Len von Vital
----------------------------------------
Len von Vital
Chief Financial Officer
Dated: May 12, 2004
A signed original of this written statement required by Section 906 has been
provided to SmartServ Online, Inc. and will be retained by SmartServ Online,
Inc. and furnished to the Securities and Exchange Commission or its staff upon
request.
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