SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 3)*
Smart Online, Inc.
(Name of Issuer)
Common Stock, par value $0.001
(Title of Class of Securities)
83171V 10 0
(CUSIP Number)
Doron Roethler
c/o Strauss, Adar, Raviv & Co. Law Office
7 Menachem Begin Str. (Betzalel) 28th Floor
Ramat Gan 52521
Isreal
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
December 9, 2008
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box: |_|
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7 for other parties
to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP NO. 83171V 10 0
1. NAMES OF REPORTING PERSONS
Doron Roethler
--------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |_|
--------------------------------------------------------------------------------
3. SEC USE ONLY
--------------------------------------------------------------------------------
4. SOURCE OF FUNDS
PF
--------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e): |_|
--------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
Israel and Holland
--------------------------------------------------------------------------------
7. SOLE VOTING POWER:
NUMBER OF 2,418,353 (1)
SHARES
BENEFICIALLY
OWNED BY 8. SHARED VOTING POWER:
EACH REPORTING 0
PERSON WITH
9. SOLE DISPOSITIVE POWER:
2,418,353 (1)
10. SHARED DISPOSITIVE POWER: 0
--------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
2,418,353 (1)
--------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES:
|_|
--------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
13.2%
--------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS): IN
--------------------------------------------------------------------------------
(1) See Item 5(a) for a detailed explanation of the Reporting Person's
beneficial ownership of Common Stock.
This Amendment No. 3 (this "Amendment") amends the Report on Schedule 13D,
originally filed on February 22, 2005, as amended on December 6, 2007 and June
30, 2008 (as amended, the "Schedule 13D"). Except as provided herein, this
Amendment does not modify any of the information previously reported on the
Schedule 13D. Capitalized terms used and not otherwise defined have the meaning
given to them in the Schedule 13D.
Item 1. Security and Issuer.
Item 1 is hereby amended and restated as follows:
This Schedule 13D relates to the Common Stock, par value $0.001 per share (the
"Common Stock"), of Smart Online, Inc., a Delaware corporation (the "Issuer").
The principal executive offices of the Issuer are located at 4505 Emperor
Boulevard, Suite 320, Durham, North Carolina 27703.
Item 2. Identity and Background.
Item 2 is hereby amended and restated as follows:
(a) This Schedule 13D is being filed on behalf of Doron Roethler (the "Reporting
Person").
(b) The business address of the Reporting Person is c/o Strauss, Adar, Raviv &
Co. Law Office, 7 Menachem Begin, (Bezalel) Street, 28th Floor, Ramat Gan 52521,
Israel.
(c) The Reporting Person is the managing director of TMF Airmarine BV, an
independent aviation spare parts company. TMF Airmarine's principal business
address is c/o Strauss, Adar, Raviv & Co. Law Office, 7 Menachem Begin,
(Bezalel) Street, 28th Floor, Ramat Gan 52521, Israel. As of December 9, 2008,
the Reporting Person also began serving as the Issuer's Interim Chief Executive
Officer.
(d) The Reporting Person has not, during the five years prior to the date of
this Schedule 13D, been convicted in a criminal proceeding.
(e) The Reporting Person has not, during the five years prior to the date of
this Schedule 13D, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
State securities laws or finding any violation with respect to such laws.
(f) The Reporting Person is a citizen of Israel and Holland.
Item 3. Source and Amount of Funds or Other Consideration.
Item 3 is hereby amended and restated as follows:
As of February 13, 2009, the Reporting Person has acquired, in the aggregate,
2,418,353 shares of Common Stock either from the Issuer or from other
shareholders of the Issuer. The Reporting Person has paid an aggregate of
$2,609,216.21 for 2,388,353 of these shares from his personal funds, including
247,043 shares purchased from Dennis Michael Nouri (the former President and
Chief Executive Officer of the Issuer) pursuant to a stock purchase agreement
dated October 10, 2006, which is attached hereto as Exhibit 1. Consideration for
the shares purchased from Mr. Nouri was made in installments over a period of
time, and the agreement included certain closing conditions, all of which were
satisfied by January 19, 2007. The remaining 30,000 shares were acquired from
the Issuer pursuant to restricted stock award grants under the Issuer's 2004
Equity Compensation Plan.
Item 4. Purpose of Transaction.
Item 4 is hereby amended and restated as follows:
The Reporting Person acquired the shares of Common Stock for investment
purposes. These shares of Common Stock constitute a significant portion of the
Reporting Person's total personal net worth. One of the Reporting Person's
investment goals is diversification, which may require the Reporting Person to
sell shares of the Common Stock. Accordingly, the Reporting Person may, from
time to time, make decisions to sell shares of the Common Stock based upon
then-prevailing market conditions.
The Reporting Person was appointed as Chairman of the Issuer's Board of
Directors in November 2007 and as the Issuer's Interim Chief Executive Officer
in December 2008.
On November 14, 2007, in an initial closing, the Issuer sold $3.3 million
aggregate principal amount of secured subordinated convertible notes due
November 14, 2010 (the "Notes") to noteholders, including the Reporting Person
(the "Noteholders"). In addition, the Noteholders committed to purchase on a pro
rata basis up to $5.2 million aggregate principal of Notes upon approval and
call by the Issuer's Board of Directors in future closings. On August 12, 2008,
the Issuer exercised its option to sell $1.5 million aggregate principal amount
of Notes with substantially the same terms and conditions as the Notes sold on
November 14, 2007. In connection with the sale of the additional Notes, the
Noteholders holding a majority of the aggregate principal amount of the Notes
outstanding agreed to increase the aggregate principal amount of Notes that they
are committed to purchase from $8.5 million to $15.3 million. On November 21,
2008, the Issuer sold $500,000 aggregate principal amount of Notes to two new
investors, and on January 6, 2009, the Issuer sold $500,000 aggregate principal
amount of Notes to an existing Noteholder, all on substantially the same terms
and conditions as the Notes sold on November 14, 2007 and August 12, 2008. The
Reporting Person currently holds $750,000 aggregate principal amount of Notes
and serves as the bond representative for the Noteholders.
The Issuer is obligated to pay interest on the Notes at an annualized rate of 8%
payable in quarterly installments commencing three months after the purchase
date of the Notes. The Issuer does not have the ability to prepay the Notes
without the approval of Noteholders holding at least a majority of the principal
amount of the Notes then outstanding.
On the earlier of the maturity date of November 14, 2010 or a merger or
acquisition or other transaction pursuant to which the Issuer's existing
stockholders hold less than 50% of the surviving entity, or the sale of all or
substantially all of the Issuer's assets, or similar transaction, or event of
default, each Noteholder in its sole discretion shall have the option to:
o convert the principal then outstanding on its Notes into shares of
Common Stock, or
o receive immediate repayment in cash of the Notes, including any
accrued and unpaid interest.
If a Noteholder elects to convert its Notes under these circumstances, the
conversion price for Notes:
o issued in the initial closing on November 14, 2007 shall be $3.05;
and
o issued on August 12, 2008, November 21, 2008, and January 6, 2009
shall be the lower of $3.05 and the average of the closing bid and
asked prices of shares of the Common Stock quoted in the
Over-The-Counter Market Summary (or, if the Issuer's shares are
traded on the Nasdaq Stock Market or another exchange, the closing
price of shares of the Common Stock quoted on such exchange)
averaged over five trading days prior to the closing date of the
sale of such Notes.
Payment of the Notes will be automatically accelerated if the Issuer enters
voluntary or involuntary bankruptcy or insolvency proceedings.
The Notes and Common Stock into which they may be converted have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or any state, local, or foreign securities laws. As a result, offers and sales
of the Notes were made pursuant to Regulation D under the Securities Act and
only to accredited investors.
In addition, if the Issuer proposes to file a registration statement to register
any of its Common Stock under the Securities Act in connection with the public
offering of such securities solely for cash, subject to certain limitations, the
Issuer must give each Noteholder who has converted its Notes into Common Stock
the opportunity to include such shares of converted Common Stock in the
registration. The Issuer has agreed to bear the expenses for any of these
registrations, exclusive of any stock transfer taxes, underwriting discounts,
and commissions.
The Convertible Secured Subordinated Note Purchase Agreement, the Form of
Convertible Secured Subordinated Promissory Note, the Registration Rights
Agreement, the Security Agreement, the First Amendment to Convertible Secured
Subordinated Note Purchase Agreement, and the Second Amendment and Agreement to
Join as a Party to Convertible Secured Subordinated Note Purchase Agreement and
Registration Rights Agreement are attached hereto as Exhibits 2, 3, 4, 5, 6, and
7, respectively, and are incorporated herein by reference.
Except as may be set forth herein or in his capacity as Chairman of the Issuer's
Board of Directors or Interim Chief Executive Officer, the Reporting Person has
no plans or proposals which would relate or result in any of the matters set
forth below:
(a) the acquisition by any person of additional securities of the
Issuer, or the disposition of securities of the Issuer;
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its
subsidiaries;
(c) a sale or transfer of a material amount of assets of the Issuer or
any of its subsidiaries;
(d) any change in the present Board of Directors or management of the
Issuer, including any plans or proposals to change the number or
term of the Issuer's Board of Directors or to fill any existing
vacancies thereon;
(e) any material change in the present capitalization or dividend policy
of the Issuer;
(f) any other material change in the Issuer's business or corporate
structure;
(g) changes in the Issuer's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control
of the Issuer by any person;
(h) causing a class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be
quoted in an inter-dealer quotation system of a registered national
securities association;
(i) a class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934, as amended; or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
Item 5 is hereby amended and restated as follows:
(a) The Reporting Person beneficially owns 2,418,353 shares of Common Stock,
which represents approximately 13.2% of the issued and outstanding shares of
Common Stock. These shares include (i) 1,323,619 shares owned by Greenleaf
Ventures Ltd., a British Virgin Islands company wholly owned by the Reporting
Person; (ii) 421,791 shares owned by Crystal Management Ltd., a company
registered in Anguilla that is wholly owned by the Reporting Person; and (iii)
672,943 shares owned directly by the Reporting Person, of which 7,500 shares are
held pursuant to a restricted stock award as to which restrictions had not
lapsed as of February 13, 2009.
(b) The Reporting Person has sole power to vote or to direct the vote and sole
power to dispose or to direct the disposition of all 2,418,353 shares of Common
Stock reported in Item 5(a) of this Schedule 13D.
(c) The Reporting Person has not completed any transactions in the Issuer's
Common Stock during the past 60 days.
(d) No other person has the right to receive or the power to direct the receipt
of dividends from, or the proceeds from the sale of, the Common Stock
beneficially owned by the Reporting Person.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
Item 6 is hereby amended and restated as follows:
Except as disclosed in this Schedule 13D, the Reporting Person does not have any
other contracts, arrangements, understandings, or other relationships with
respect to the securities of the Issuer.
Item 7. Material to Be Filed as Exhibits.
Item 7 is hereby amended and restated as follows:
Exhibit 1 Stock Purchase Agreement, dated October 10, 2006, between
Dennis Michael Nouri and Reporting Person (previously filed
with Amendment No. 1 to the Schedule 13D)
Exhibit 2 Convertible Secured Subordinated Note Purchase Agreement,
dated November 14, 2007, by and among the Issuer and certain
investors, including the Reporting Person (incorporated herein
by reference to Exhibit 4.1 to the Issuer's Quarterly Report
on Form 10-Q, as filed with the Securities and Exchange
Commission (the "SEC") on November 14, 2007)
Exhibit 3 Form of Convertible Secured Subordinated Promissory Note
(incorporated herein by reference to Exhibit 4.2 to the
Issuer's Quarterly Report on Form 10-Q, as filed with the SEC
on November 14, 2007)
Exhibit 4 Registration Rights Agreement, dated November 14, 2007, by
and among the Issuer and certain investors, including the
Reporting Person (incorporated herein by reference to Exhibit
10.6 to the Issuer's Quarterly Report on Form 10-Q, as filed
with the SEC on November 14, 2007)
Exhibit 5 Security Agreement, dated November 14, 2007, among the
Issuer and Doron Roethler, as agent for certain investors,
including the Reporting Person (incorporated herein by
reference to Exhibit 10.7 to the Issuer's Quarterly Report on
Form 10-Q, as filed with the SEC on November 14, 2007)
Exhibit 6 First Amendment to Convertible Secured Subordinated Note
Purchase Agreement, dated August 12, 2008, by and among the
Issuer and certain investors, including the Reporting Person
(incorporated herein by reference to Exhibit 4.1 to the
Issuer's Quarterly Report on Form 10-Q, as filed with the SEC
on November 12, 2008)
Exhibit 7 Second Amendment and Agreement to Join as a Party to
Convertible Secured Subordinated Note Purchase Agreement and
Registration Rights Agreement, dated November 21, 2008, by and
among the Issuer and certain investors, including the
Reporting Person
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
Doron Roethler
Dated: February 16, 2009 /s/ Doron Roethler
--------------------------
Signature
Name: Doron Roethler